US financial regulator the Commodity Futures Trading Commission (CFTC) has launched a broad inquiry into the legitimacy of more than one million energy and metals transactions by major traders in commodities markets over the past two years, according to a
The paper says that the CFTC has issued a ‘special call’ requesting Wall Street banks and traders to provide documents that would confirm the legality of recent derivatives transactions known as ‘exchanges of futures for swaps’ were legal. JPMorgan Chase, Goldman Sachs and Citigroup are among those to have received document requests.
Lawyers at the CFTC enforcement division are also said to be reviewing the trades for possible violations. The move comes as the watchdog prepares to introduce tougher trading rules for over-the-counter (OTC) derivatives.
report adds that the inquiry will focus on whether large traders and market-makers used unregulated OTC swaps markets to trade what were in fact futures, strictly regulated contracts that are economically identical to swaps. Trading futures off an exchange is illegal, and regulators are concerned that traders may have used these deals, known as Exchange of Futures for Swaps (EFSs), to agree prices that did not reflect the market.
CFTC staff are requesting information on EFSs executed following the passage of the Dodd-Frank financial reform law in 2010 until this year, according to individuals familiar with the inquiry. They want traders to show the first step of the transactions involved swaps and not futures contracts masked as swaps. A CFTC official said: “Where’s the evidence? .?.?. It can’t just be that a transaction is labelled a swap and there’s no audit trail.”
The CFTC is also cracking down on off-exchange foreign exchange (forex) ‘Ponzi’ schemes, with several criminal prosecutions and monetary penalties imposed on the perpetrators.
Far and away, the largest financial market on the planet is the foreign exchange currencies market, where on average individuals and organisations trade more than $5 trillion daily. In the FX world, the ability to master the market isn't considered a luxury for treasury officers–it's a necessity.
Using data for predictive analytics is the future of banking success, argued Jean-Laurent Bonnafé, CEO of BNP Paribas, in his session on how the bank is reinventing its approach to innovate with and for corporates.
The top five sectors Asian fintech investors are interested in are data analytics, blockchain, lending, payments and regtech, according to Gary Hwa, EY regional managing partner.
On the third day of the Singapore Fintech Festival conference, there was a focus on specific applications of fintech innovation. One was trade finance, which is clearly is ripe for a revolution.