Suspended
THE Bank of Jamaica (BOJ) has suspended Sterling Asset Management Limited (SAM) from inter-dealer foreign exchange (FX) trading with other authorised dealers and cambios for the next three months
The inter-dealer trading prohibition is set to take effect tomorrow and last until May 19 according to a BOJ notice dated February 15.
“This happened due to a clerical error on Sterling’s part. The BOJ requires licensed cambios to manually post an ‘opening bid’ and an ‘opening offer’ every day on their trading platform. On three occasions since the launch of the platform, Sterling has omitted to post its opening bid and offer,” Marian Ross-Ammar, vice-president of trading and investment at Sterling Asset Management, told the Jamaica Observer in response to email queries.
The same notice stated that failure by other regulated FX participants to adhere to the prohibition with Sterling will result in sanctions as per the requirements. The JamClear FXTP: Ladder of Enforcement for Breach of Usage Requirements highlights that the first offence will attract a warning letter(s) for the participant which committed the offence. FXTP is the acronym for foreign exchange trading platform.
The second offence attracts financial penalties, including a fixed administration fee of $15,000 and a variable fee to be determined as 1.0 per cent of the JMD value of trades in breach of the requirements. If the offence was related to not posting the minimum requirements and a nine-month period elapses without any further breaches, the BOJ will remove both offences from the participant’s record. This will not be extended by more than three occasions for each participant.
Ross-Ammar added, “The BOJ’s penalty for omitting to post an opening bid and offer on 3 occasions is to restrict you from using the platform for a three-month period. To be clear, BOJ has temporarily restricted Sterling’s cambio from buying and selling USD to and from cambios and authorised dealers.”
The third sanction will see the BOJ prohibit the participant from conducting trades in the inter-dealer space for three months, with all deposit-taking institutions (DTI’s) and cambios notified accordingly. Any breach of this sanction by the JamClear FXTP participant or a fourth offence will result in the withdrawal of the authorised dealer (AD) designation and/or revocation of the cambio licence of the relevant participant.
The BOJ launched a new FX platform in June 2020, called FX Trading Platform (FXTP), which facilitates real time electronic FX trading between authorised FX traders, namely being authorized dealers such as deposit-taking institutions and cambios for the United States-dollar/Jamaica-dollar (USD/JMD) currency pair. It allows the BOJ to observe transactions between market players and was fully phased in July 2021.
While the use of the FXTP is not mandatory, a treasury specialist highlighted that utilising it gives live access to the wholesale market — and not having access means that one has to go through a dealer, which might impact the spread earned by the FX participant. A “spread” is the profit earned on selling — in this case, what is earned from selling each US dollar.
“To be clear, BOJ has temporarily restricted Sterling’s cambio from buying and selling USD to and from cambios and authorized dealers. Sterling’s cambio is still able to buy and sell USD to any person or entity that is NOT a cambio or an authorised dealer,” the Sterling VP said for clarity on their operations.
She further highlighted that the cambio business represents less than one per cent of Sterling’s revenue, and that clients may enjoy better rates as the cambio segment is likely to earn more money since transactions would be conducted directly between end-user.
An executive at a dealer mentioned that the team was told not to discuss it with anyone in the public and that the matter was to be kept confidential.
The Bank of Jamaica has itself declined to comment on the reasons behind its action.
“I’m not discussing an entity’s business with any journalist, one, and two, I’m not discussing the configuration of my trading platform with any journalist. That’s a discussion I have [only] with market participants so you will not get anything [about Sterling Asset Management being suspended from inter-dealer trading] from me,” said Natalie Haynes, BOJ deputy governor for banking and currency operations and financial markets in a call on the matter.
Haynes indicated that the Bank of Jamaica did not put out a public notice about the issue.
“The notice was sent to a closed group and somebody sent it out to the press, and I am not giving that any credence,” she added. Dealers have shied away from talking about the issue with Sunday Finance.
However, Ross-Ammar stated, “Sterling’s cambio does not contest the clerical error. Sterling is, however, following up with the BOJ regarding the way in which the communication was made. The BOJ notification to the industry omitted the nature of the breach, was widely circulated to well over 170 email addresses, and ended up in the hands of many people outside the industry. In the current climate of public concern that has been created by the SSL scandal, it is not surprising that this document has caused some ripples in the investment community.”
The Sterling team informed Sunday Finance that the BOJ should have sent another communication about the matter on late Friday. No response was furnished up to press time.
Sunday Finance also reached out to Heather Ferguson who is president of the Cambio Association of Jamaica, but received no response up to press time.
While the BOJ has been seen as a no-nonsense regulator, another cambio which asked not to be identified said that the BOJ suspending cambios for not putting in the bid is foolishness, and that a punitive fine would be a better option.
“If you make a mistake, you make a mistake — they’re not killing people or doing money laundering. When you’re giving a suspension, please think about other people,” the cambio head said as another player was recently suspended by the BOJ for the same matter affecting Sterling.
“We have automated daily reminders that will alert the cambio manager to enter these bids and offers. Sterling is also encouraging the BOJ to enable the ‘good until cancelled’ feature on its platform — that will alleviate the need for participants to manually enter these bids and offers every day,” the Sterling executive said on measures to protect it from another sanction.