Greg Kilminster
Head of Product - Content
Swiss energy trader fined $48 million for attempted market manipulation
The Commodity Futures Trading Commission (CFTC) has fined TOTSA TotalEnergies Trading SA (TOTSA) $48 million for attempting to manipulate the market for EBOB-linked futures contracts in order to benefit its derivatives positions. This conduct violates the Commodity Exchange Act (CEA) and CFTC regulations.
The investigation was conducted with the assistance of the Swiss Financial Market Supervisory Authority (FINMA) and the United Kingdom Financial Conduct Authority (FCA).
Some context
EBOB is a type of refined gasoline that is primarily used in European automobiles. Several energy-trading companies, including TOTSA, blend and sell EBOB gasoline. Futures contracts that are linked to the price of EBOB are traded on regulated exchanges. The value of these futures contracts is determined based on the Argus EBOB Benchmark.
In an attempt to benefit its EBOB-linked short futures position, TOTSA not only blended and sold large quantities of physical EBOB but also tried to sell it at prices lower than what buyers were willing to pay. This conduct is considered attempted market manipulation, which is a violation of Section 6(c)(1) of the CEA and CFTC Regulation 180.1(a)(1).
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APRA publishes corporate plan
The Australian Prudential Regulation Authority (APRA) has unveiled its 2024-25 Corporate Plan, outlining strategic objectives and regulatory priorities for the next four years. APRA's primary focus remains on ensuring that regulated entities—comprising banks, insurers, and superannuation funds—uphold their financial commitments under all reasonable circumstances, while continuing to provide critical financial services to the Australian community.
Some context
APRA’s Corporate Plan builds on the regulatory foundations laid over the past decade, especially following the global financial crisis and the Royal Commission into Misconduct in the Banking, Superannuation, and Financial Services Industry. Having previously concentrated on expanding the prudential framework, APRA is now shifting towards maintaining and fine-tuning existing regulations to address the evolving financial landscape. This recalibration is a response to emerging risks, such as increased digital reliance, global banking instability, and the challenges posed by an ageing population.
A significant milestone in this journey is the completion of a multi-year programme to modernise APRA's prudential architecture. This modernisation effort aims to make the regulatory framework more accessible and manageable for regulated entities. Additionally, APRA is committed to intensifying its supervisory role, especially where there are lapses in risk management, and ensuring that regulated entities are held accountable for any legal breaches.
Key takeaways
- Maintaining resilience
APRA's strategic objectives for the 2024-25 period include a continued emphasis on financial and operational resilience. In response to recent global banking instability, APRA plans to adjust capital and liquidity standards to ensure they remain fit for purpose. There will be an increased focus on cyber risk management, particularly given the growing threats to system resilience and the rise of sophisticated scams targeting the financial sector. APRA will also implement the new Prudential Standard CPS 230 on Operational Risk, raising minimum standards for operational resilience across the board.
- Addressing emerging risks
APRA is raising expectations for entities to consider climate-related financial risks in their decision-making processes. Additionally, the authority is preparing for potential regulatory expansions, such as the government's proposed licensing regime for payment service providers. This development could broaden APRA’s regulatory scope, ensuring it remains responsive to new market entrants and technologies.
- Industry-specific challenges
APRA is partnering with government stakeholders to explore ways to improve access to and the affordability of household insurance, a growing concern for many Australians. In the superannuation sector, APRA will continue its collaboration with the Australian Securities and Investments Commission (ASIC) to ensure that trustees meet the requirements of the Retirement Income Covenant, ensuring better outcomes for retirees.
- Investment in key enablers
APRA will invest $73.2 million over the next four years in technology, data, cyber security, and supervision systems, funded by the 2024-25 Federal Budget. This investment is aimed at enhancing data-driven supervision and internal cyber security controls, making it easier for regulated entities to comply with APRA’s requirements.
To further strengthen its workforce, APRA plans to invest in enhancing the skills and capabilities of its people. This includes better workforce planning, more robust training programmes, and increased access to diverse on-the-job experiences.
Next steps
As APRA moves forward with its 2024-25 Corporate Plan, regulated entities can expect more targeted supervision and a regulatory framework that adapts to the changing financial environment. The authority’s commitment to balancing financial safety with competition and efficiency will be critical as it supports the Council of Financial Regulators’ review into competition among small and medium-sized banks.
For regulated entities, the next steps involve aligning with APRA’s heightened expectations, particularly in areas such as operational resilience, climate risk, and governance. Entities should also prepare for the potential expansion of APRA’s regulatory perimeter, particularly with the proposed licensing regime for payment service providers.
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ASIC new digital portal to aid licensing
The Australian Securities and Investments Commission (ASIC) has launched a pilot programme for a new digital portal aimed at streamlining the application process for Australian Financial Services (AFS) licences. The pilot, which began on 12 August 2024, is part of ASIC's broader digital transformation strategy, with the full rollout of the portal expected in the first quarter of 2025.
Some context
ASIC's new portal is a significant step in the regulator's journey towards becoming a more digitally enabled and data-informed organisation by 2030. The initiative reflects ASIC's commitment to modernising its processes to better serve stakeholders, including regulated entities and consumers. The current pilot phase, which involves a limited group of new AFS licence applicants, is designed to refine the system based on user feedback before its wider implementation.
The existing eBusiness licensee portal will continue to be used by other AFS licence applicants during the pilot phase. This dual approach allows ASIC to gather insights and make necessary adjustments to the new system before it is fully operational.
Key takeaways
- The new AFS licence portal aims to simplify the licensing process by providing a more intuitive and user-friendly experience. The system pre-fills information already available to ASIC, reducing the time and effort required by applicants. By tailoring questions to the specifics of each application, the portal ensures that users only encounter relevant prompts, further streamlining the process.
- The pilot programme is an invitation-only initiative involving a select group of new AFSL applicants. During this phase, ASIC will collect feedback to improve the portal’s functionality and user experience. The insights gained will inform adjustments before the full rollout when all AFS licensees and applicants will transition to the new system.
- This project is a critical component of ASIC’s larger digital transformation agenda, which aims to create a seamless, single-entry digital platform for all interactions with the regulator. By 2030, ASIC plans to be a fully data-informed regulator, leveraging secure and scalable digital systems to enhance regulatory compliance and reduce harm in the financial sector.
Next steps
The successful completion of the pilot phase will pave the way for the full deployment of the new AFSL portal in the first quarter of 2025. During this period, ASIC will continue to refine the system based on pilot feedback, ensuring that the final product meets the needs of all users.
AFS licence applicants and holders should prepare for the upcoming transition by familiarising themselves with the features of the new portal and anticipating changes to their application and maintenance processes.
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EBA updates data used for identifying G-SIIs
The European Banking Authority (EBA) has updated the data used to identify globally systemically important institutions (G-SIIs). The EBA does this annually and provides user-friendly tools for aggregating the data across the European Union (EU).
The publication includes 13 indicators that are used to measure systemic importance, and this year’s edition includes an additional institution for the first time.
Some context
The identification of global systemically important institutions (G-SII) is based on the disclosure of global denominators and the results of the Global systemically important banks (G-SIB) exercise. These results are expected to be published by the Banking Supervision (BCBS) and the Financial Stability Board (FSB) in November of each year.
The EBA Guidelines on disclosure of G-SIIs align with the internationally agreed standards developed by the BCBS and the FSB. These guidelines define uniform requirements for disclosing the values that are used during the identification and scoring process of G-SIIs.
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CFPB report reveals millions spent on cash back fees
The Consumer Financial Protection Bureau (CFPB) has released a report outlining consumers’ use of cash back, the associated costs and benefits for merchants, and market practices regarding cash back fees.
Key takeaways
The CFPB analysed cash back fees from eight major retailers, including Dollar General, Dollar Tree/Family Dollar, Kroger, Albertsons, Walgreens, CVS, Walmart, and Target, and key findings include:
- Cash back fees cost consumers millions of dollars annually. The CFPB estimates that three companies in the sample collect over $90 million in fees yearly. These fees far exceed the marginal cost to merchants for processing each transaction.
- Three major retailers charge cash back fees despite competitors offering the service for free. Dollar General, Dollar Tree, and Kroger, including their subsidiary brands, charge fees for cash back. Dollar stores have the highest fees for small withdrawal amounts, while Kroger has raised its fees for smaller transactions and across different brands.
- Cash back fees are imposed on low pre-set withdrawal amounts, which disproportionately affect consumers and may lead to repeat withdrawals and additional fees. This disproportionately impacts low-income and underbanked individuals, particularly in rural and low-income communities where cash is heavily relied upon for daily transactions.
The CFPB plans to closely monitor developments in this area and collaborate with other federal agencies to ensure that people have fair and meaningful access to cash back services.
Click here to read the full RegInsight on CUBE’s RegPlatform