Morning Bell        AFME warns how proposed transaction tax would affect FX markets AFME released a report that shows how a proposed tax on financial transactions could significantly increase costs in foreign exchange markets. The report, prepared by Oliver Wyman, warns that the tax could drive as much as three-quarters of tax-eligible transactions outside the EU. "This study shows that the proposed tax would in effect penalise Europe's businesses for sensible risk management [who] use FX products to manage currency fluctuations, and also threaten to impose further costs on the investment returns of pension funds and asset managers," said James Kemp, managing director at AFME. The Wall Street Journal/Dow Jones Newswires(17 Jan.)   Industry News  Greece's Papademos will discuss debt relief with bondholder group Negotiations between Greek officials and a group representing private bondholders are set to resume after a five-day break. Prime Minister Lucas Papademos is poised to meet with the group to discuss forgiving 50% or more of Greece's debt. "The next few weeks will be the most difficult in the Greek programme," said Athanasios Vamvakidis, a foreign exchange strategist at Bank of America. "All this needs to be completed by mid-March to avoid a disorderly default. Not an impossible task, but clearly very challenging with very much at stake." Bloomberg Businessweek(17 Jan.), Reuters(17 Jan.), The Washington Post/The Associated Press(17 Jan.) Almunia emphasises competition as he considers DB-NYSE merger Joaquin Almunia, the EU's top antitrust regulator, vowed to drive competition using "all available instruments" as he considers the proposed merger of Deutsche Boerse and NYSE Euronext. "In this case as in others", the European Commission "will seek to ensure that European markets remain fair, efficient and therefore competitive to the advantage of their users", Almunia said. Bloomberg(17 Jan.), The Wall Street Journal(17 Jan.)

UK urges EU to ignore "vested interests" when ruling on exchange merger: EU competition authorities indicated that they will recommend blocking the proposed merger of Deutsche Boerse and NYSE Euronext. UK officials urged the EU to reject "vested interests" and "political interference" when they rule on the tie-up. Reuters(17 Jan.)

London investment bankers face prospect of no bonuses
Bankers and headhunters predicted that a larger percentage of investment bankers in London will receive zero bonuses, known as "doughnuts", this year. "This will probably be the worst year for zero bonuses we've seen, although those that will have done well will still get something," said Jason Kennedy of The Kennedy Group. "Global heads and senior managing directors are among those that will get nothing -- they're the expensive staff, and they'll be living off their higher salaries." Reuters(17 Jan.)

• Other News

EFSF sells €1.5 billion in 6-month bills
Bloomberg (17 Jan.)

Spain sells €4.88 billion in bills in market test
Reuters (17 Jan.)

Regulatory Roundup

Draghi and King question role of credit rating agencies
European Central Bank President Mario Draghi and Bank of England Governor Mervyn King separately questioned credit rating agencies' role after Standard & Poor's downgraded ratings of several euro-zone nations. Draghi and King encouraged investors to make their own assessments about the worth of European debt rather than rely on rating agencies. "What we need to do is to move to a point, and I think markets have gone some way towards that, where they pay less attention to the verdicts of the ratings agencies," King said. The New York Times (tiered subscription model)(17 Jan.)

Groups want more time for EU regulators to draft rules
EU regulators drafting rules for banks and markets should be given more time, industry groups said. Existing deadlines "jeopardize the goal of drafting high-quality and credible regulation", the groups wrote in a letter to officials including Michel Barnier, the EU's internal-market commissioner. Bloomberg(17 Jan.)

BoE's King warns UK bankers about large bonuses
Mervyn King, governor of the Bank of England, said UK banks should bolster capital cushions to weather future shocks rather than pay executives large bonuses. "The reputation of those institutions will be affected if their senior executives reward themselves, particularly in a period when the banks, in terms of their share prices, have hardly been stellar," King said. Reuters(17 Jan.), Bloomberg(17 Jan.)

ECB explores alternatives to bond purchases
Ewald Nowotny, a member of the European Central Bank Governing Council, said the ECB is looking into alternatives to its bond-buying programme. "But this discussion is not so far developed that we can dispense with the [programme]," Nowotny said. Reuters(17 Jan.), The Wall Street Journal(18 Jan.)

• Other News

Tougher regulation won't hinder growth, UK's Hoban says
The Wall Street Journal/Dow Jones Newswires (17 Jan.)

UniCredit exec voices concerns about Basel III
The Wall Street Journal/Dow Jones Newswires (17 Jan.)