Commodity Audios, Odd Lot Volume, Malaysia: Compliance

The U.S. Commodity Futures Trading Commission, facing resistance from agricultural and energy firms, is struggling to reach consensus on when traders must keep audio records that could be used in enforcement cases.

The rule, proposed in June 2011 and awaiting final approval, would require recording by members of derivatives exchange and swap-execution facilities. The records could help the CFTC’s enforcement unit determine the intent of traders when probing claims of market manipulation and false reporting.

The CFTC used recordings of telephone calls in the probe that led to its $200 million settlement with Barclays Plc (BARC) over claims that the bank helped manipulate interest rates.

The agency proposal met resistance starting last year from industry groups representing small and large trading firms and exchanges including Archer-Daniels-Midland Co. (ADM), Cargill Inc., Macquarie Bank Ltd. and the Kansas City Board of Trade. The rule would affect all exchange members and the swap-execution facilities created by the Dodd-Frank Act to boost transparency.

Groups including the Commodity Markets Council and National Grain and Feed Association have held five meetings with CFTC staff members on the issue in the last month. The groups say the proposed rule would unnecessarily capture commercial end-users that trade derivatives to hedge risk.

CFTC members are working to reach consensus on a final version, according to an agency official who sought anonymity because the rulemaking process isn’t public.

Compliance Policy

Odd Lots Considered for Official Count of U.S. Trading Volume

Hundreds of millions of shares traded each day in companies such as Apple Inc. (AAPL) and International Business Machines Corp. (IBM) may be added for the first time to the official tally of U.S. equity volume.

Securities exchanges and the Financial Industry Regulatory Authority plan to consider adding trades of fewer than 100 shares, known as odd lots, to the record of transactions, Colin Clark, senior vice president at NYSE Euronext (NYX), said in a phone interview. There’s general support for modifying the so-called consolidated tape of transactions to include them, he said.

The policy of leaving odd lots out resulted in about 4 percent of volume being omitted from the official count in late 2009, up from 2.3 percent about two years earlier, a 2011 paper by Maureen O’Hara, a finance professor at Cornell University, and Chen Yao and Mao Ye of the University of Illinois found. The trades are now more likely to be from high-frequency firms, indicating a shift from their traditional source among individual investors, the study said.

Only executions of at least 100 shares, known as a round lot, are included in the record of transactions and compiled in the Trade and Quote Database, or TAQ, used by academics to study asset prices, trading and investor behavior. Compared with most of the 1990s when odd lots accounted for less than 1 percent of New York Stock Exchange volume, their omission now distorts analyses, according to the July 2011 paper.

The exchanges and the Financial Industry Regulatory Authority, which oversee the market-data programs, plan to vote in November about whether to include trades of fewer than 100 shares in the transaction reports, said Clark, a member of the operating committee for the Consolidated Tape Association.

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Malaysia to Allow Bond Trading by Individuals to Add Volume

Malaysia will allow individuals to trade bonds in a move aimed at boosting investment volumes in its debt market, the Securities Commission said.

Islamic and non-Islamic notes can traded on the stock exchange or over-the-counter through appointed banks, the country’s capital-market regulator said in a statement released Sept. 7 in Kuala Lumpur.

In the initial phase, individuals will be able to invest in debt which is issued or guaranteed by the government before the platform is extended to include offers by public companies and banks, according to the regulator’s statement.

The Southeast Asian country is following its neighbors Thailand, Indonesia and the Philippines, where issuers already sell bonds in small lots for individuals to buy through banks and brokerages. Malaysia currently allows only over-the-counter transactions involving largely institutional investors.

Separately, National Bank of Abu Dhabi PJSC, the United Arab Emirates’ second-largest lender by assets, said it plans to seek an Islamic banking license in Malaysia to meet demand for Shariah-compliant financing.

The company wants to expand after starting non-Islamic commercial banking operations in Southeast Asia’s third-largest economy in July, said Leong See Meng, chief executive officer of National Bank of Abu Dhabi Malaysia Bhd.

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Indonesia Considers Down Payment Rule for Shariah Banks, BI Says

Bank Indonesia may issue a regulation on the requirement of a down payment for loans from Shariah-compliant banks in October or November, Edy Setiadi, executive director of Islamic banking at the central bank, said in Jakarta Sept. 7.

The regulation aims to avoid a “bubble” in consumer lending, Setiadi said. The minimum down payment requirement may be similar to levels imposed for conventional banks, according to Setiadi.

ECB to Assess Bank Ownership Changes Under EU Plan, Il Sole Says

The European Central Bank would gain the power to vet potential owners of banks under a European Commission proposal to create a single financial supervisor in the euro area, according to a document published by Il Sole 24 Ore.

The Frankfurt-based central bank “should have the task to assess the acquisition and disposal of significant holdings in credit institutions,” according to a document published on the Milan-based newspaper’s website Sept. 7 that was identified as a draft of the commission’s proposal.

A board for supervisory issues would be created in the ECB led by a member of the Governing Council and composed of officials from the central bank and national authorities, according to the document. A commission spokesman declined to confirm the document’s authenticity or to comment on its publication when contacted by Bloomberg News.

The ECB would oversee all banks in the euro area and have consolidated supervision powers over financial holding companies, according to the document. The ECB would be able to levy fees on the industry to cover the costs of supervision and could perform inspections and impose sanctions under some circumstances. The central bank would also be charged with granting and revoking banking licenses in consultation with member states, the document states.

National regulators would need to coordinate closely with the central bank, according to the document.

Separately, the European Union will probably not be able to set up a banking supervisor across the trade bloc by January as proposed, German Finance Minister Wolfgang Schaeuble told reporters in Stockholm, where he was holding talks with Swedish Finance Minister Anders Borg last week.

The process of implementing EU supervision will kick off “with systemically-relevant institutes, then maybe banks on the rescue program and then rules made for all banks,” Schaeuble said.

BIS Central Bankers to Start Inquiry on Libor Rate

Bank of England Governor Mervyn King said global central bankers agreed to set up an inquiry into Libor after confidence collapsed in the benchmark rate for more than $500 trillion of securities.

The announcement follows a meeting yesterday of central bank governors led by King in his role as chairman of the Economic Consultative Committee at the BIS in Basel, Switzerland. The inquiry will be led by “senior officials,” and comes as Financial Services Authority Managing Director Martin Wheatley conducts a separate investigation into how the London interbank offered rate is set.

King put Libor on the agenda after Barclays Plc was fined 290 million pounds ($464 million) for its role in manipulating the rate, which triggered the resignations of its chairman, chief executive officer and chief operating officer. The Bank of England became embroiled in the scandal, and lawmakers criticized it last month for “naivety” in its handling of questions about the rate as far back as 2007.

The BIS was founded in 1930 and acts as a central bank for the world’s monetary authorities. King took over in November as chairman of its Global Economy Meeting and the ECC, which meets every two months.

A lobby group representing the banking industry in Brussels, Washington and Hong Kong said today that all systemically significant financial benchmarks should be subject to regulatory oversight following the Libor scandal.

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Tougher Dodd-Frank Fiduciary Standard for U.S. Brokers Stalled

Even with Wall Street and consumer advocates allied in pushing for it, a Securities and Exchange Commission proposal to raise standards for U.S. brokers advising retail investors has run aground.

The agency, which has been drafting a rule for almost two years, has scheduled no action on the measure even as 2012 wanes and a presidential election approaches.

SEC Chairman Mary Schapiro, who pushed to include the measure in the 2010 Dodd-Frank Act to ensure clients receive equal treatment from brokers and investment advisers, said other rules will probably take precedence in coming months.

Dodd-Frank, an overhaul of financial regulation passed in the wake of the 2008 credit crisis, instructed the SEC to consider mandating that brokers operate under a fiduciary standard as rigorous as that for investment advisers.

Barbara Roper, director of investor protection for the Consumer Federation of America, said it’s unlikely there will be a final rule before the end of this year.

The SEC’s 2011 report said consumers are often baffled by the distinction between brokers and advisers. The report recommended a uniform standard “to act in the best interest of the customer without regard to the financial or other interest of the broker, dealer, or investment adviser.”

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Compliance Action

Bankia State Aid Wins Temporary Approval From EU Commission

BFA, the parent of Spain’s Bankia SA (BKIA), won temporary European Union approval to receive a 4.5 billion-euro ($5.75 billion) recapitalization from Spain’s banking bailout fund FROB, the European Commission said today.

“The Spanish authorities have committed to present a restructuring plan in time to allow the Commission to approve the plan by November 2012,” the regulator said in a statement on its website.

The nationalized lender last month posted a 4.45 billion-euro first-half loss. European Union officials must approve government rescue funding for banks and can require lenders to shed units and change business behavior.

N.Z. Regulator Says Vodafone Fined for Fair Trading Breaches

The New Zealand Commerce Commission fined Vodafone for fair trade breaching, according to an e-mailed statement.

The regulator said it fined Vodafone NZ$960,000 ($778,000) in Auckland District Court on 21 charges over marketing campaigns from 2006 to 2009 that breached the Fair Trading Act.

The action follows a previous fine of about NZ$500,000 for other breaches of the act.

The FCC Said to Propose Market-Maker Role in Airwaves Auction

A U.S. agency Sept. 7 will propose acting as the sole buyer for airwaves that television stations will surrender for an auction of spectrum to mobile providers led by Verizon (VZ) Wireless, two officials said.

The idea is among several being advanced by Federal Communications Commission Chairman Julius Genachowski for the auction planned for 2014, said the agency officials, who spoke Sept. 6 on condition of not being identified because the matter hasn’t been made public.

The auction is being set up to provide more spectrum for Verizon, AT&T Inc. (T) and other wireless-service providers that are facing soaring demand for data to feed tablet computers and smartphones such as Apple Inc.’s iPhone.

The FCC plans to buy airwaves that some TV stations will voluntarily relinquish in a process known as a reverse auction. It would then sell the frequencies in a traditional auction. The FCC will seek public comment before it settles next year on rules for the auction, the officials said.

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U.K. Cigarette Companies Impacted by Smoking Rules

British American Tobacco Plc (BATS) and Imperial Tobacco Group Plc (IMT), Europe’s two largest cigarette makers, fell Sept. 7 in London after reports that Russia and France plan to impose greater restrictions on smokers.

France’s health minister will unveil a plan to remove branding from cigarette packs in coming weeks, Le Parisien reported Sept. 5, without citing anyone. The Russian government plans to submit a law banning smoking in public places to Parliament by Nov. 1. The country has the second-largest tobacco market after China. BAT had 20.8 percent of eastern Europe’s cigarette market in 2011, while Imperial had 11.2 percent, according to data compiled by Bloomberg.

The Russian government wants to reduce premature deaths caused by smoking, Deputy Health Minister Sergei Velmiaikin said Sept. 3. The world’s first plain-pack law is due to take effect in Australia Dec. 1, and governments in New Zealand and the U.K. are considering similar legislation.

Interviews

UniCredit Sees Bank Union Ready for Large Firms by July

Federico Ghizzoni, chief executive officer of UniCredit SpA (UCG), talked about the European Central Bank’s bond-purchase program, the Italian economy and the outlook for a European banking union.

He spoke Sept. 8 with Bloomberg Television’s Guy Johnson in Cernobbio, Italy.

Barnier Sees EU Bank Supervisor Likely by January

European Union Financial Services Commissioner Michel Barnier talked with reporters about banking supervision.

He spoke Sept. 8 in Cernobbio, Italy.

Intesa Warns Against Veering From European Integration

Intesa Sanpaolo SpA (ISP) Chief Executive Officer Enrico Cucchiani discussed the Italian economy and European banking, fiscal, economic and political integration.

He talked with Bloomberg Television’s Guy Johnson in Cernobbio, Italy.

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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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