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Trading Probe, Hedge Fund Risk, Fannie Bill: Compliance

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March 19 (Bloomberg) -- New York Attorney General Eric Schneiderman opened an investigation into whether U.S. stock exchanges and alternative venues provide high-frequency traders with improper advantages, a person with knowledge of the matter said.

Schneiderman is examining the sale of products and services that offer faster access to data and richer information on trades than is typically available to the public, according to the person. Wall Street banks and rapid-fire trading firms pay thousands of dollars a month for these services from firms including Nasdaq OMX Group Inc. and IntercontinentalExchange Group Inc.’s New York Stock Exchange.

The attorney general’s staff has discussed his concerns with executives of Nasdaq and NYSE and requested more information, said the person, who requested anonymity because the inquiry hasn’t been announced.

The investigation threatens to disrupt a model that market regulators have openly permitted for years as high-speed trading and concerns about its influence have grown.

For more, click here.

Compliance Policy

U.K. Regulators and BOE Sign Market Supervision Agreement

The U.K.’s Financial Conduct Authority and the Bank of England agreed on a memorandum of understanding that sets out how they will cooperate in relation to the supervision of markets and financial market infrastructures, including companies such as LCH.Clearnet Group Ltd. and London Stock Exchange Group, according to a statement on the regulator’s website.

The activities of the Prudential Regulation Authority, which is a part of the Bank of England, are included in the memorandum of understanding.

Nouy Says ECB Mulls Quarterly Release of Oversight Records

The European Central Bank proposed that a record of meetings held by the new Supervisory Board be delivered to European lawmakers quarterly.

The ECB began preparations last year to become the region’s top bank overseer in November, as part of a banking union intended to mitigate future financial turmoil. The parliament has complained that the ECB hasn’t met the terms of an agreement over reporting and transparency.

The Supervisory Board began holding its twice-monthly meetings in January. Daniele Nouy, the board’s chairman, said she’s willing to discuss providing information earlier if requested.

The ECB is accountable to the European Parliament over its monetary policy decisions and now on decisions relating to its new duties as supervisor of the euro area’s banks.

Nouy said the board is on track with its preparations to begin supervision, including the assessment of bank balance sheets known as the Asset Quality Review.

Hedge Fund Risk Management Faces Scrutiny at U.S. CFTC Meeting

Hedge-fund and mutual-fund firms faced scrutiny of their risk-management practices in a meeting yesterday with the top U.S. derivatives regulator.

The Commodity Futures Trading Commission staff met with respresentatives of Invesco Ltd., UBS AG and Halcyon Asset Management LLC in Washington. Discussions covered funds’ controls for risks tied to firms’ investments and operations, as well as to regulations. The CFTC regulates futures markets and has been expanding oversight of the swaps market under the 2010 Dodd-Frank Act financial-regulation law.

The discussion is the latest step by regulators to increase oversight of asset managers. The designation could lead to tighter rules on capital, leverage and liquidity, similar to those of banks.

Compliance Action

Toyota Said to Reach $1.2 Billion U.S. Criminal Settlement

Toyota Motor Corp. has reached a $1.2 billion settlement to end a U.S. criminal probe of sudden unintended acceleration that led to the recall of more than 10 million vehicles, two people familiar with the matter said.

The settlement, which isn’t final, may be announced as early as today, said the people, who asked not to be named because the accord isn’t public. The probe examined whether Toyota made false or incomplete disclosures to regulators about defects in its cars, and how it handled drivers’ complaints, said a third person, who also asked not to be identified.

The recalls blemished Toyota’s reputation for quality that spurred its rise to become the world’s top-selling automaker. A settlement would put Toyota a step closer to resolving legal fallout of those recalls.

Spokeswomen for Manhattan U.S. Attorney Preet Bharara and for the FBI in New York declined to comment on the settlement.

For more, click here.

Interviews/Commentary

Howard Says Fannie Mae Wind-Down Bill Strikes Right Balance

Jerry Howard, chief executive officer of the National Association of Home Builders, talked about a U.S. Senate proposal to wind down Fannie Mae and Freddie Mac and overhaul the government’s role in the housing market.

He spoke with Betty Liu and Michael McKee on Bloomberg Television’s “In the Loop.”

For the video, click here.

To contact the reporter on this story: Carla Main in New York at cmain2@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net Stephen Farr, Andrew Dunn

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