Compliance Newsflashes: FSA Weighs In on Transatlantic Mergers, and more

FSA: U.S. Regulations Won't Apply in the Event of NASDAQ Takeover of LSE

U.K. regulatory body the Financial Services Authority (FSA) weighed in on the potential regulatory ramifications of a potential U.S. takeover of the London Stock Exchange (LSE). In a statement issued on Monday, FSA Chairman Callum McCarthy declared that LSE member firms and listed companies will not be subject to American regulations such as Sarbanes-Oxley in the event of an acquisition.

"In respect of the LSE, neither the FSA nor the Securities and Exchange Commission (SEC) consider that U.S. ownership of the LSE, in and of itself, would result in U.S. regulations, including Sarbanes-Oxley, applying to companies listed or quoted on its markets or member firms of the LSE. As is currently the case, some companies on the Exchange's markets may have - or choose to seek - registration with the SEC," said McCarthy in the statement.

Much has been made of the potential fallout should the Nasdaq Stock Market, which acquired 25.1 percent of the LSE, become a majority shareholder in the Exchange. Also under consideration is NYSE Group's proposed merger with Euronext N.V., which operates exchanges in Belgium, France, the Netherlands, Portugal and the U.K.

Although the immediate future of the LSE's regulation seems stable, McCarthy noted the potential cloudiness of the future. "Over time, a combined group, although continuing to operate separate subsidiary exchanges, may seek to harmonize aspects of both markets in respect of its trading platform, rules, membership arrangements and listings of companies," he said.

SEC Chairman Cox Urges Options Exchanges to Start Penny Quoting SEC Chairman Christopher Cox sent a letter last week to the six options exchanges urging them to begin quoting a limited number of options in pennies on a pilot basis beginning on Jan. 29, 2007. Options are currently quoted in increments of nickels and dimes.

"Quoting in penny increments will benefit investors by allowing options quotes and orders to be expressed at better prices, and has the potential to enhance further the already strong competition and innovation that exists in the options markets," Chairman Cox said, in a release.

Several of the options exchanges and their members recently have expressed interest in individually beginning to quote options in penny increments.

Quoting options in pennies will increase quote message traffic, which the systems of exchanges, market data vendors and securities firms must be able to manage. For this reason, quoting options in pennies would begin in a small number of options. Penny quoting could be expanded after the Commission and others have a chance to study its impact on market quality and systems capacity.

JWG-IT Signs First Wave of Founder Members

JWG-IT, the commercial think tank for EU-driven IT change in financial services, revealed that major technology suppliers are to join JWG-IT as Founder Members. Intel, Kurtosys and GoldenGate have engaged with JWG-IT's firm-led dialogue to discuss how they can deploy their technologies to solve the real business challenges, which regulations such as MiFID have imposed on financial institutions. JWG-IT has also secured commitment from major financial institutions looking for an independent forum to address the operational issues that are emerging from MiFID. Since its inception in January 2006, JWG-IT has held workshops with 50 participants from 12 top-tier investment banks. Members have worked to define practical solutions around common IT operating models on topics including transaction reporting, trade reporting and pre-trade price transparency.

"Whilst the industry continues to debate MiFID policy, JWG-IT has been working with the firms affected by this all-encompassing regulation to discuss how they can practically implement MiFID better, faster, cheaper and with less risk," said PJ Di Giammarino, founder and CEO of JWG-IT, in a release. "Banks will continue to compete, but in order to free up budget to invest in strategic programs and keep fees down, costs must be reduced by collaborating around common IT operating models and sharing the burden in areas that have not been shared to date."

Wachovia Selects Reveleus for Basel II Compliance Initiative

Wachovia Corp. has selected Reveleus, a business of i-flex, solutions, to provide its solution Basel II compliance. Reveleus will provide Wachovia with a complete, pre-packaged solution enabling the bank to compute regulatory capital per the requirements of the Basel II Accord.

Wachovia is one of the Tier 1 banks mandated by the United States banking regulators to comply with the Basel II capital adequacy directives.

"We chose Reveleus for the completeness and flexibility of the Reveleus Basel II Solution and its ability to meet our current and future requirements. Furthermore, we've found that the Reveleus team possesses deep expertise and a detailed understanding of the Basel II regulatory capital requirements. Wachovia is looking forward to our partnership with Reveleus to help ensure that we meet our compliance deadlines," explained Pete Carlson, senior vice president and director of external reporting at Wachovia, in a release.