The PetroYuan Is Born: Gazprom Now Settling All Crude Sales To China In Renminbi

Two topics we’ve deemed critically important to a thorough understanding of both global finance and the shifting geopolitical landscape are the death of the petrodollar and the idea of yuan hegemony. 

Last November, in “How The Petrodollar Quietly Died And No One Noticed,” we said the following about the slow motion demise of the system that has served to perpetuate decades of dollar dominance:

Two years ago, in hushed tones at first, then ever louder, the financial world began discussing that which shall never be discussed in polite company - the end of the system that according to many has framed and facilitated the US Dollar's reserve currency status: the Petrodollar, or the world in which oil export countries would recycle the dollars they received in exchange for their oil exports, by purchasing more USD-denominated assets, boosting the financial strength of the reserve currency, leading to even higher asset prices and even more USD-denominated purchases, and so forth, in a virtuous (especially if one held US-denominated assets and printed US currency) loop.

The main thrust for this shift away from the USD, if primarily in the non-mainstream media, was that with Russia and China, as well as the rest of the BRIC nations, increasingly seeking to distance themselves from the US-led, "developed world" status quo spearheaded by the IMF, global trade would increasingly take place through bilateral arrangements which bypass the (Petro)dollar entirely. And sure enough, this has certainly been taking place, as first Russia and China, together with Iran, and ever more developing nations, have transacted among each other, bypassing the USD entirely, instead engaging in bilateral trade arrangements.

Falling crude prices served to accelerate the petrodollar’s demise and in 2014, OPEC nations drained liquidity from financial markets for the first time in nearly two decades:

By Goldman’s estimates, a new oil price “equilibrium” (i.e. a sustained downturn) could result in a net petrodollar drain of $24 billion per month on the way to nearly $900 billion in total by 2018. The implications, BofAML notes, are far reaching: "...the end of the Petrodollar recycling chain is said to impact everything from Russian geopolitics, to global capital market liquidity, to safe-haven demand for Treasurys, to social tensions in developing nations, to the Fed's exit strategy.”

Shifting to the idea of yuan hegemony, China is aggressively pushing its Silk Road Fund and Asian Infrastructure Investment Bank.

The $40 billion Silk Road Fund is backed by China’s FX reserves, the Export-Import Bank of China, and China Development Bank and seeks to increase ROIC for Chinese SOEs by investing in infrastructure projects across the developing world, while the $50 billion AIIB is funded by 57 founding member countries (the US and Japan have not joined) and will serve to upend traditionally dominant multilateral institutions which have failed to respond to the rising influence and economic clout of their EM membership. China will push for the yuan to play a prominent role in the settlement of AIIB transactions and may look to establish special reserves in both the AIIB and Silk Road fund to issue yuan-denominated loans.

Back in early November, SWIFT data showed that 15 new countries had joined a list of nations settling more than 10% of their trade deals with China in yuan. "This is a good sign for [yuan] adoption rates and internationalisation. In particular, Canada's [yuan] usage for payments, which has increased greatly over this period, is very interesting since we have not seen strong adoption of the [yuan] from North America to date,” Astrid Thorsen, Swift's head of business intelligence said.

Earlier that month, China and Russia indicated that going forward, more trade between the two countries would be settled in yuan. From Reuters, last November:

Russia and China intend to increase the amount of trade settled in the yuan, President Vladimir Putin said in remarks that would be welcomed by Chinese authorities who want the currency to be used more widely around the world.

Spurred on by their often testy relations with the United States, Russia and China have long advocated reducing the role of the dollar in international trade.

Curtailing the dollar's influence fits well with China's ambitions to increase the influence of the yuan and eventually turn it into a global reserve currency. With 32 percent of its $4 trillion foreign exchange reserves invested in U.S. government debt, China wants to curb investment risks in dollar.

The quest to limit the dollar’s dominance became more urgent for Moscow this year when U.S. and European governments imposed sanctions on Russia over its support for separatist rebels in Ukraine.

"As part of our cooperation with this country (China), we intend to use national currencies in mutual transactions.The initial deals for rouble and yuan are taking place. I want to note that we are ready to expand these opportunities in (our) energy resources trade," Putin said at the time, suggesting that going forward, Russia may look to settle sales of oil in yuan. 

Sure enough, Gazprom has confirmed that since the beginning of the year, all oil sales to China have been settled in renminbi. From FT:

Russia’s third-largest oil producer, is now settling all of its crude sales to China in renminbi, in the most clear sign yet that western sanctions have driven an increase in the use of the Chinese currency by Russian companies.

Russian executives have talked up the possibility of a shift from the US dollar to renminbi as the Kremlin launched a “pivot to Asia” foreign policy partly in response to the western sanctions against Moscow over its intervention in Ukraine, but until now there has been little clarity over how much trade is being settled in the Chinese currency.

Gazprom Neft, the oil arm of state gas giant Gazprom, said on Friday that since the start of 2015 it had been selling in renminbi all of its oil for export down the East Siberia Pacific Ocean pipeline to China.

Russian companies’ crude exports were largely settled in dollars until the summer of last year, when the US and Europe imposed sanctions on the Russian energy sector over the Ukraine crisis...

Gazprom Neft responded more rapidly than most, with Alexander Dyukov, chief executive, announcing in April last year that the company had secured agreement from 95 per cent of its customers to settle transactions in euros rather than dollars, should the need to do so arise.

Mr Dyukov later said the company had started selling oil for export in roubles and renminbi, but he did not specify whether the sales were significant in scale.

According to Gazprom Neft’s first-quarter results issued last month, the East Siberian Pacific Ocean pipeline accounted for 37.2 per cent of the company’s crude oil exports of 1.6m tonnes in the three months to March 31.

With that, the "PetroYuan" has officially been born and while FT notes that "other Russian energy groups have been more reluctant to drop the dollar for settlement of oil sales," the fact that Russian producers are now openly considering a shift at the same time that officials in the US and Europe are openly discussing stepped up economic sanctions suggests renminbi settlements may become more commonplace going forward.

To understand why and to what extent this is significant in the current environment, consider the following from WSJ:

Officials of the Organization of the Petroleum Exporting Countries, which declined to cut oil production last year, reasoned that maintaining high production levels would protect market share in crucial importing nations.;

But Chinese customs data released Friday show that China’s crude imports from some big OPEC nations have plummeted, while imports from Russia surged 36% in 2014. Meanwhile, imports from Saudi Arabia fell 8% and those from Venezuela dropped 11%.

To summarize: Western economic sanctions on Russia have pushed domestic oil producers to settle crude exports to China in yuan just as Russian oil is rising as a percentage of total Chinese crude imports. Meanwhile, the collapse in crude prices led to the first net outflow of petrodollars from financial markets in 18 years, and if Goldman's projections prove correct, the net supply of petrodollars could fall by nearly $900 billion over the next three years. All of this comes as China is making a concerted push to settle loans from its newly-created infrastructure funds in renminbi.

Putting it all together, the PetroYuan represents the intersection of a dying petrodollar and an ascendant renminbi.

http://www.zerohedge.com/news/2015-06-09/petroyuan-born-gazprom-now-settling-all-crude-sales-china-renminbi

Robots pursue banking careers in San Francisco

Robots have enjoyed phenomenal success on the nation's factory floors. Now they've got their eye on banking.

Sterling Bank & Trust has "hired" two robots as greeters at the bank's new locations opening in Cupertino and Alhambra, in the Los Angeles area. As part of their training, the two robots have made appearances at the bank's San Francisco branches.

Credit for bringing the robots on board goes to the bank's owner, Scott Seligman of San Francisco-based Seligman & Associates.

He got the idea after reading a Wall Street Journal story about the Bank of Tokyo Mitsubishi UFJ relying on robots to better serve customers in Japan. Sterling Bank says the robots' appearances have drawn an enthusiastic response from customers, many of them Asian.

The robots are especially popular with customers' children and grandchildren, said Steve Adams, senior vice president of Sterling Bank & Trust. They especially enjoy the robots having fun demonstrating their kung fu moves and dancing to Psy's song "Gangnam Style." That is when the robots aren't hard at work greeting customers or handing out bankers' business cards.

And the cute factor can't be overlooked, with their blinking eyes and gestures, as they demonstrated in the accompanying video.

Adams hopes the robots might draw in prospective customers as well. Sterling Bank's San Mateo location features a huge window, allowing the robots to show off their stuff to those who aren't banking with Sterling — yet.

Adams is quick to give credit for the robots' banking ambitions at Sterling to Financial Consultant Gary Ng and Ken Yu, a customer service representative for the bank. The two men spent the last three months training the robots for success in banking. They continue to "mentor" the two robots as their handlers.

One of the robots picked up the name Lucky Chance somewhere along the way, but he's likely to take on a new name as he pursues a career in banking.

Although greeters today, Ng says the robots could eventually do far more to help Sterling Bank serve customers.

For instance, the robots have the ability to recognize a customer's face and greet them by name, but Ng says they sometimes get his name wrong. "The facial recognition software works about 80 percent of the time, but they'll get better," he said. Clearly, Ng's teaching the robots an important rule for a successful career in banking — under-promise and over-deliver.

"The robots are focused on marketing and entertaining customers," Adams said, adding that none of the robots' human colleagues have to worry about losing their jobs to them.

The robots cost $8,000 each and bringing them on board is not a cost-cutting move, he insists.

Of course, some might wonder why robots weren't brought into banking sooner. Perhaps the financial crisis could have been avoided altogether if the robot from the 1960s TV program "Lost in Space" had been circling through the mortgage-loan departments at our nation's banks warning, "Danger, danger, Will Robinson."

http://www.bizjournals.com/sanfrancisco/blog/2015/06/robots-banking-careers-san-francisco-sterling-bank.html?s=print

Prosecutors search Deutsche Bank offices for client transaction evidence

German prosecutors have raided Deutsche Bank (DBKGn.DE) offices in Frankfurt in a search for evidence related to client securities transactions, as Germany's largest lender struggles to break free of regulatory issues that contributed to an overhaul of its top leadership this week.

A source familiar with the situation said Tuesday's raid was tied to a tax rebate strategy by some of the bank's clients known as "dividend stripping", in which a stock is bought just before losing rights to a dividend, then sold, taking advantage of a now-closed legal loophole which allowed both the buyer and the seller to reclaim capital gains tax.

Deutsche Bank confirmed the raid but declined to comment on what prompted it. A spokesman for the lender said no employees have been accused of wrongdoing in the case.

Frankfurt prosecutors carried out "wide-ranging investigative measures," a spokesman for the prosecutors' office said, declining to give details of the target or cause of the probe.

Deutsche Bank shares were the biggest decliners in Germany's Dax .GDAXI index of blue chip companies, falling 2.8 percent by 8 a.m. EDT. The Dax fell 0.9 percent, while the STOXX Europe 600 banking index .SX7P was down 0.8 percent.

The lender, which on Sunday announced the surprise departure of co-chief executives Anshu Jain and Juergen Fitschen following a sharp drop in shareholder confidence, has been straining to maintain its reputation in face of a raft of legal and regulatory problems.

Those problems have prompted billions of dollars in fines and settlements.

Authorities have repeatedly raided its offices in recent years, in connection with investigations linked to the collapse of the Kirch media empire and a tax fraud case related to the trading of carbon dioxide emissions rights.

A separate source familiar with the situation had said earlier on Tuesday that the latest investigation was related to German private bank Sal. Oppenheim, which Deutsche bought in 2010. The bank said the raid was not linked to Sal. Oppenheim.

(Writing by Jonathan Gould; Editing by Maria Sheahan and David Holmes)

http://www.reuters.com/article/2015/06/09/us-deutsche-bank-raid-idUSKBN0OP0VU20150609

Historical Bond Fraud

Historical bonds are those bonds that were once valid obligations of American entities but are now worthless as securities, are quickly becoming a favorite tool of scam artists. Here are several things that you should know about them:

Types of Historical Bonds Used for Fraud

Although all sorts of historical bonds are collected and traded, historical railroad bonds comprise most of the bonds used to perpetrate fraud. Historical railroad bonds commonly used by scam artists include those issued by the Chicago, Saginaw, and Canada Railroad Co., the East Alabama and Cincinnati Railroad Co., the Mad River and Lake Erie Railroad Co., the Galveston, Houston & Henderson Railroad Co. and the Richmond, and York River Railroad Co. These railroad bonds are but a few of the 12,000 to 15,000 varieties of historical railroad bonds that are known to exist. Non-railroad historical bonds commonly used by scam artists include bonds issued by the Noonday Mining Co.

Lies Used

Lie: Historical bonds are payable in gold.
Fact: Historical bonds are not payable in gold.
Historical bonds are not valid obligations. Even if they were valid obligations, they would not be payable in gold because gold clauses in bonds issued before 1977 are unenforceable in U.S. courts. Adams v. Burlington Northern R.R. Co., 80 F.3d 1377, 1380 (9th Cir. 1996)(26K TXT file, uploaded 9/28/98); 31 U.S.C. § 5118(d)(2) (2.5K TXT file, uploaded 9/28/98).
Lie: Historical bonds are backed by the Treasury Department.
Fact: Historical bonds are not and have never been backed by us.
While historical bonds often have the words "United States of America" printed on them, these references were merely to identify the bonds as issued by entities located in the United States. Nowhere on historical bonds are there any statements that the bonds are issued or backed by us or any other part of the United States Government. Only in limited and well-known circumstances have we guaranteed obligations issued by private parties, for example, the bonds issued by the Chrysler Corporation in the early 1980s.
Lie: The Treasury Department has established a federal sinking fund to retire historical bonds.
Fact: There is no federal sinking fund to retire historical bonds.
As these historical bonds were neither issued nor backed by us or any other part of the United States Government, it would be patently absurd to suggest that we would establish a sinking fund to retire these historical bonds.

Lie: Historical bonds can be used in high-yield investment "trading program" sanctioned by any, some, or all the following entities: the International Chamber of Commerce ("ICC"), the IMF, the World Bank, the United Nations, the Federal Reserve Board, a Federal Reserve Bank, and the Treasury Department.
Fact: There are no such "trading programs," and none of these entities ever sanctions or regulates such private investment activity. For example, the IMF has issued a warning about financial schemes misusing its name.

Lie: Funds in, or some proceeds from, these high-yield trading programs go to humanitarian purposes or infrastructure development projects that are approved by the United Nations, the World Bank, or the Treasury Department.
Fact: There are no such "trading programs" or "high-yield investment programs."

The scam artist's use of humanitarian or infrastructure development theme is a trick to (1) make the investor want to believe that the trading programs are real and (2) make the investor believe that they could be helping a Third World country by forking over their money.

Lie: Historical bond trading programs yield high rates of return through the buying and selling of "debenture" or "medium term notes" supposedly issued by "prime" or "top" European or "World" banks.
Fact: Officials of leading European banks, including Barclays Bank, have denied any participation in such programs and there is no evidence that the market for such instruments exists as described by scam artists.

This appears to be a recycling of the "prime bank" schemes that have long been labeled as bogus by countless domestic and foreign banking authorities. See, for example, the warnings issued about "prime bank" scams by the Federal Reserve Board, the Federal Reserve Bank of New York and the SEC. Courts have repeatedly held that prime bank trading programs, including those purporting to generate profits through the use of historical railroad bonds, are fictitious. See, e.g., SEC v. The Infinity Group, 993 F. Supp. 324 (E.D. Pa. 1998) (prime bank instruments described as "fantasy securities")(28K TXT file, uploaded 9/28/98); SEC v. Lauer, < link to cclauer.txt> 52 F.3d 667, 670 (7th Cir. 1995) (such instruments "do not exist")(12K TXT file, uploaded 10/5/98); SEC v. Daniel E. Schneider et al., No. 98-CV-14-D (D. Wyo. February 13, 1998) (order granting preliminary injunction; "prime bank trading schemes are fictitious according to readily available information")(22K TXT file, uploaded 9/25/98).

True Values of Historical Bonds

Historical bonds are worthless as securities. None of the historical United States railroad bonds are payable by today's successor railroads such as CSX, Norfolk Southern and Union Pacific. Instead, historical bonds only have value as collector's items. A 1995 publication, Stocks and Bonds of North American Railroads: Collectors Guide with Values (one of many available publications) assessed the collector's value of the historical railroad bonds listed at between $25 and $700 each. Moreover, there are many sites on the Internet that you can visit to evaluate the collector's value of any particular bond.

Bogus Third-Party Valuations to Trick Investors

Scam artists are selling historical bonds to unsophisticated investors at inflated prices far exceeding their fair value as collectibles. They often use third-party valuations, which state that the bonds are worth millions or billions of dollars each. These valuations or authentications, which are often referred to as "hypothecated" or "hypothetical," are bogus. A typical valuation (104K JPG file, file uploaded 1/24/98) will falsely overstate the value of these bonds by assuming erroneously that, despite the unenforceability of the gold clauses contained in the bonds, and the defunct and bankrupt status of most of the bonds' issuers, some person or entity is obligated to redeem the bonds in gold bullion. See SEC v. Gerald A. Dobbins et al., No. 98-229 (C.D. Cal. May 19, 1998) (findings on order to show cause re: preliminary injunction; valuations of historical bonds held to be "misstatements")(8.5K TXT file, uploaded 9/25/98).

Scam artists using such valuations may also make the false assertion that while perhaps not payable today in gold or in money, the bonds are used in high-yield trading programs in the United States, offshore and in Europe. As stated above, there are no such trading programs. In several cases, the third parties issuing the valuations appear to be working in conjunction with the scam artists. All these false assertions have been used to defraud investors into paying as much as $150,000 for historical bonds that regularly trade for $25.

Chicago, Saginaw and Canada Railroad Co. Bonds

A historical bond fraud case in point involves bonds issued by the Chicago, Saginaw and Canada Railroad Co. (CS&C). It has been alleged that these securities are payable by us in gold. We neither issued these bonds, nor are they payable in gold, backed, or guaranteed by us or any other part of the United States Government. In 1873, CS&C issued 5,500 thirty-year gold-backed bearer bonds, paying seven percent interest to finance construction of a proposed railroad. Click to view a full-size image of a CS&C bond (99K JPG file, uploaded 1/24/98).

CS&Cs creditors forced it into bankruptcy in 1876 and a predecessor of CSX Transportation, Inc. ("CSX") purchased its assets. CSXs predecessor did not assume any of CS&Cs outstanding debt, including the railroad bonds. All claims to money due under the bonds, which had a face value of $1,000 each, were resolved 112 years ago in the 1876 bankruptcy proceeding. At that time, investors presented their bonds for payment out of funds from the foreclosure sale and received a distribution amounting to less than 25 cents on the dollar. After the bankruptcy proceeding, the bonds remained in court archives until they were discovered in the basement of a federal building. A museum in Grand Rapids, Michigan, packaged the bonds with other historical information about this railroad for sale as collector's items for $29.95 each. Despite what a bogus valuation (104K JPG file, file uploaded 1/24/98) might claim about CS&C bonds, the bonds have no value other than as collectible memorabilia, since CSX has disclaimed any liability for redemption of these bonds, and they are most certainly not payable in gold. See Adams (26K TXT file, uploaded 9/28/98); 31 U.S.C. § 5118(d)(2)(2.5K TXT file, uploaded 9/28/98).

Courts have held that the CS&C bonds have only nominal value as collectibles. See Schneider (22K TXT file, uploaded 9/25/98) (preliminary injunction entered against defendants; bonds have "no value, except that of a collectible"). Similarly, other courts have found that bonds issued in the 1800s by the East Alabama & Cincinnati Railroad Co. and the Marietta & Northern Georgia Railway lack any investment value. See SEC v. Dobbins (C.D. Cal. March 9, 1998) (complaint)(13K TXT file, uploaded 9/25/98); SEC v. Dobbins (C.D. Cal. May 19, 1998) (8.5K TXT file, uploaded 9/25/98) (findings on order to show cause re: preliminary injunction); SEC v. Dobbins (C.D. Cal. May 19, 1998) (preliminary injunction) (7.6K TXT file, uploaded 9/25/98); Infinity Group, 993 F. Supp. at 330(28K TXT file, uploaded 9/28/98).

http://www.treasurydirect.gov/instit/statreg/fraud/fraud_historicalbond.htm

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Goldman Sachs expected to settle forex suit for almost $130 million: WSJ

Goldman Sachs Group Inc is expected to pay $129.5 million to settle its portion of a lawsuit that accuses banks of rigging prices in the foreign exchange market, The Wall Street Journal reported, citing a person familiar with the matter.

The Journal said in its report that a final agreement may be reached in the next several weeks.

The lawsuit accused traders at a dozen banks of improperly sharing confidential information about their clients' orders through electronic chat rooms, then using that information to make money at the expense of their clients.

In April, Bank of America Corp had agreed to pay $180 million to settle the lawsuit. JPMorgan Chase & Co settled for $99.5 million in January, and Switzerland's UBS AG settled for $135 million in March.

Goldman Sachs was not available for comment outside regular U.S. business hours.

http://www.reuters.com/article/2015/05/09/us-goldman-forex-idUSKBN0NU00Z20150509

Forex’s ‘Last Look’ Practice Gets Curbed

Two of the world’s biggest currency-trading platforms plan to restrict a controversial industry practice in which banks can pull out of trades at the last moment if the market moves against them.

Thomson Reuters Corp. and BATS Global Markets Inc. will limit the practice, known as “last look,” on their platforms in coming weeks, in a move aimed at increasing transparency in the foreign-exchange market.

The change comes amid a broader shake-up of the trading industry prompted by concerns about traders’ efforts to manipulate a range of financial markets. Markets for precious metals, interest rates, stocks and currencies have all come under scrutiny from regulators in recent years because of allegations of inappropriate behavior.

Regulators in the U.K., the global hub for foreign-exchange trading, are expected to report next month on their own review into the supervision and transparency of some markets, including the foreign-exchange market. The so-called Fair and Effective Markets Review, or FEMR, specifically asked asset managers and other bank clients about their views on last look.

While some foreign-exchange platforms already don’t permit last look, it is still allowed on some large venues, including Hotspot, owned by BATS; and FXall, owned by Thomson Reuters. Hotspot and FXall account for about 25% of clients’ electronic forex trading, according to financial-industry consultants Greenwich Associates.

The last look practice is a legacy of over-the-phone currency trading, when traders would take a final check of the market before executing an order. It has survived even as foreign-exchange trading moved onto electronic platforms, leaving banks with the option to back out of an order after it was accepted by a client.

Thomson Reuters and BATS plan to tighten the time frame for canceling quotes and introduce a minimum acceptance rate banks have to respect.

Phil Weisberg, global head of foreign exchange at Thomson Reuters, said last look requires “more clarity.” Some clients don’t understand “the rules of engagement with the bank” and “are confused about trading protocols,” he added, referring to the exact conditions banks have to respect on the execution of each specific trade.

William Goodbody, head of FX at Hotspot, said, “Last look is a widely used practice in the industry. To make it work, it needs a clear set of guidelines.”

In June 2014, the U.K. Treasury, the Bank of England and the Financial Conduct Authority, the U.K.’s financial watchdog, launched the FEMR to consider ways to improve the supervision and transparency of some markets. FEMR findings, due to be released on June 10, are expected to establish rules on the execution of currency trades.

Foreign exchange is a highly unregulated market, compared to stock trading, as currencies aren’t traded on exchanges.

Banks’ foreign-exchange trading clients are likely to welcome the move to curb last look, said Kevin McPartland, a principal at Greenwich Associates.

“Giving market participants more visibility into where, how and with whom their orders are executed is a good thing,” Mr. McPartland said.

Javier Paz, a senior consultant at Aite Group, said last look echoes the equity-market practice of “spoofing,” an illegal strategy in which traders place orders they don’t intend to execute to move the market to their advantage.

But there are also some significant differences, he said. In spoofing, a trader places an offer to buy or sell, then cancels it quickly, whereas in last look, there’s always a client willing to execute one side of the trade, Mr. Paz said.

Write to Chiara Albanese at chiara.albanese@wsj.com

http://www.wsj.com/articles/forexs-last-look-practice-gets-curbed-1432768404

The Justice Department has begun looking into a common practice in foreign-exchange markets that allows banks to back out of unfavorable trades at the last moment, a person briefed on the matter said.

Prosecutors, along with the Securities and Exchange Commission, have asked Barclays Plc for information related to its electronic-trading platform, which contains a program that allows traders to take a “last look” at an order before executing it, according to the person, who asked not to be named because the matter isn’t public.

Prosecutors’ interest in the last-look practice has grown out of a broader investigation into the manipulation of benchmarks and client orders in the $5.3 trillion-a-day currency market. The inquiries follow an investigative path laid out in recent months by Benjamin Lawsky, New York’s banking regulator.

Barclays said earlier Tuesday that it set aside an additional 750 million pounds ($1.2 billion) to cover the cost of settling the currency-rigging investigation, bringing its total expected cost to about 1.25 billion pounds.

Vestige Practice

The last-look option is a vestige of the early computer era when the time lag between an order being entered at one bank and confirmed at another was long enough to expose the market maker to unpredictable price fluctuations. As that lag tightened, banks retained the right to halt currency trades on a last-look basis.

Critics of the practice say it’s obsolete and can harm investors.

“Last look is a hangover from a technology problem that no longer exists, yet still allows traders to reject trades and re-quote orders to the disadvantage of clients,” David Mercer, chief executive of LMAX Exchange, a forex trading platform, said in a Feb. 20 statement.

BlackRock Inc. said last month that last looks can cause market participants to experience so-called phantom liquidity where prices that appear to be available suddenly disappear, in response to the Bank of England’s Fair and Effective Markets Review. Making completed trades available and transparent would make the market better, BlackRock said.

“These developments, would in our view, facilitate fairer outcomes for end investors and increase market effectiveness and efficiency,” BlackRock said.

New Front

It isn’t clear whether the Justice Department’s review of last-look practices will lead to a new front in its forex investigation. The SEC is exploring whether any elements of the practice violate disclosure laws, another person briefed on the matter said.

Peter Carr, a Justice Department spokesman, declined to comment on any inquiry specifically into last-look practices, as did Florence Harmon of the SEC.

Until now, regulators in the U.K., Switzerland and the U.S. have been primarily focused on manipulation of benchmark currency exchange rates by traders at some 30 global banks, with an emphasis on collusive behavior. The last-look review indicates that regulators and prosecutors are turning their focus to established practices that could make markets unfair.

The prosecutors’ request appears to bolster a line of inquiry opened up by Lawsky, superintendent of New York’s Department of Financial Services, who said last month that he was looking into the practice.

In its annual report released Tuesday, Barclays said that various “regulatory and enforcement authorities,” including the Justice Department, SEC and Lawsky’s agency, “are investigating a range of issues associated with Foreign Exchange sales and trading, including electronic trading.” Kerrie Cohen, a spokeswoman for Barclays, declined to comment.

http://www.bloomberg.com/news/articles/2015-05-29/amex-president-gilligan-dies-at-55-after-becoming-ill-on-flight

Chinese Stocks Are Crashing

The Shanghai Composite has extended yesterday's losses and is now officially in "correction" - down over 11% from its highs yesterday.

This is the biggest 2-day drop since August 2009

The much-heralded Shenzhen Composite is also down over 11% from yesterday's highs...

Intraday, a small opening ramp has been demolsihed in Shenzhen, CHINEXT, and CSI-300...

*  *  *

This has all happened since Hanergy's CEO exposed the endgame of the biggest Ponzi market ever

Charts: Bloomberg

http://www.zerohedge.com/news/2015-05-28/chinese-stocks-are-crashing

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Your CitiFX Pro Account is Closing and Transferring to FXCM

Dear Valued Client,

We are writing to inform you that as of Friday, June 26, 2015, Citibank, N.A. ("Citibank") will no longer offer its CitiFX Pro service and all related accounts will be closed. To facilitate your ability to continue to trade FX, we are pleased to inform you that Citibank has arranged for the transfer of your CitiFX Pro account to Forex Capital Markets, LLC, which is a subsidiary of FXCM Inc. ("FXCM") (NYSE: FXCM) and one of the largest foreign exchange brokers in the market. Forex Capital Markets, LLC is a registered Futures Commission Merchant (FCM) and Retail Foreign Exchange Dealer (RFED) with the Commodity Futures Trading Commission (CFTC), and is a member of the National Futures Association (NFA). Please see Important Disclosures & Disclaimers below.

FXCM is a leading provider of online forex trading and related services, with over 170,000 active accounts as of March 31, 2015. Further information on FXCM can be found here. Citi makes no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the information, products, services offered by FXCM.

Your Account Will Seamlessly Transfer

Provided you do not opt out (as described below), we have established a process for the seamless transfer of your CitiFX Pro open trade positions and cash margin account balance to FXCM. This process will include:

	Citibank providing your account information, including open trade positions and other information (including personally identifiable information) from your CitiFX Pro account application to FXCM;
	Citibank closing any open positions at 2:00 pm EDT on Friday, June 26, 2015 (*except for those currency pairs listed below), so they may be re-established by FXCM on your new FXCM account (as described below); and
	Citi transferring your cash margin to FXCM.

Your new FXCM account will be available for trading on Sunday, June 28, 2015. The terms and conditions that will govern your open trade positions that are re-established by FXCM within the FXCM trading platform as well as your closing cash margin balance that is transferred to FXCM will be such terms and conditions as FXCM shall determine or as otherwise agreed to between you and FXCM. In addition, use of your personally identifiable information will be governed by FXCM's privacy policy. For further information on FXCM, please see the URL provided above.

*PLEASE NOTE that FXCM does not support the same currency pairs as Citi. You can see the full list of currency pairs that FXCM supports in the FAQs here. You are advised to close out your open trade positions in unsupported currency pairs, if any, before 09:00 am EDT Monday, June 22, 2015, otherwise they will be closed out by Citi and not re-established by FXCM. Any mark to market gain or loss will be applied or debited from your account prior to the account transfer.

Please also note that any open order you have placed at the time of the transfer that has not been triggered yet will need to be re-established by you within the FXCM trading platform.