U.K. ECB Challenge, HFT Hearing, Commerzbank: Compliance

Britain’s lawyers will take on the European Central Bank in a hearing today at the bloc’s top court, fighting policies they argue would punish the nation’s financial hub because the U.K. has kept the pound sterling.

David Cameron’s government is attacking ECB policy documents stating that clearinghouses handling trades in euros should be based in the single-currency area. Britain says the policies amount to an ultimatum.

The hearing at the court in Luxembourg is the latest in a series of U.K. maneuvers against European Union responses to the financial crisis, including a possible tax on transactions and curbs on bankers’ bonuses.

The U.K. is on a losing streak at the European Court of Justice. It failed to overturn EU powers to ban short selling and was told that an early challenge against the transaction-tax plan was premature.

A U.K. government spokesman, who can’t be named in line with official policy, said in an e-mail that the government believes the ECB’s policy contravenes European law and fundamental single-market principles by preventing the clearing of some financial products outside the euro area.

The U.K. will contest statements from the ECB setting out a so-called location policy for clearinghouses. The ruling in the case won’t come for months.

A spokesman for the European Central Bank in Frankfurt declined to comment.

The cases are T-496/11, T-45/12 and T-93/13 United Kingdom v. ECB.

Compliance Action

Amedisys Says SEC Staff Concludes Medicare Probe With No Action

Amedisys Inc. was advised by Securities and Exchange Commission staff that an investigation into its operations and participation in the Medicare program has been completed and the staff doesn’t intend to recommend any enforcement action.

Amedisys, the largest U.S. home-nursing provider, reported the investigation in June 2010.

The U.S. Senate Finance Committee said in May 2010 it was reviewing whether the home-nursing industry manipulated the number of visits made to patients to boost government reimbursements.

Commerzbank Said to Face Penalties in U.S. Sanctions Probe

Commerzbank AG, Germany’s second-largest lender, will probably be the next bank to resolve alleged sanctions violations with the U.S., a person with knowledge of the matter said.

The firm may incur penalties of at least $500 million as part of a deferred-prosecution agreement with authorities, the person said, asking not to be identified because the talks are confidential. Such agreements spare companies that comply from being prosecuted.

The probe is part of a U.S. crackdown on financial institutions for handling funds linked to blacklisted nations that led to a record $8.97 billion fine against BNP Paribas SA.

A spokeswoman for the German bank declined to comment. The New York Times reported the settlement talks earlier.


High-Speed Trading Risk Blamed on Short-Sighted U.S. Regulations

A sweeping blueprint designed by the U.S. Securities and Exchange Commission to reduce conflicts of interest in the stock market won support from leaders of exchanges and large money managers.

Chief executives from the New York Stock Exchange to institutional investors including Citadel LLC and Invesco Ltd. backed the commission’s call to rein in some high-frequency trading and make secretive trading venues known as dark pools disclose more about how they work. The SEC also should move forward with a plan to require that brokers provide investors with detailed maps of how their orders are filled, the executives said yesterday at a hearing of the Senate Banking Committee.

The testimony signaled industry support for SEC Chair Mary Jo White’s agenda even as some market participants have pressed the agency to do more. White has said the agency would consider new rules in the coming months as it weighs claims that high-frequency traders enjoy systematic advantages over long-term investors.

“We’ve lost track of getting the best price for a company that’s trying to raise capital and an investor that would like to meet a company,” said Jeffrey Sprecher, chief executive officer of NYSE-owner Intercontinental Exchange Inc. “I think if we just look at holistic practices to do the right thing for investors, we’ll land on the right public policy.”

Yesterday’s hearing was expected to intensify pressure on the SEC to change rules it enacted over the past decade intended to promote competition among exchanges.

High-frequency traders came under criticism yesterday from Invesco and Senator Elizabeth Warren, a Massachusetts Democrat who questioned whether their short-term, low-risk trading strategies promote liquidity or are “just skimming money off the top of these trades.”

“We know that there are a lot of people who pretend to be market makers, but it’s unclear to us whether this is really just trading volume or if it’s real liquidity,” said Kevin Cronin, global head of trading at Invesco.

The SEC’s rules for a national market system have come under scrutiny as lawmakers examine whether high-frequency traders have exploited changes introduced by regulators, exchanges and brokers.

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