Swap-Trade Reports, Derivatives, Amaranth Settles, Ferrostaal: Compliance

Prices for swaps traded on so-called swap execution facilities or exchanges will be delayed for 30 minutes under a rule approved by the U.S. Commodity Futures Trading Commission.

The commission voted 5-0 to approve a final rule for how prices for trades will be made public, which depends on the type of transaction and who is doing the trading. The regulation for “real-time” price disclosures will put swaps subject to a clearing requirement at an initial 30-minute delay, which would narrow to 15 minutes after the first year. The rule also provides for an initial 48-hour delay for end users of derivatives to report prices.

The rule phases in the delays, starting no sooner than July 16.

The Dodd-Frank Act required the CFTC and the Securities and Exchange Commission to increase transparency in the $708 trillion global over-the-counter derivatives market, where largely unregulated trades helped fuel the 2008 credit crisis. The commission voted 3-2 on Nov. 19, 2010, to propose a 15- minute delay for reporting the block trades of standardized swaps.

Industry groups representing banks including JPMorgan Chase & Co. (JPM), Goldman Sachs Group Inc. (GS) and Deutsche Bank AG argued that the proposal for a 15-minute limit -- meant as a window to give traders a chance to hedge big trades prior to them going public -- wasn’t enough time to protect them from competitors taking advantage of their need to hedge.

Bloomberg LP, the parent company of Bloomberg News, has said it intends to register as a swap-execution facility.

Compliance Policy

NYSE-Deutsche Boerse Offer Derivatives Fees Cap to EU

NYSE Euronext and Deutsche Boerse AG told antitrust regulators they would impose a three-year ban on derivative-fee increases should they approve their merger.

The exchanges would agree not to raise published trading and clearing prices for derivatives on NYSE Euronext’s Liffe exchange and Deutsche Boerse’s Eurex market, Deutsche Boerse said in an e-mailed statement yesterday. The remedy was sent last week after the exchanges submitted a revised set of proposals including the sale of NYSE’s Liffe single-stock equity derivatives business to the European Union, two people familiar with the situation said earlier in the day yesterday.

Officials are analyzing the exchanges’ previous offers, EU Competition Commissioner Joaquin Almunia said yesterday. The exchanges are trying to convince European regulators that merging to create the world’s largest exchange operator won’t stifle competition in derivatives and clearing.

James Dunseath, a spokesman for NYSE Euronext (NYX) in London, declined to comment. The companies sent the new remedy in a letter to Almunia, Deutsche Boerse said.

The exchanges plan to meet European regulators to discuss the revised remedies before the European Commission breaks for official holidays tomorrow, the two people said. If the meeting suggests the remedies are still insufficient, the exchanges will continue to press their case, they said.

Before deciding whether to approve or block a deal, the European Commission must consult competition agencies from the European Union’s 27 nations. Commissioners from each EU country must also vote on a decision. Companies can then appeal a merger ban at the EU courts. The last day the commission can rule is Feb. 9.

CFTC Votes 5-0 to Adopt Rule on Swaps Data Recordkeeping

The U.S. Commodity Futures Trading Commission approved a rule requiring swap data repositories to keep digital information about swaps immediately accessible during the life of the swap and for five years after its termination.

The swaps recordkeeping rule, required by the Dodd-Frank Act, passed with a 5-0 vote at a meeting yesterday in Washington.

China to Amend Futures-Trading Regulations, Xinhua Reports

China will amend futures-trading rules to improve government supervision, the official Xinhua News Agency reported yesterday, without citing anyone. The State Council will publish a draft of the proposed regulations today and invite public comment, Xinhua said.

BOE to Apply New ABS Transparency Collateral Criteria From 2013

The Bank of England will require more information on some asset-backed securities it accepts as collateral from January 2013.

The requirements will apply to small and medium enterprise- backed corporate obligation securities, commercial mortgage backed securities and asset backed commercial paper, the central bank said in a notification published in London yesterday. The requirements cover loan level information, transaction documentation, transaction overviews, standardized monthly investor reports and cashflow models.

The new rules will apply from Jan. 1, 2013, following which there will be a 12-month implementation period. During this time, securities not meeting the criteria will still be accepted, with an additional 5 percentage-point “haircut” applied each month they are not compliant.

“Additional haircuts will be added each month until Jan. 1, 2014, when transactions no longer meeting the criteria would be made ineligible,” the central bank said.

Compliance Action

Further Euro-Bond Steps Urged by European Parliament Committee

A European Parliament panel urged further steps toward joint bond sales by euro-area nations, highlighting growing political concerns over the region’s two-year-old debt crisis.

The European Union assembly’s economic committee pressed EU regulators “to come forward rapidly” with proposals tied to the introduction of common euro bonds, which the German government opposes. The non-binding resolution responds to a Nov. 23 paper by the European Commission, the EU’s regulatory arm, on options for joint debt issuance, also called “stability bonds.”

“The prospect of stability bonds could foster stability in the euro area in the medium term,” the committee said in the resolution approved yesterday in Brussels and due to go to the full 754-seat EU assembly early next year. The committee said it is “deeply concerned by the continuous strains on the euro-area sovereign bond markets reflected in widening spreads, high volatility and vulnerability to speculative attacks over the last two years.”

The idea of bonds sold jointly by the euro area’s 17 nations remains alive because unprecedented support by governments and the European Central Bank have failed to stamp out debt concerns that began in Greece in late 2009 and now threaten Spain and Italy. The troubles led Greece to seek an initial rescue in April 2010, pushed Ireland and Portugal into aid programs over the ensuing year and prompted a second Greek bailout in October.

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BofA Said Close to Settling Countrywide Fair-Lending Probe

Bank of America Corp. (BAC) is close to settling a U.S. Justice Department probe into whether its Countrywide Financial Corp. unit violated fair-lending practices, said two people with knowledge of the discussions.

A deal may be announced as early as this week and will include money to compensate Countrywide customers, said the people, who declined to be identified because the talks were private. Charlotte, North Carolina-based Bank of America acquired subprime lender Countrywide in 2008, and with it billions of dollars in mortgage liabilities.

Bank of America, the second-largest U.S. lender by deposits, would be the biggest financial firm to settle a case with the Justice Department’s new fair-lending unit. The DOJ has extracted more than $30 million in compensation for loan discrimination cases, including deals with American International Group Inc. (AIG) and Citizens Republic Bancorp Inc. (CRBC)

The Obama administration has increased scrutiny of banks to prevent redlining -- excluding borrowers in low-income or minority neighborhoods -- as well as pricing discrimination and steering customers to products based on race or national origin. The 1977 Community Reinvestment Act requires banks to make loans in all of the areas they serve.

Before being acquired, Countrywide was the biggest U.S. provider of subprime mortgages, a type of loan that regulators have said was offered disproportionately to minorities. Xochitl Hinojosa, a Justice Department spokeswoman, and Bank of America’s Dan Frahm said they couldn’t comment on the possible settlement.

Courts

Amaranth’s $77.1 Million Manipulation Settlement Approved

A federal judge approved a $77.1 million settlement by Amaranth Advisors LLC, the hedge fund that collapsed in 2006 after losing $6.6 billion on natural gas trades, of a lawsuit brought by traders who accused it of market manipulation.

U.S. District Judge Shira Scheindlin, in an order Dec. 15, approved the agreement, which was filed two days earlier in Manhattan federal court by plaintiff’s attorney Christopher Lovell of Lovell Stewart Halebian Jacobson LLP. The parties had reached a tentative agreement in October.

“The plaintiffs compromised to a tiny fraction of their overall claim,” Stephen Senderowitz of Winston & Strawn P.C. in Chicago, a lawyer for Amaranth, said yesterday in a phone interview. The settlement avoided the cost and risk of a trial, and paves the way for investors to receive any remaining funds, he said.

Lovell didn’t return calls seeking comment on the settlement.

The case is In Re Amaranth Natural Gas Commodities Litigation, 07-06377, U.S. District Court, Southern District of New York (Manhattan.)

Ferrostaal Fined $183 Million by Court at Ex-Managers’ Trial

Ferrostaal AG was fined 140 million euros ($183 million) yesterday by a Munich court in a bribery case related to the conduct of two former employees.

The fine is the result of an agreement between the company, prosecutors and the judges, court spokeswoman Margarete Noetzel said in an e-mailed statement. The sanction was issued as part of a verdict in the trial of two former company managers accused of paying bribes in Greece and Portugal.

Ferrostaal said at the beginning of the trial on Dec. 15 that it was willing to pay the fine, which was the result of “intensive negotiations.” The company said in a statement yesterday that it would bear the consequences and pay the fine.

The two former company managers, identified only as Johann- Friedrich Ha., 73, and Hans-Dieter Mue., 73, were convicted of bribery, received suspended prison terms of two years and were fined, according to the statement.

Prosecutors had been probing Essen, Germany-based Ferrostaal, which manages the development of industrial and petrochemical plants, since 2009 to determine whether it bribed officials for contracts.

Ex-NFL Star Willie Gault Sued by SEC in Stock-Pumping Fraud

Willie Gault, the former NFL wide receiver and Olympic sprinter, was accused by U.S. regulators of taking part in a scheme to artificially inflate the stock of a medical-device company that he helped manage.

Heart Tronics (HRTT), based in Studio City, California, repeatedly announced millions of dollars in fake sales orders for its heart-monitoring devices between 2006 and 2008, the Securities and Exchange Commission said in a complaint filed yesterday in U.S. District Court in California. The SEC also sued Gault’s co- chief executive officer, J. Rowland Perkins, attorney Mitchell Stein, and Stein’s handyman and chauffeur, Martin B. Carter.

Gault, 51, was installed as Heart Tronics’ president and co-CEO in October 2008 to generate publicity for the company and foster investor confidence, the SEC said. Stein, who controlled most of the company’s business activities, hired promoters to tout Heart Tronics stock on the Internet. The defendants reaped almost $8 million by trading the stock, according to the complaint.

Jared Scharf, an attorney who represents Gault, Perkins and Heart Tronics, said his clients denied accounts of falsified sales. “The company intends to defend the lawsuit vigorously,” Scharf said.

The SEC sued a total of six individuals, and Stein was named by the Justice Department in a parallel criminal case, the SEC said. A phone call to Stein’s Woodland Hills, California, law firm wasn’t immediately returned. A phone number listed to Martin B. Carter in Clewiston, Florida, was disconnected.

The case is U.S. Securities and Exchange Commission v. Heart Tronics, 11-cv-01962, U.S. District Court, Central District of California (Los Angeles).

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Interviews/Speeches

Chilton Says MF Global Client Funds Must Be Returned

Bart Chilton, a commissioner at the U.S. Commodity Futures Trading Commission, talked about the outlook for returning lost money to former customers of bankrupt commodities broker MF Global Inc.

Chilton spoke with Scarlet Fu and Stephanie Ruhle on Bloomberg Television’s “InsideTrack.”

For the video, click here.

CFTC’s Gensler Says Agency to Propose Volcker Rule in January

U.S. Commodity Futures Trading Commission Chairman Gary Gensler said his agency may vote to propose the so-called Volcker Rule in January.

The CFTC is the last of several U.S. financial regulators to propose the rule curtailing banks’ proprietary trading and their relationships with hedge funds. The rule is required by the 2010 Dodd-Frank Act.

“I would be hopeful that we would address ourselves to a proposal -- possibly even in the first meeting of January -- of the Volcker Rule,” Gensler told reporters at a meeting yesterday in Washington.

Kroszner Says ‘No Magic Number’ for Capital Rules

Randall Kroszner, professor of economics at the Booth School of Business at the University of Chicago and a former Federal Reserve governor, talked about bank capital and liquidity requirements.

The Federal Reserve will issue capital and liquidity rules this week reshaping supervision of the riskiest, largest banks and those with more than $50 billion in assets, a government official familiar with the matter said. Kroszner spoke with Lisa Murphy and Michael McKee on Bloomberg Television’s “In the Loop.”

For the video, click here.

Comings and Goings

Germany Appoints Elke Koenig to Succeed Sanio as BaFin Chief

The German government appointed Elke Koenig to replace Jochen Sanio as head of the country’s financial regulator, BaFin, effective Jan. 1.

“The financial markets are going through difficult times - - a lot is in a state of transition -- so it’s of special significance to have an experienced and proven personality at the head” of BaFin, Finance Minister Wolfgang Schaeuble said in an e-mailed statement. “This will strengthen the confidence in Germany as a financial center.”

Bahrain’s AAOIFI Appoints Khaled Al Fakih as Secretary General

The Accounting and Auditing Organisation for Islamic Financial Institutions appointed Khaled Al Fakih as its secretary general, replacing Mohamad Nedal Alchaar. The Mananma, Bahrain-based institution made the announcement in an e-mailed statement yesterday.

Zuma Names Mokhatla as Acting Head of Special Investigating Unit

South African President Jacob Zuma appointed Nomvula Mokhatla, the deputy national director of Public Prosecutions, as acting head of the Special Investigating Unit.

Mokhatla replaces Nomgcobo Jiba, who was acting in the post following the resignation last week of Willem Heath, the Presidency said in a statement on SAPA PR today.

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.

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