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According to comments made by US Securities and Exchange Commission (SEC) Chair Mary Jo White during today’s annual SIFMA meeting, the industry should not expect regulatory oversight easing any time soon.

White expects the regulator to continue its use of “aggressive tools” like wire taps and stings to discover evidence of fraud. However, budget restraints will be an ongoing restraint in their use.

When asked about the SAC Capital Advisors settlement, she said that although it happened before she came to the SEC, she believed it was the right. White declined to comment on the current regulatory issues faced by SAC’s Steven Cohen since she might be sitting in judgment of him in the future.

More to come.

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Javelin SEF is the first swaps execution facility (SEF) operator to submit a list of potential instruments that the electronic trading platform would like to “make available to trade” to the US Commodity Futures Trading Commission (CFTC), Bloomberg’s Silla Brush reported on October 19.

Greenwich Associates’ Kevin McPartland, who is quoted in the story, offers expanded analysis in a blog post of his own.

It’s not surprising that an all-electronic operation like Javelin was the first to break the surface tension with such a broad instrument list since it has no interest of keeping these transaction voice-based.

The CFTC has 90 days to decide whether to approve or reject Javelin SEF’s list. If it does not extend its decision deadline, traders will be required to execute trades for dollar-, sterling- and euro-denominated interest rate swaps on SEFs starting in mid-January 2014.

The regulator also started the clock ticking on a 30-day industry comment period for the SEF’s list that began on the filing date and, hopefully, will provide interesting opinions.

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The US Securities and Exchange Commission (SEC) announced today that Knight Capital Americas is the first broker-dealer it has fined for breaking market-access Rule 15c3-5 during its infamous rouge algo incident, which happened on August 1, 2012.

The singular honor will cost the firm $12 million on top of the $460 million that it lost during the trading fiasco.

SEC officials cited that the firm didn’t have adequate controls at a point immediately prior to its submission of orders to markets as well as for code deployment and testing for its equity order router.

Knight Capital also lacked adequate written description of its risk management controls and the company’s controls and written procedures to guide employees responding “significant technological and compliance incidents,” regulators added.

Additionally, The SEC charged the broker-dealer with violations of Regulation SHO’s Rule 200(g) and 203(b), which require broker-delaers to mark short-sale orders appropriately and locating shares to borrow for short sales respectively.

Not surprisingly, Knight consented to the SEC order without admitting or denying the regulator’s findings.



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Since today is the US quasi-holiday Columbus Day and Thanksgiving Day for our northern neighbor, I do not feel really bad about sharing my thoughts about the Investment Company Institute‘s Capital Markets Conference held on October 10.

I have to admit that the conference had a pretty impressive line up. Commodity Futures Trading Commissioner Scott O’Malia started the conference by providing some interesting volume data for OTC swaps since some swap execution facilities (SEFs) went live on October 2.

Of the approximately 6,500 OTC swaps trade executed during this period, only 50 or so elected to do the electronically via request for quotes (RFQs) or using a best bid and offer (BBO) platforms, or that 99.23% of the trades were voice traded.

I have to admit, I was scribbling my notes while handling a minor IT issue at the time, so please take the figures with a truckload of salt. I’ve seen other coverage that claims that the figure is closer to 50%, which sounds a bit high since not a single SEF operator has submitted a list of contracts it would they would like to make “available to trade,” according to a trusted source.

Until that happens, all transactions fall into the “permitted trades” bucket that let’s investors decide how to execute their centrally cleared trades.

Commissioner O’Malia also discussed his concern that each SEF should provide pre-trade certainty for every transactions. If SEFs do not have it place soon, he would be calling the CFTC’s Technology Advisory Committee (TAC) into session in early November to seek a technology solution to the issue. Read the rest of this entry »

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I’ve spent far more time today updating The SEF Scorecard than I originally intended. Little did I know that HTML and Cascading Style Sheets (CSS) are twin works of Satan, but more on that later.

Bloomberg started the summer as the first SEF operator to receive temporary registration from the US Commodity Futures Trading Commission (CFTC), but now the field is starting to get crowded. GFI Group,  MarketAxessState StreetTradeweb, each  received temporary approval from the CFTC recently. This leaves the 10 remaining SEF operators cooling their jets while they wait for their regulatory approval.



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