Receiving Wide Coverage ...
The Flash Unmasked? Are the world's financial markets so vulnerable that they can be brought down by some guy in the suburbs? That unsettling question is bound to reverberate throughout the industry in the wake of news that U.S. authorities are charging a London trader with triggering the May 2010 "flash crash" that temporarily sent stocks plummeting. Authorities say Navinder Singh Sarao frequently manipulated futures contracts prices by submitting and then canceling large orders, setting the stage for the infamous crash. While government officials are not pinning sole responsibility for the crash on Sarao, the papers say his arrest underscores concerns about the apparent fragility of the markets and the dangers of high-speed trading. There are other worrisome angles to the story: "it took the authorities five years to track down a rogue actor making enormous trades," the New York Times points out. "And, they were led to him only with the help of an outside whistle-blower." The Washington Post reminds readers the charges against Sarao suggest U.S. authorities mistakenly accused a different firm of sparking the crash back in September 2010. The Post also talks to an expert who suggests Sarao is "not alone and whatever he did is occurring regularly in one form or another" and that authorities need to address problems with the larger system. The Financial Times and Wall Street Journal play it pretty straight.
Merrill Lynch Misstep: European officials have been known to complain that U.S. regulators are unduly harsh with foreign banks. Now it's an American bank's turn to be in the sightlines of overseas authorities. Britain's Financial Conduct Authority is fining Bank of America Merrill Lynch $19.8 million "for failing to properly report tens of millions of client transactions over a seven-year period" between 2007 and 2014, according to the Times. The FT notes this is the largest penalty the FCA has ever extracted for this particular infraction. It also emphasizes that incorrect reporting has been a recurring problem for Merrill Lynch, which received a warning in 2002 and a separate fine in 2006.
Wall Street Journal
The Federal Deposit Insurance Corp. has a new plan to help big banks fail better. The agency wants banks to improve their tracking of customer deposits so it will be more easily able to determine which accounts are insured by the government in the event an institution goes under.
Reality television star Jim Marchese leads an eventful life both on and offscreen. The "Real Housewives of New Jersey" star's side gig as a corporate whistleblower has earned him roughly $10 million in awards, the paper reports. He helped the Justice Department reach its 2014 mortgage-securities settlement with Bank of America and called out his former employer CTI BioPharam Corp. for Medicare fraud. Marchese also appears to have a knack for sound bite-ready quotes even when the cameras aren't rolling: "If I see you kick a puppy, I'm going to say something," he tells the paper. "It's not within me to not say something."
Low interest rates continue to put a drag on regional and community banks' earnings, while Wall Street banks make up for the problem with profitable investment banking and trading activity.
Benjamin Lawsky doesn't run on anybody else's clock. The New York financial watchdog says foreign-exchange settlement negotiations with Barclays and Deutsche Bank may be delayed while his agency reviews their electronic trading practices.
Financial Times
Bank of New York Mellon may be able to keep activist investors at bay a little longer thanks to solid quarterly earnings. That's good news for bank chief Gerald Hassell in particular, since shareholder Marcato Capital Management has been calling for his ouster.
Elsewhere ...
The Atlantic: Don't miss The Atlantic's long read on Liberty Reserve, the so-called "bank of the underworld" and alleged hub of criminal activity that allowed users to anonymously purchase digital currency known as LRs and use it to make transactions with one another. The article describes U.S. authorities' attempts to bust Liberty Reserve, an effort with obvious parallels to the 2013 takedown of online black market Silk Road.
