Tag Archives: Traders
Bitcoin’s value jumped by almost 9% at one point on Monday, as investors fled the so-called stablecoin Tether.
Tether tokens are supposed to be tied to the U.S. dollar, with the eponymous company behind them claiming that it has a dollar in its accounts for each token it issues. There is no conclusive evidence to support this claim, but the token is still often used as a dollar substitute for trading purposes, as they are more easily transferred between exchanges than dollars are.
Some have long suspected that the Tether operation is being used to buy a load of Bitcoins for nothing, effectively propping up the value of Bitcoin. It so happens that Tether and a major cryptocurrency exchange called Bitfinex share the same CEO, and Tether sends all its freshly minted tokens to Bitfinex. When they get there, the price of Bitcoin tends to go up, suggesting Tether tokens are being used to buy Bitcoins.
On Monday, the value of the Tether token, which had been worth around 99 cents, suddenly plunged as low as 93 cents before recovering to around 97 cents. At the same time, Bitcoin’s price shot up by 8.9% to $ 6,769 before settling down to around $ 6,640 at the time of writing—still up 5.2% over the preceding day.
According to Bloomberg, the reason for Tether’s pull away from the $ 1 mark lay in renewed rumors around Bitfinex’s financial health.
Bitfinex said in a Monday Medium post that its customers were still able to withdraw cryptocurrencies and fiat-currency holdings “without the slightest interference,” although “fiat deposits have been temporarily paused for certain user groups” pending the implementation of a new deposit system Tuesday. This missive appears to have been what staunched the selloff.
Bitcoin wasn’t the only winner from the Tether upset. Alternative “stablecoins” such as Gemini Dollar and TrueUSD are also up, as traders pulled back from Tether.
LONDON (Reuters) – Some firms using computers to trade at ultra-fast speeds are not applying safeguards required to avert market meltdowns, Britain’s Financial Conduct Authority (FCA) said on Monday.
Algorithmic or high-frequency trading uses computers to automatically place an order in financial markets, without human intervention, and represents sizeable volume on stock markets.
The FCA reviewed algorithmic trading, which some critics have blamed for sharp price moves, at about a dozen firms and found some were failing to properly apply mandatory safeguards.
Sterling’s “flash crash” in Asian trading in October 2016 for instance was blamed by some on algorithmic trading, but a central bank report later concluded there was no single perpetrator.
“Firms should consider and act on (the review‘s) content in the context of good practice for their business,” Megan Butler, the FCA’s director of wholesale supervision, said.
Some firms were unable to show that their systems are tested and operating properly, a requirement since January under the European Union’s MiFID II securities law.
“Additionally, firms need to do more work to identify and reduce potential conduct risks created by their algorithmic trading strategies,” the FCA said in a report.
The FCA did not propose new rules but will “proactively” supervise and monitor algorithmic trading, adding that firms need to consider the combined impact multiple strategies may have on the fair and effective operation of financial markets.
The FIA European Principal Traders Association (EPTA) said the FCA review was done before MiFID II came into force, adding that as members trade their own money, they have a strong focus on risk management.
The FCA said last year it would not take enforcement action straight away as long as firms were making efforts to comply with MiFID. Neil Robson, a lawyer at Katten Muchin Rosenman, said Monday’s statement suggested regulatory forbearance may be short lived.
In a related move on Monday, the Bank of England published a consultation paper on what it expects from firms it authorizes regarding the management of risks from algorithmic trading.
“It applies to all algorithmic trading activities of a firm, including in respect of unregulated financial instruments such as spot foreign exchange,” the BoE’s Prudential Regulation Authority said in a statement.
FIA EPTA Secretary General Piebe Teeboom said it was important that all players in algorithmic trading are subject to the same requirements and high levels of market conduct.
All firms should name a senior person who is responsible for algorithmic trading, and branches of foreign banks in Britain will have to show they are properly managing risks.
The PRA guidance will come into effect in June and the regulator will publish a discussion paper on operational resilience in algorithmic trading later this year.
Additional reporting by Maiya Keidan; Editing by Alexander Smith and David Holmes