Ticks Widening, Singapore Censure, Swaps: Compliance

Proposals to study changing the

price increments at which some U.S. stocks change hands may be

getting closer to implementation.

Executives from the biggest American exchanges are drafting

a pilot program that would widen so-called tick sizes on about

100 smaller and less-liquid securities for a year, according to

a document seen by Bloomberg News. Another would cover lower-priced, active stocks to see if smaller increments would benefit

investors, the document showed.

Most American shares have been bought and sold at prices

denominated in pennies for more than a decade after the spread

was narrowed in an initiative known as decimalization, which

some economists say hurt liquidity by lowering profits for

market makers. Those professionals, who help facilitate orderly

trading, earn money by collecting the difference between the

highest price to buy a share and the lowest to sell.

Officials from the New York Stock Exchange (NYX) and Nasdaq held

discussions with the U.S. Securities and Exchange Commission

this month on the pilots, according to a person with direct

knowledge of the matter who asked not to be identified because

the talks were private.

The SEC has asked exchange officials to help draw up the

plans because they know the most about how securities trade,

according to two people with direct knowledge of the

discussions.

Sara Rich, a NYSE Euronext spokeswoman, and Robert Madden,

a Nasdaq spokesman, declined to comment on the pilot programs.
Randy Williams, a BATS Global Markets Inc. spokesman, also

declined to comment. SEC spokesman John Nester declined to

comment.

Compliance Policy

Danish Banks Welcome FSA Steps to Conform With EU on CoCos

Denmark’s financial industry has welcomed a decision by the

Financial Supervisory Authority to recommend that trigger levels

governing contingent convertible bonds be in line with European

standards.

Banks will be able to choose between a threshold of 7

percent core equity Tier 1 and an individual solvency

requirement, which includes Tier 2 capital, the regulator said

June 12. That matches European standards and is well below the

10.125 percent a government-appointed committee in March

recommended be applied to systemically important banks.

According to Anders Balling, head of bank oversight at the

FSA in Copenhagen, lenders will probably favor the 7 percent

trigger as a more reliable gauge of when conversion will occur.

The regulator said last month it will allow banks the

option of using contingent capital, or debt that converts to

equity at regulator-determined triggers, to help the industry

fulfill stricter reserve requirements. For the country’s six

biggest banks, led by Danske Bank and Nykredit, lawmakers are

still debating where trigger levels should be set.

Banks have until June 19 to send their responses to the

FSA’s proposal.

EU Postpones Decision on Robustness of U.S., Japan Swaps Rules

The European Union will take more time to assess U.S. and

Japanese rules for swaps trading as it scrutinizes banks’ access

to clearinghouses based outside the 27-nation bloc.

The European Commission gave regulators a Sept. 1 deadline

to complete a review of the measures, allowing them to “take

account of international ongoing developments,” according to a

letter published on the website of the European Securities and

Markets Authority. The previous deadline was June 15.

The EU and the U.S. have been locked in an escalating spat

over swaps rules amid warnings from the bloc that planned U.S.

requirements would leave EU banks saddled with extra costs and

incompatible legal obligations.

The international reach of U.S. Commodity Futures Trading

Commission rules has been one of the most controversial elements

of the U.S. Dodd-Frank Act. Nations may discuss the measures at

a June 20 meeting of derivatives regulators in Montreal.

The commission also extended ESMA’s deadline for other

national swap-rule assessments to Oct. 1.

Special Section: Singapore Censures

Singapore Censures 20 Banks for Bids to Rig Benchmark Rates

Singapore’s monetary authority censured banks for trying to

rig benchmark interest rates and ordered them to set aside as

much as S$12 billion ($9.6 billion) at zero interest pending

steps to improve internal controls.

ING Groep NV, Royal Bank of Scotland Group Plc (RBS) and UBS AG (UBSN)

were among 20 banks at which 133 traders tried to manipulate the

Singapore interbank offered rate, swap offered rates and

currency benchmarks in the city-state, the Monetary Authority of

Singapore said in a statement June 14. The regulator said it

will also make rigging key rates a criminal offense and bring

supervision under its direct oversight.

The crackdown in Singapore comes amid a widening global

review of benchmark rates following revelations last week of

potential manipulation in the $4.7 trillion-a-day currency

market.

Nineteen firms were asked to post reserves ranging from

S$100 million to S$1.2 billion — depending on the severity of

the attempts by their traders to manipulate rates — for a year

and will earn zero interest on that money, MAS said. Commerzbank

AG was exempted from setting aside any money.

The banks have taken disciplinary action against the 133

traders found to have tried to rig the rates, with about three-quarters of them having resigned or been asked to leave their

firms, MAS said. The traders who are still employed will be

subject to disciplinary action, the regulator said.

“While there was no conclusive finding the Sibor, SOR and

FX benchmarks were successfully manipulated, the traders’

conduct reflected a lack of professional ethics,” according to

the statement from the central bank.

Sibor, used to price debt ranging from commercial term-loans to homeowners’ mortgages, is calculated daily on behalf of

the Association of Banks in Singapore.

Singapore will be among the first countries to start using

trading data rather than the survey of estimates in calculating

benchmark rates, ABS and the Singapore Foreign Exchange Market

Committee said in a separate statement. The new method will

apply to four of the current 11 rates in the nation, while

another four will be discontinued and two will be replaced with

benchmarks from other markets, it said.

Local-currency Sibor will continue to be based on the

survey method to reflect interbank borrowing costs, according to

the statement. The benchmark will be subject to regular reviews,

it said. The U.S. dollar Sibor rate and Malaysian ringgit spot

rates will be replaced with U.S. dollar-Libor and onshore

ringgit spot rates.

Bank of America Corp., BNP Paribas SA (BNP), Oversea-Chinese

Banking Corp. (OCBC), Barclays (BARC), Credit Agricole (ACA), Credit Suisse AG (CSGN), DBS

Group Holdings Ltd. (DBS), Deutsche Bank AG, Standard Chartered Plc (STAN),
United Overseas Bank Ltd. (UOB), Australia New Zealand Banking Group

Ltd. (ANZ), Citigroup Inc. (C), JPMorgan Chase Co. (JPM), Macquarie Group

Ltd. (MIC), HSBC Holdings Plc (HSBA) and Mitsubishi UFJ Financial Group

Inc. (8306)’s Bank of Tokyo-Mitsubishi UFJ unit were among the banks

named by MAS in the statement June 14.

Singapore Adds to Bank Penalties Levied for Rate-Rigging: Table

The penalties levied by Singapore come in the wake of

sanctions imposed by regulatory bodies in other nations.

In addition to penalties imposed by the Monetary Authority

of Singapore, penalties were levied on banks for manipulating

benchmark interest rates by regulators including the U.K.’s
Financial Conduct Authority, the U.S. Commodity Futures Trading

Commission and Department of Justice, and the Swiss Financial

Markets Regulatory Authority.

For a table of the penalties, click here.

Singapore to Scrap Four Benchmarks, Four Others to Use Trades

Singapore plans to scrap four benchmarks and use trades in

place of others. The changes follow Singapore’s central bank

review into how benchmark rates are set.

Four benchmarks will be calculated using market trades

instead of by survey, the Association of Banks in Singapore and

Singapore Foreign Exchange Market Committee said in a statement.

The Singapore dollar spot FX, Thai baht spot FX, Indonesian

rupiah spot FX and Singapore dollar swap offer rate (overnight,

one-month, three-month and six-month) are to be calculated using

trades.

The Malaysian ringgit spot FX and U.S. dollar Sibor are to

be replaced with onshore Malaysian ringgit spot FX and U.S.

dollar Libor.

Vietnam dong spot FX, Thai baht SOR, Indonesian rupiah SOR,

and Singapore dollar interest rate swaps are to be discontinued,

according to ABS.

Mitsubishi UFJ, UOB, ING, Credit Agricole React to MAS Measures

Mitsubishi UFJ Financial Group Inc. will boost control

structure following the probe by the Monetary Authority of

Singapore, spokesman Shinya Matsumoto said by phone June 14.

It’s “extremely regrettable” that the lender has been

pointed out by Singapore’s MAS about lack of internal control,

Matsumoto said.

United Overseas Bank Ltd. will implement measures

prescribed by Singapore’s regulatory authority. It will

strengthen policies and procedures, according to an e-mailed

statement from the lender.

ING Groep NV (INGA) has taken disciplinary actions against a small

number of individuals involved after the Monetary Authority of

Singapore’s review of rate-setting processes, the bank said in

an e-mailed statement June 14.

Amsterdam-based ING Groep fully cooperated with reviews and

said it’s “committed to conducting its business with highest

levels of integrity.” The company will take further measures to

enhance procedures for submitting rates, monitor those processes

and train staff, it said.

Credit Agricole SA’s corporate and investment-banking

division said it will follow recommendations set out by the

Monetary Authority of Singapore.

Interviews

Merkel Says EU Transaction Tax Must Be ‘Tailor Made’

German Chancellor Angela Merkel talked about stimulating

economic growth, investor concerns over the proposed European

financial-transaction tax and the prospects for a free-trade

agreement between the European Union and the U.S.

She spoke in Berlin with Bloomberg’s Matthew Winkler.

For the video, click here.

To contact the reporter on this story:

Carla Main in New Jersey at

cmain2@bloomberg.net.

To contact the editor responsible for this report:

Michael Hytha at mhytha@bloomberg.net.

Ticks Widening, Singapore Censure, Swaps: Compliance