Eugene Grygo, Chief Content Editor, FTF News
For this week’s posting, I purposely tried to find news items that if not necessarily good news had some silver linings of hope and progress. I found three via my random, unscientific search.
SEC Achieves Early $30 Million Settlement in Newswire Hacking Case
The first piece I hit upon was the news from the SEC that it will be getting $30 million from Jaspen Capital Partners Ltd., based in the Ukraine, and the firm’s CEO Andriy Supranonok in an agreement to settle allegations that they “profited from trading on non-public corporate information hacked from newswire services,” according to SEC officials. (Here’s a link to our previous coverage)
Last month, the SEC was in the headlines because of its case against 34 defendants who allegedly schemed to trade on information stolen from newswire services and transmitted to “a web of international traders, including Jaspen and Supranonok.” A key to the SEC’s prosecution of the case were the “sophisticated analytical tools” used to identify “abusive” contracts-for-differences CFD trading via “this opaque market,” said Michael J. Osnato, chief of the SEC Enforcement Division’s Complex Financial Instruments Unit.
“By getting an early look at the information before its public release, the traders allegedly generated more than $100 million of illegal profits over a five-year period,” alleges the SEC. “The case was filed in U.S. District Court for the District of New Jersey, which entered an asset freeze and other emergency relief against Jaspen and Supranonok, among others.”
“Barely a month after we froze tens of millions of dollars in illegal profits from the defendants’ trading on illegal inside information obtained from hacked news releases, we obtained a settlement with foreign traders that deprives them of their wrongful gains,” said Andrew J. Ceresney, director of the SEC’s Enforcement Division in a prepared statement.
The SEC’s complaint charges that Jaspen and Supranonok made “approximately $25 million buying and selling contracts-for-differences (CFDs) on the basis of hacked press releases stolen from two newswire services between 2010 and 2014 and made additional profits trading on press releases stolen from a third newswire service in 2015.”
Without admitting or denying the SEC’s allegations, Jaspen and Supranonok agreed to be enjoined from violating the antifraud provisions of U.S. securities laws and related SEC antifraud rules and to return $30 million of allegedly ill-gotten gains, according to the SEC, which adds that the settlement offers are subject to approval by the court. The SEC will continue to litigate against the other 32 defendants charged in the case.
ISDA’s Push for Standardized Symbology for Derivatives
The derivatives industry advocate, the International Swaps and Derivatives Association (ISDA), is taking on a symbology project intended to provide an industry-wide, open-source standard to help all derivatives facilities such as trading venues, clearinghouses, repositories and other infrastructures meet regulatory needs. The need for this kind of a standard is evident as 18 major market participants are getting behind the effort to offer standardized identification of derivative instruments. (Check out our story here)
ISDA has also named a project manager, the London-based capital markets technology consultancy Etrading Software, and has created a Symbology Governance Committee (SGC) that will provide oversight for the classification and identification standard to come.
This initiative comes at the right time as Scott O’Malia, ISDA’s CEO says in a prepared statement that with Markets in Financial Instruments Directive/Regulation (MIFID II/MIFIR) looming and more SEC regulatory requirements are on the way, an industry wide, open-source standard “with sufficient granularity to meet regulatory needs is now critical.”
It will be interesting to watch the progress of this effort especially if it is accepted as quickly as the Legal Entity Identifier (LEI) push was.
Full Speed Ahead for T+2?
Sometimes sorting out what the SEC is thinking is a little like reading tea leaves. For instance, the recent letter from SEC Chair Mary Jo White to the industry steering committee (ISC) for the shorter T+2 settlement cycle expresses full support for the effort but also seems to say that it has no intention of speeding up its rule-changing process. (Click to the story here.)
If ever there was a case for fast tracking new rules, it would be T+2 settlement if only to stick to the October 2017 timetable that the ISC, the DTCC and others are working toward. The letter also appears to be saying that the regulator will not be in lock step with the ISC.
The silver lining here is that the industry is not obligated to wait for the SEC given that T+2 would meet and surpass the requirements of many current SEC rules. In all likelihood, waiting for the regulators to finalize new rules could have delayed T+2 by a year or more beyond 2017.
A potential fly in ointment is that the industry may get to T+2 only to have key steps changed by the regulators after the fact. That would not be much fun for firms that revamped operations and systems to achieve shorter settlement cycles.
Need a Reprint?
