Bond Exclusion, Oil-Price Probe, Saab: Compliance
Government bonds should be excluded from the European Union’s planned financial-transaction tax because the levy would drive up sovereign borrowing costs, a panel of European debt-management officials said.
Primary issuance, secondary-market trading, related derivatives and repurchase agreements all affect borrowing costs, which would rise unless transactions involving government debt are exempt, according to an April 18 letter to senior EU finance aides that was obtained by Bloomberg News.
The proposed tax “underestimates the impact of the proposal on market liquidity,” said the two-page analysis signed by Anne Leclercq, director for treasury and capital markets in Belgium’s finance ministry in Brussels. “This impact would substantially reduce the attractiveness of sovereign bonds and jeopardize diversification of the investor base, in particular for those sovereign issuers for which liquidity is at the heart of their strategy.”
The officials’ concern adds to warnings issued by European Central Bank policy makers. ECB Executive Board members Yves Mersch and Benoit Coeure both questioned the tax’s design this month. The ECB’s Bond Market Contact Group said in a May 6 report that the proposal would hurt banks and disrupt markets.
EU Tax Commissioner Algirdas Semeta aims to create the transaction tax to take effect as soon as next year. The proposed levy could be collected worldwide by France, Germany and nine other EU nations, including Belgium, that have so far signed up, if the effort stays on schedule.
The EU is trying to remedy what it sees as a “patchwork” of levies and rein in speculative trading. The Brussels-based European Commission has resisted calls to exclude derivatives and secondary-market trading from the tax proposal, even when those trades involve government bonds.
Finra Considering Rule to Require More Dark Pool Data Disclosure
A Wall Street regulator is considering new rules to shine light on dark trading after the largest U.S. dark pool operator stopped sharing data on the volume of its trades.
The Financial Industry Regulatory Authority may ask brokers to distinguish trades that occur in dark pools from ones that don’t, Chief Executive Officer Richard G. Ketchum told reporters yesterday. Doing so would enable Finra to publish figures for how much trading occurs in every dark pool.
Ketchum made the remarks at a Finra conference in Washington.
Ketchum’s comments come as exchanges have asked the U.S. Securities and Exchange Commission to consider curbs on trading outside of public markets. U.S. off-exchange volume reached 36.2 percent of all trading in the first quarter, up from 32.8 percent last year, according to data compiled by Bloomberg.
Estimates of trading in dark pools, which don’t publish bids and offers, are published monthly by research firm Tabb Group LLC and institutional broker Rosenblatt Securities Inc. Last month, Credit Suisse Group AG (CSGN), operator of the largest U.S. dark pool, said it would stop providing data to Tabb and Rosenblatt, which Ketchum noted in his comments.
Under current reporting rules, Finra can’t with certainty break out trades that happen in a particular dark pool. That’s because brokers that operate dark pools use a single identifier for all activity.
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EU Seeks to Widen Net for Bankers Targeted in Bonuses Clampdown
Bankers who make more than their bosses could be ensnared by European Union bonus curbs even if their total pay is less than 500,000 euros ($644,000), under proposals from the bloc’s top banking regulator.
The European Banking Authority also targeted the best paid 0.3 percent of staff in a bank, and some bankers with bonuses higher than 75,000 euros, in plans published yesterday that seek to identify which bankers should be caught by an EU law banning bonuses greater than twice fixed pay.
The EU brokered a deal in February to outlaw banker bonuses that are more than twice fixed pay, a move lawmakers said would prevent excessive payouts and curb irresponsible risk-taking. U.K. Chancellor of the Exchequer George Osborne opposed the curbs, saying they would harm the competitiveness of the nation’s finance industry.
Banks would be able to exclude some employees only if they could show the workers have “no material impact on the institution’s risk profile,” the EBA said in an e-mailed statement from London.
The London-based EBA set a deadline of Aug. 21 for outside comment on yesterday’s proposals, which must be endorsed by the European Commission before they can become binding.
Oil-Fixing Probe Accelerates as Europe Asks Traders for Help
The investigation into possible oil-price fixing gathered pace as trading houses from Glencore Xstrata Plc, the $70 billion mining firm, to Gunvor Group Ltd. were asked to provide information to European regulators.
Glencore Xstrata, Gunvor and Vitol Group, which aren’t under investigation, along with other firms with offices in Switzerland, are assisting the European Commission with the inquiry, said three people familiar with the situation, who asked not to be identified because the matter is private. The commission announced last week that it’s probing whether oil companies colluded to distort prices.
The probe of potential abuse in the energy market is the third into global benchmark prices in the past year and follows investigations into the London interbank offered rate, or Libor, and ISDAFix, the benchmark for the $379 trillion swaps market. Royal Dutch Shell Plc (RDSA), BP Plc (BP/) and Statoil ASA (STL) are targets of the latest inquiry into whether prices of crude, refined oil products and biofuels were manipulated, potentially harming consumers. Platts, a price assessor, was also questioned.
Spokesmen for Baar, Switzerland-based Glencore Xstrata, Geneva-based Vitol and Gunvor, and competitors Mercuria Energy Trading SA, also of Geneva, and Amsterdam-based Trafigura Beheer BV, either didn’t return calls seeking comment or declined to discuss the matter because of company policy.
Antoine Colombani, a spokesman for the Brussels-based commission, declined to comment when contacted by Bloomberg News yesterday.
Bloomberg LP, the parent of Bloomberg News, competes with Platts and other companies in providing energy markets news and information.
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Sweden Prosecutors Arrest Former Saab Auto CEO on Tax Charge
Three former Saab (SAABB) Automobile executives, including former Chief Executive Officer Jan-Aake Jonsson and Chief Financial Officer Karl-Gustav Lindstroem, were arrested by Swedish prosecutors in an accounting-fraud probe.
Three people were questioned May 20 on suspicion of “grave attempts to complicate tax controls” during 2010 and 2011, Olof Sahlgren, the Swedish Economic Crime Authority’s chief prosecutor, said by phone yesterday, declining to give the names of the arrested. Court documents filed in Vaenersborg indicate Jonsson, Lindstroem and Saab’s former general counsel Kristina Geers were detained.
The suspects were released yesterday after questioning and are still under suspicion, Sweden’s TT newswire reported.
The probe focuses on incidents before Saab filed for bankruptcy in December 2011, almost two years after it was purchased by Dutch supercar-maker Spyker NV. Spyker, which bought Saab from General Motors Co. (GM), was forced to halt production because of a lack of cash before the insolvency.
Bengt-Erik Sik, Geers’s lawyer, denied the accusations and said in a telephone interview “we are all very shocked how this is being handled.”
Helena Wising, Jonsson’s lawyer, said earlier she was on her way to meet her client when reached on her mobile phone and declined to comment further. Lindstroem’s lawyer, Bo Ahlenius, wasn’t immediately available to comment.
National Electric Vehicle Sweden AB bought Saab out of bankruptcy in August.
ICE-NYSE Deal Formally Notified to EU for Merger Examination
IntercontinentalExchange Inc. (ICE) formally sought European Union approval for its plans to buy NYSE Euronext 15 months after regulators blocked Deutsche Boerse (DB1) AG’s acquisition of the New York Stock Exchange operator.
The EU regulator said last month it would review the exchange’s plans after national regulators didn’t object to it taking the lead. The formal filing by ICE was made on May 17 and triggered an initial deadline of June 24 for the EU to rule on the deal, the European Commission said on its website yesterday.
ICE agreed on Dec. 21 to acquire NYSE Euronext for cash and stock totaling $8.2 billion at the time. EU regulators vetoed Deutsche Boerse’s purchase of NYSE last year, citing concern over competition in derivatives and clearing.
ICE, the energy and commodity futures bourse, said in March that it sought an EU review of its acquisition to avoid separate probes in the U.K., Spain and Portugal.
Brookly McLaughlin, a spokeswoman for Atlanta-based ICE, and Caroline Tourrier, a spokeswoman for NYSE Euronext in Paris, didn’t immediately respond to a call and e-mail seeking comment.
Japan FSA Orders OSE to Prevent System Problem, NHK Says
Japan’s Financial Services Agency ordered the Osaka Securities Exchange to prevent a recurrence of the system problem that suspended Nikkei 225 derivatives trading in March, NHK World reported, without saying who provided the information.
Earlier, Nikkei 225 Stock Average futures volume plunged more than 90 percent March 4 as a software error forced a halt to Osaka trading of some derivatives, the first outage for Nasdaq OMX Group Inc. technology installed in 2011.
Marks & Spencer Wins U.K. Supreme Court Ruling in Tax Dispute
Marks & Spencer Group Plc (MKS) won a U.K. Supreme Court case, easing restrictions on its ability to claim tax relief from losses at its now-defunct German and Belgian units.
The country’s highest court rejected an appeal by Her Majesty’s Revenue & Customs today on how that relief is calculated, handing another victory to Britain’s largest clothing retailer in its decade-long legal battle. M&S wants to use losses at the units to offset taxable profits in the U.K.
Google Inc. (GOOG), Apple Inc. (AAPL), Goldman Sachs Group Inc. (GS) and other multinational companies have faced criticism in countries where they operate for using legal methods to avoid paying full taxes.
A spokesman for HMRC and Simon Whitehead, a lawyer at London-based tax firm Hage Aaronson who represented M&S in the case, declined to immediately comment.
The retailer is “pleased with today’s ruling,” Clare Wilkes, a spokeswoman for M&S, said in an e-mailed statement. She declined to comment further because the case is ongoing.
The case is: Commissioners for Her Majesty’s Revenue and Customs v Marks & Spencer Plc, Supreme Court,  UKSC 30.
UBS Must Face Former CMBS Strategist’s Whistle-Blower Lawsuit
UBS AG (UBSN) was ordered to face a whistle-blower lawsuit by a former commercial mortgage-backed securities strategist who said he was fired for telling supervisors he was being pressured to publish misleading reports.
U.S. District Judge Jesse Furman in Manhattan rejected the Swiss bank’s bid to throw out the case, saying in a decision filed yesterday that the former strategist, Trevor Murray, met requirements for proceeding under whistle-blower provisions of federal law.
Murray brought the lawsuit under whistle-blower protection provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, alleging that UBS violated the provisions because the decision to fire him was based partially on disclosures that are protected by the 2002 Sarbanes-Oxley investor-protection law.
UBS had argued that the suit should be dismissed because Murray didn’t report the allegations to the U.S. Securities and Exchange Commission and therefore isn’t legally defined as a whistle-blower.
Karina Byrne, a spokeswoman for Zurich-based UBS, didn’t immediately respond to an e-mail yesterday seeking comment on the decision.
The case is Murray v. UBS Securities LLC, 12-cv-05914, U.S. District Court, Southern District of New York (Manhattan).
Apple’s Cook, Oppenheimer Testify on Taxes Before Senate
Tim Cook, chief executive officer for Apple Inc., Peter Oppenheimer, chief financial officer, and Phillip Bullock, head of tax operations, testified before the Senate Permanent Subcommittee on Investigations in Washington about the iPhone maker’s tax payments, use of offshore tax shelters and U.S. tax policy.
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Lew Vows Action on Money Market Funds If SEC Fails to Act
U.S. Treasury Secretary Jack Lew vowed to take action on money market funds if the Securities and Exchange Commission fails to act, he said in testimony prepared for a Senate Banking Committee hearing.
If the SEC moves ahead with “meaningful structural reforms” of the money market mutual fund industry, then the Financial Stability Oversight Council probably won’t issue a final recommendation on rules to the agency, Lew said.
“However, if the SEC does not pursue additional reforms that are necessary to address” the industry’s structural vulnerabilities, then “council should use its authorities to take action in this area,” he said.
Last week, SEC Chairman Mary Jo White told lawmakers that the agency’s proposal on money market mutual funds is “well under way.”
Lew also said that the Financial Stability Oversight Council is likely to vote in the “near term” on whether to designate an initial set of non-bank financial companies as being systemically important and warranting Federal supervision.
ICE Joins CME Warning of Splits in Global Derivatives Rules
Top executives of the two largest U.S. derivatives exchanges say regulators must take further steps to align Dodd-Frank Act rules with those of foreign counterparts to avoid oversight splits that could harm markets.
The Commodity Futures Trading Commission and overseas agencies have a few months to improve coordination before differences hurt business, IntercontinentalExchange Inc. Chairman and Chief Executive Officer Jeffrey Sprecher said at a House Agriculture Committee hearing where he testified alongside CME Group (CME) Inc. Executive Chairman Terry Duffy.
The CFTC and Securities and Exchange Commission are leading U.S. efforts to revamp oversight of the $633 trillion global swaps market after unregulated trades helped fuel the 2008 credit crisis. Representative Frank D. Lucas, the Oklahoma Republican who leads the Agriculture Committee, called the hearing to begin considering changes to the law that authorizes the CFTC to provide oversight of swaps and futures markets.
Duffy warned lawmakers that a proposal to pay for market oversight through industry fees would drive business out of the U.S.
The international reach of the CFTC’s swap rules has been one of the most contentious parts of the agency’s Dodd-Frank work, drawing opposition from banks including JPMorgan Chase & Co. (JPM), Goldman Sachs Group Inc. and Barclays Plc. (BARC)
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