London Gold Fix, Bitcoin, UBS-China Futures: Compliance

The London gold fix, the benchmark used by miners, jewelers and central banks to value the metal, may have been manipulated for a decade by the banks setting it, researchers say.

Unusual trading patterns around 3 p.m. in London, when the so-called afternoon fix is set on a private conference call between five of the biggest gold dealers, are a sign of collusive behavior and should be investigated, New York University’s Stern School of Business Professor Rosa Abrantes-Metz and Albert Metz, a managing director at Moody’s Investors Service, wrote in a draft research paper.

The paper is the first to raise the possibility that the five banks overseeing the century-old rate may have been actively working together to manipulate the benchmark. It also adds to pressure on the firms to overhaul the way the rate is calculated. Authorities around the world are examining the $20 trillion gold market for signs of wrongdoing.

Abrantes-Metz advises the European Union and the International Organization of Securities Commissions on financial benchmarks.

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Compliance Action

Banks’ Corporate-Bond Sales Said to Face SEC Probe of Favoritism

The U.S. Securities and Exchange Commission is examining whether Wall Street banks have given certain clients preferential treatment in corporate-bond sales, according to a person with direct knowledge of the matter.

The SEC also is reviewing the banks’ trading of bonds after offerings, said the person, asking not to be named because the probe is confidential. The inquiry is in early stages and may not lead to any enforcement action, the person said.

The SEC sent banks requests in the fourth quarter seeking information about allocations and trading, the Wall Street Journal reported Feb. 28, citing unidentified people familiar with the matter. The agency is reviewing whether some money managers exert too much influence in offerings, leaving smaller investors disadvantaged in the deals, the paper said.

Goldman Sachs Group Inc.’s annual filing last week added “allocations of and trading in fixed-income securities” to a list of activities at the New York-based firm that are subject to open regulatory scrutiny. That firm and New York-based Citigroup Inc. are among banks being examined, the Journal said.

Spokesmen for Goldman Sachs, Citigroup, and the SEC, declined to comment on whether the SEC is investigating.

Mt. Gox Seeks Bankruptcy After $463 Million Bitcoin Loss

Mt. Gox, once the world’s largest Bitcoin exchange, filed for bankruptcy in Japan.

The collapse follows weeks of turmoil amid reports that hackers had pilfered the missing $473 million in Bitcoin from Mt. Gox, leading the company to halt withdrawals on Feb. 7.

The regulation of Bitcoin and its derivatives is an unresolved question in many parts of the world. At the top U.S. derivatives regulator, the Commodity Futures Trading Commission, lawyers are considering if and how to oversee derivatives linked to Bitcoin and other digital currencies, according to two people briefed on its work.

Steve Adamske, CFTC spokesman, declined to comment.

Patrick Murck, the general counsel for the Bitcoin Foundation, an advocacy group for the currency, said the rules will vary with the services offered.

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UBS Planning China Stock Futures as Hedge Demand Soars

UBS AG plans to start trading Chinese stock-index futures after turnover more than tripled in the past two years amid growing investor demand for ways to hedge against equity losses.

The Swiss bank will probably offer contracts on the CSI 300 Index by next year after acquiring a Chinese commodities-futures brokerage last month, said Yang Xia, the head of China equities at UBS.

The use of financial derivatives in China is expanding as policy makers allow more investment from foreign money managers, loosen restrictions on hedge funds and seek a bigger role for the yuan in global capital markets.


Schaeuble Doesn’t See Quick Agreement in Euro Bank-Failure Talks

German Finance Minister Wolfgang Schaeuble said he doesn’t see quick progress on a euro-area bank-failure plan, even with a looming deadline for the legislation.

European finance chiefs convene in Brussels on March 10-11, seeking a breakthrough in talks on the proposed Single Resolution Mechanism and an accompanying 55 billion-euro ($76 billion) fund to cover the cost of saving or shuttering lenders.

Schaeuble has to balance domestic and outside pressures on Germany, as the biggest bailout contributor.

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