The document is a letter from Richard Tullo to William Donaldson, Chairman of the SEC, criticizing proposed Regulation NMS. The key points made in the letter are:
1) Regulation NMS does little to modernize markets and may cost investors billions by allowing trades to occur away from the best price.
2) It expands subsidies to ECNs and forces exchanges to build infrastructure to benefit competitors.
3) The proposal to distribute proprietary market information could harm customers and should be clarified.
4) The SEC should promote market structures that encourage liquidity provision rather than faster execution times.
La Regulación Optima es de Libre MercadoMauro Mazza
This document discusses the debate around whether securities exchanges or governments are better equipped to regulate securities markets and protect investors. It argues that exchanges have strong incentives to promote market integrity and discourage fraud/manipulation in order to maintain trading volume, while governments are more prone to overregulation in response to crises. Specifically, it claims exchanges police markets to attract listings and trading, while governments seek to avoid crises and satisfy political demands for action during downturns, even if costly or ineffective.
Facing increased regulatory oversight, more banks are opting for an integrated collateral management system that facilitates collateral optimization in coordination with central clearing counterparties (CCPs).
Negotiated brokerage commissions and the individual investorArun Verma
This document analyzes negotiated brokerage commissions for individual investors following the deregulation of commission rates in 1975. It summarizes:
1) The study examines commission rate discounts obtained by over 8,000 individual investors of a large retail brokerage firm between 1975-1979, finding discounts became more common and larger over time.
2) Discounts were related to characteristics of investors and trades, such as account size and transaction volume, in plausible ways.
3) However, discounts did not fully offset a general trend of rising commission costs for small investors at full-service brokers following deregulation.
This document discusses various topics related to pricing shares and stock markets. It begins by defining stocks/shares and describing their nominal, book, and market values. It then distinguishes between ordinary shares and preferred shares, noting their different risk profiles and dividend payment priorities. Various models for valuing shares are presented, including dividend discount models assuming no growth, constant growth, and the capital asset pricing model (CAPM) for calculating the required rate of return. The primary and secondary stock markets are defined, with the primary market involving a company's initial public offering of shares and the secondary market comprising subsequent trading on exchanges. Finally, extraordinary corporate events like capital increases and takeovers are briefly covered.
This document explains illegal naked shorting and stock manipulation on Wall Street. It describes how naked short selling and fails-to-deliver allow hedge funds and prime brokers to artificially increase the supply of shares and manipulate stock prices, harming companies and investors. Loopholes in SEC regulations are exploited to counterfeit shares and cover up short positions. Trillions of dollars have been stolen from investors through these predatory practices. Emerging companies are frequent targets and over 1000 have been bankrupted. The participants profit while fleecing small investors and damaging American businesses.
Competition policy, cartel enforcement and leniency programDr Danilo Samà
Competition policy, cartel enforcement and leniency program
Author:
Dr Danilo Samà (LUISS “Guido Carli” University)
Abstract:
The present assessment focuses on the antitrust action in detecting and fighting oligopolistic collusion, analyzing the development of the innovative and modern leniency policy. Following the examination of the main conditions and reasons for cartel stability and sustainability, our attempt is to comprehend under which circumstances leniency program represents a functional and successful tool for preventing the formation of anti-competitive agreements.
Keywords:
cartels enforcement, competition policy, game theory, leniency program, oligopolistic markets
JEL classification:
C70; K21; L13
Year:
2008
Pages:
1-12
Citation:
Samà, Danilo (2008), Competition policy, cartel enforcement and leniency program, LUISS “Guido Carli” University, Rome, Italy, pp. 1-12.
SUPPLY CHAIN FINANCE IN THE CONTEXT OF WORKING CAPITAL MANAGEMENTIgor Zax (Zaks)
Igor Zax, Managing Director of Tenzor Ltd., published a special report, Supply Chain Finance in the Context of Working Capital Management .
The report, published in conjunction with BCR Publishing, covers industry structure, risk management, financing and operational aspects, the way companies viewed the product, as well as trade offs between dynamic discounting and supply chain finance products.
Generate $497 over and over with social mediaSnazzyM
The document discusses the benefits of exercise for mental health. It states that regular physical activity can help reduce anxiety and depression and improve mood and cognitive functioning. Exercise has also been shown to increase gray matter volume in the brain and reduce risks for conditions like Alzheimer's and dementia.
La Regulación Optima es de Libre MercadoMauro Mazza
This document discusses the debate around whether securities exchanges or governments are better equipped to regulate securities markets and protect investors. It argues that exchanges have strong incentives to promote market integrity and discourage fraud/manipulation in order to maintain trading volume, while governments are more prone to overregulation in response to crises. Specifically, it claims exchanges police markets to attract listings and trading, while governments seek to avoid crises and satisfy political demands for action during downturns, even if costly or ineffective.
Facing increased regulatory oversight, more banks are opting for an integrated collateral management system that facilitates collateral optimization in coordination with central clearing counterparties (CCPs).
Negotiated brokerage commissions and the individual investorArun Verma
This document analyzes negotiated brokerage commissions for individual investors following the deregulation of commission rates in 1975. It summarizes:
1) The study examines commission rate discounts obtained by over 8,000 individual investors of a large retail brokerage firm between 1975-1979, finding discounts became more common and larger over time.
2) Discounts were related to characteristics of investors and trades, such as account size and transaction volume, in plausible ways.
3) However, discounts did not fully offset a general trend of rising commission costs for small investors at full-service brokers following deregulation.
This document discusses various topics related to pricing shares and stock markets. It begins by defining stocks/shares and describing their nominal, book, and market values. It then distinguishes between ordinary shares and preferred shares, noting their different risk profiles and dividend payment priorities. Various models for valuing shares are presented, including dividend discount models assuming no growth, constant growth, and the capital asset pricing model (CAPM) for calculating the required rate of return. The primary and secondary stock markets are defined, with the primary market involving a company's initial public offering of shares and the secondary market comprising subsequent trading on exchanges. Finally, extraordinary corporate events like capital increases and takeovers are briefly covered.
This document explains illegal naked shorting and stock manipulation on Wall Street. It describes how naked short selling and fails-to-deliver allow hedge funds and prime brokers to artificially increase the supply of shares and manipulate stock prices, harming companies and investors. Loopholes in SEC regulations are exploited to counterfeit shares and cover up short positions. Trillions of dollars have been stolen from investors through these predatory practices. Emerging companies are frequent targets and over 1000 have been bankrupted. The participants profit while fleecing small investors and damaging American businesses.
Competition policy, cartel enforcement and leniency programDr Danilo Samà
Competition policy, cartel enforcement and leniency program
Author:
Dr Danilo Samà (LUISS “Guido Carli” University)
Abstract:
The present assessment focuses on the antitrust action in detecting and fighting oligopolistic collusion, analyzing the development of the innovative and modern leniency policy. Following the examination of the main conditions and reasons for cartel stability and sustainability, our attempt is to comprehend under which circumstances leniency program represents a functional and successful tool for preventing the formation of anti-competitive agreements.
Keywords:
cartels enforcement, competition policy, game theory, leniency program, oligopolistic markets
JEL classification:
C70; K21; L13
Year:
2008
Pages:
1-12
Citation:
Samà, Danilo (2008), Competition policy, cartel enforcement and leniency program, LUISS “Guido Carli” University, Rome, Italy, pp. 1-12.
SUPPLY CHAIN FINANCE IN THE CONTEXT OF WORKING CAPITAL MANAGEMENTIgor Zax (Zaks)
Igor Zax, Managing Director of Tenzor Ltd., published a special report, Supply Chain Finance in the Context of Working Capital Management .
The report, published in conjunction with BCR Publishing, covers industry structure, risk management, financing and operational aspects, the way companies viewed the product, as well as trade offs between dynamic discounting and supply chain finance products.
Generate $497 over and over with social mediaSnazzyM
The document discusses the benefits of exercise for mental health. It states that regular physical activity can help reduce anxiety and depression and improve mood and cognitive functioning. Exercise has also been shown to increase gray matter volume in the brain and reduce risks for conditions like Alzheimer's and dementia.
Vladislav Borodinov - dancer, professional category, latin…prosvsports
Vladislav Borodinov is a professional Latin dancer born in 1982 who started dancing at age 15. He graduated from a choreography program in Russia and has studied in the UK. He now owns a dance studio and club in Moscow. His professional dance partner is Irina Garus, with whom he has competed internationally since 1999. Vladislav was also a participant on the Russian version of "Dancing With the Stars" in its early seasons, which helped raise his profile and lead to professional success. He is inspired by quotes about dance and its ability to express the soul.
The document is a song lyric that describes a caring relationship where one person lifts the other up during difficult times. It expresses how the singer was confused and sold their soul but the other person cleared their mind, bought their soul back, and gave them dignity. The other person needed the singer and gave them strength to face the world alone again by putting them on a pedestal.
The document discusses how taking a sustainability approach to business processes can uncover greater efficiencies than a lean approach alone. A sustainability lens considers wider system boundaries and identifies opportunities between different business silos by viewing waste from one process as a potential input for another. Case studies show companies achieving significant cost savings through collaborative sustainability projects across their operations and supply chains. Managing collaboration at scale requires online platforms and communities like those provided by 2degrees.
Effective feedback aims to implement new approaches in giving and receiving feedback that minimizes defensiveness and promotes problem solving by identifying success factors such as those outlined in Chart A.
Picasso foi um pintor espanhol nascido em 1881 que revolucionou a arte moderna através do cubismo. Ele teve várias mulheres e filhos ao longo de sua vida e é famoso por obras como A Fase Azul, A Fase Rosa e Guernica, pintura de protesto contra a violência da guerra.
This document summarizes ABN AMRO Clearing's second Amsterdam Investor Forum (AIF) held in February. The event brought together 250 professionals from the alternative investment industry. It featured panels, presentations, and keynote speeches on topics like managed account platforms, credit strategies, regulations, fraud detection, and central bank policies. An "AIF Factor" competition gave emerging fund managers the opportunity to pitch their funds to investors. Feedback on the event was positive, praising the quality of speakers and networking opportunities. Such events position ABN AMRO Clearing as a leading provider of prime clearing services to major actors in the alternative investment industry.
Chapter 03 - How Securities Are TradedChapter Three How SECU.docxsleeperharwell
Chapter 03 - How Securities Are Traded
Chapter Three
How SECURITIES Are TradedCHAPTER OVERVIEW
This chapter discusses how securities are traded on both the primary and secondary markets, with detailed coverage of both organized exchange and over the counter activities. Margin trading and short selling are discussed along with detailed examples of margin arrangements. The chapter discusses elements of regulation and ethics issues associated with security transactions.LEARNING OBJECTIVES
After studying this chapter the student should have considerable insight as to how securities are traded on both the primary and secondary markets. The student should understand the mechanics, risk, and calculations involved in both margin and short trading. The student should begin to understand some of the implications, ambiguities, and complexities of the regulation of securities markets.Presentation of Material
3.1 How Firms Issue Securities
Key characteristics of primary and secondary sales of securities are presented here. The relationship between the primary market terms and activity in the secondary market presents a good opportunity for class discussion and relating the material in the investment class to principles of finance.
Investment banking involves the sale of new issues of securities to investors; Figure 3.1 shows the relationship between parties involved in an underwritten offering. Shelf registrations allow a firm that is regularly reporting to sell a limited amount of new stock without going through a registered public offering. This allows a firm more flexibility in selling additional shares.
Private placements allow a firm to sell securities without going through a registered public offering. While most stock offerings employ public offerings, many issues of debt are completed using private placements. It is useful to discuss differences in the markets for equity and bond when discussing this material. Bond markets are dominated by financial institutions and many of the special characteristics of bond issues lend themselves to private placements. In some years the volume of private placements exceeds public offerings of corporate bond issues.
When a company sells securities to the general investing public for the first time, the transaction is referred to as an Initial Public Offering (IPO). The underwriting firms commonly underprice IPOs leading to significant short-term performance for some investors.
3.2 How Securities Are Traded
This section presents the major types of secondary markets. The discussion of secondary markets should be focused on services rather than institutional characteristics of our markets. Discussion of different demands for services by different types of investors can help students understand the recent developments in our markets.
Orders for transactions in securities have different priorities. Market orders are to be executed immediately at current market prices. Price-Contingent Orders pl.
The document discusses the Futures & Options Expo 2000 conference which covered regulatory changes in the futures industry, including proposed legislation to modernize regulation. It also discusses the Chicago Mercantile Exchange's new business-to-business initiative and partnerships, as well as issues facing the managed futures sector. The conference showed the ongoing transformation in the futures industry driven by globalization, technology changes, and deregulation.
This document provides an overview of modern market making. It discusses the economics and microstructure of market making, the roles played by market makers in providing liquidity. It describes the process of market making, where market makers set bid and ask prices to facilitate trades between buyers and sellers. Recently, there has been a shift to electronic market making, where algorithms and computer programs set prices instead of humans. The document focuses on pricing models used by electronic market makers and compares different models. It examines alternatives to traditional market making and provides a conclusion on the topic.
KCG Holdings is a U.S.-based financial firm that specializes in electronic trading across multiple asset classes. KCG utilizes sophisticated trading technologies and models to facilitate trading between market participants. While relatively small, KCG accounts for over 15% of daily U.S. equity trading volume. KCG engages in both principal trading as a market maker and agency-based trading on behalf of clients. KCG's focus on continuous technological investment and specialization in trading allows it to maintain a low cost structure compared to larger financial institutions.
Report on FINRA's Order Trail System, including a high level technology architecture detail as well as future challenges that need to be addressed by the upcoming Consolidated Audit Trail System (CATS).
This document summarizes and analyzes proposed SEC Rule 22c-2, which would require mutual funds to impose mandatory 2% redemption fees on certain short-term redemptions. It discusses the SEC's goal of deterring abusive trading practices that harm long-term investors. It also notes that while the proposed rule aims to address abusive trading, it could unduly burden financial intermediaries due to complex reporting requirements and potentially apply fees to ordinary investors not engaged in abusive practices. The document provides an overview of the proposed rule and debates its potential effectiveness and drawbacks.
This document is a paper written by M Ahnaf Khan for their final project at Bard College on high frequency trading. It discusses the emergence of high frequency trading, various trading strategies used by HFT firms like market making and arbitrage, the impact of HFT on price discovery and liquidity, and various regulations implemented in response to events like the 2010 Flash Crash. The paper aims to analyze the effect of HFT on market prices and propose a new regulation of implementing a financial transaction tax.
1) The document summarizes Christopher Whalen's testimony before the Senate regarding regulation of over-the-counter (OTC) derivatives markets.
2) Whalen argues that flaws in the business models of large dealer banks like JPMorgan, Bank of America, and Goldman Sachs have led to the current unregulated structure of the OTC derivatives market.
3) He claims that supra-normal returns in the closed OTC market effectively act as a tax on other market participants and taxpayers who are left paying for periodic failures of OTC derivatives users like AIG and Citigroup.
The document summarizes a theory that financial markets were previously split into two parts - price risky and price stable. This split market paradigm was disrupted in the 1970s with the introduction of over-the-counter (OTC) instruments. Had the split been maintained, it argues there would have been less risk added to the system and perhaps no financial crisis in 2007. It describes how restoring the split market through new trading technology could reduce risks.
Preparing for a future of complexity helen lofthouse by-lined article b-wre...Keira Ball
The document discusses how new regulations for OTC derivatives will lead to significant changes in the market structure and increased complexity. Regulations will drive standardization and migration of OTC activity to exchanges and electronic trading platforms. This will fragment liquidity across dozens of potential new venues. It will also increase costs for customized OTC transactions. To prepare, market participants need to focus on accessing advanced technology to find liquidity across venues, optimizing margin and collateral usage, and managing increased operational complexity of the changing market structure. Dealers that can help clients solve these challenges will be well positioned to deliver value in the new environment.
How blockchain could disrupt wall street Ian Beckett
The document discusses how blockchain technology could disrupt stock exchanges and Wall Street. It notes that active management has underperformed, fees are decreasing, and liquidity provided by high-frequency trading may shift away from exchanges. Blockchain eliminates third parties like exchanges by allowing direct trading between parties on distributed ledgers with no fees and immediate settlement. This could lead to new global blockchain-based exchanges handling multiple asset classes within 10 years that circumvent the traditional exchange model.
Real-time, high-frequency trading (HFT) is placing increasing pressure on regulatory compliance teams to keep up with and monitor the industry's widening pools of structured and unstructured data. Emerging technologies can help capital markets firms use big-data analytics to collect, classify and analyze high volumes of data to formulate strategies for better surveillance, compliance and spot abuse.
The document discusses arguments for and against raising the minimum core capital base for commercial banks. Key points include:
- Raising capital promotes stability by reducing risk-taking and providing a buffer against losses. Better capitalized banks lead to lower credit volatility and increased resilience to financial downturns.
- However, smaller banks and micro-lenders may be discouraged from entering the market or expanding if capital requirements are increased. Higher requirements could also reduce lending and economic growth.
- The document also provides background information on several major stock exchanges, including their distinguishing characteristics and operations.
DATA SCIENCE APPROACH TO STOCK MARKET ANALYSISIRJET Journal
This document discusses using data science techniques to analyze stock market data. It begins by defining stock analysis as a tool used by investors and traders to research historical and recent data to make informed investment decisions. It then discusses two strategies for stock market prediction - using technical indicators to predict stock trends and using a Hidden Markov Model which takes a probabilistic approach. The document provides an introduction to understanding the stock market, how it functions as both a primary and secondary market, and some common technical indicators and metrics used in stock analysis like stochastic oscillator and momentum index.
The document summarizes key topics discussed at the 23rd annual FIA Law & Compliance Division Workshop, including security futures, access to foreign exchanges, and block trading. Regarding security futures, it outlines the new regulatory framework established by the Commodity Futures Modernization Act which designates them as both commodities and securities. It also discusses ongoing rulemaking efforts between the SEC and CFTC. For access to foreign exchanges, it compares the CFTC and SEC approaches. The CFTC allows direct customer access through automated order routing systems while the SEC focuses on best execution. It also notes the CFTC grants no-action letters to foreign exchanges while the SEC requires registration. Finally, it discusses the emergence
Vladislav Borodinov - dancer, professional category, latin…prosvsports
Vladislav Borodinov is a professional Latin dancer born in 1982 who started dancing at age 15. He graduated from a choreography program in Russia and has studied in the UK. He now owns a dance studio and club in Moscow. His professional dance partner is Irina Garus, with whom he has competed internationally since 1999. Vladislav was also a participant on the Russian version of "Dancing With the Stars" in its early seasons, which helped raise his profile and lead to professional success. He is inspired by quotes about dance and its ability to express the soul.
The document is a song lyric that describes a caring relationship where one person lifts the other up during difficult times. It expresses how the singer was confused and sold their soul but the other person cleared their mind, bought their soul back, and gave them dignity. The other person needed the singer and gave them strength to face the world alone again by putting them on a pedestal.
The document discusses how taking a sustainability approach to business processes can uncover greater efficiencies than a lean approach alone. A sustainability lens considers wider system boundaries and identifies opportunities between different business silos by viewing waste from one process as a potential input for another. Case studies show companies achieving significant cost savings through collaborative sustainability projects across their operations and supply chains. Managing collaboration at scale requires online platforms and communities like those provided by 2degrees.
Effective feedback aims to implement new approaches in giving and receiving feedback that minimizes defensiveness and promotes problem solving by identifying success factors such as those outlined in Chart A.
Picasso foi um pintor espanhol nascido em 1881 que revolucionou a arte moderna através do cubismo. Ele teve várias mulheres e filhos ao longo de sua vida e é famoso por obras como A Fase Azul, A Fase Rosa e Guernica, pintura de protesto contra a violência da guerra.
This document summarizes ABN AMRO Clearing's second Amsterdam Investor Forum (AIF) held in February. The event brought together 250 professionals from the alternative investment industry. It featured panels, presentations, and keynote speeches on topics like managed account platforms, credit strategies, regulations, fraud detection, and central bank policies. An "AIF Factor" competition gave emerging fund managers the opportunity to pitch their funds to investors. Feedback on the event was positive, praising the quality of speakers and networking opportunities. Such events position ABN AMRO Clearing as a leading provider of prime clearing services to major actors in the alternative investment industry.
Chapter 03 - How Securities Are TradedChapter Three How SECU.docxsleeperharwell
Chapter 03 - How Securities Are Traded
Chapter Three
How SECURITIES Are TradedCHAPTER OVERVIEW
This chapter discusses how securities are traded on both the primary and secondary markets, with detailed coverage of both organized exchange and over the counter activities. Margin trading and short selling are discussed along with detailed examples of margin arrangements. The chapter discusses elements of regulation and ethics issues associated with security transactions.LEARNING OBJECTIVES
After studying this chapter the student should have considerable insight as to how securities are traded on both the primary and secondary markets. The student should understand the mechanics, risk, and calculations involved in both margin and short trading. The student should begin to understand some of the implications, ambiguities, and complexities of the regulation of securities markets.Presentation of Material
3.1 How Firms Issue Securities
Key characteristics of primary and secondary sales of securities are presented here. The relationship between the primary market terms and activity in the secondary market presents a good opportunity for class discussion and relating the material in the investment class to principles of finance.
Investment banking involves the sale of new issues of securities to investors; Figure 3.1 shows the relationship between parties involved in an underwritten offering. Shelf registrations allow a firm that is regularly reporting to sell a limited amount of new stock without going through a registered public offering. This allows a firm more flexibility in selling additional shares.
Private placements allow a firm to sell securities without going through a registered public offering. While most stock offerings employ public offerings, many issues of debt are completed using private placements. It is useful to discuss differences in the markets for equity and bond when discussing this material. Bond markets are dominated by financial institutions and many of the special characteristics of bond issues lend themselves to private placements. In some years the volume of private placements exceeds public offerings of corporate bond issues.
When a company sells securities to the general investing public for the first time, the transaction is referred to as an Initial Public Offering (IPO). The underwriting firms commonly underprice IPOs leading to significant short-term performance for some investors.
3.2 How Securities Are Traded
This section presents the major types of secondary markets. The discussion of secondary markets should be focused on services rather than institutional characteristics of our markets. Discussion of different demands for services by different types of investors can help students understand the recent developments in our markets.
Orders for transactions in securities have different priorities. Market orders are to be executed immediately at current market prices. Price-Contingent Orders pl.
The document discusses the Futures & Options Expo 2000 conference which covered regulatory changes in the futures industry, including proposed legislation to modernize regulation. It also discusses the Chicago Mercantile Exchange's new business-to-business initiative and partnerships, as well as issues facing the managed futures sector. The conference showed the ongoing transformation in the futures industry driven by globalization, technology changes, and deregulation.
This document provides an overview of modern market making. It discusses the economics and microstructure of market making, the roles played by market makers in providing liquidity. It describes the process of market making, where market makers set bid and ask prices to facilitate trades between buyers and sellers. Recently, there has been a shift to electronic market making, where algorithms and computer programs set prices instead of humans. The document focuses on pricing models used by electronic market makers and compares different models. It examines alternatives to traditional market making and provides a conclusion on the topic.
KCG Holdings is a U.S.-based financial firm that specializes in electronic trading across multiple asset classes. KCG utilizes sophisticated trading technologies and models to facilitate trading between market participants. While relatively small, KCG accounts for over 15% of daily U.S. equity trading volume. KCG engages in both principal trading as a market maker and agency-based trading on behalf of clients. KCG's focus on continuous technological investment and specialization in trading allows it to maintain a low cost structure compared to larger financial institutions.
Report on FINRA's Order Trail System, including a high level technology architecture detail as well as future challenges that need to be addressed by the upcoming Consolidated Audit Trail System (CATS).
This document summarizes and analyzes proposed SEC Rule 22c-2, which would require mutual funds to impose mandatory 2% redemption fees on certain short-term redemptions. It discusses the SEC's goal of deterring abusive trading practices that harm long-term investors. It also notes that while the proposed rule aims to address abusive trading, it could unduly burden financial intermediaries due to complex reporting requirements and potentially apply fees to ordinary investors not engaged in abusive practices. The document provides an overview of the proposed rule and debates its potential effectiveness and drawbacks.
This document is a paper written by M Ahnaf Khan for their final project at Bard College on high frequency trading. It discusses the emergence of high frequency trading, various trading strategies used by HFT firms like market making and arbitrage, the impact of HFT on price discovery and liquidity, and various regulations implemented in response to events like the 2010 Flash Crash. The paper aims to analyze the effect of HFT on market prices and propose a new regulation of implementing a financial transaction tax.
1) The document summarizes Christopher Whalen's testimony before the Senate regarding regulation of over-the-counter (OTC) derivatives markets.
2) Whalen argues that flaws in the business models of large dealer banks like JPMorgan, Bank of America, and Goldman Sachs have led to the current unregulated structure of the OTC derivatives market.
3) He claims that supra-normal returns in the closed OTC market effectively act as a tax on other market participants and taxpayers who are left paying for periodic failures of OTC derivatives users like AIG and Citigroup.
The document summarizes a theory that financial markets were previously split into two parts - price risky and price stable. This split market paradigm was disrupted in the 1970s with the introduction of over-the-counter (OTC) instruments. Had the split been maintained, it argues there would have been less risk added to the system and perhaps no financial crisis in 2007. It describes how restoring the split market through new trading technology could reduce risks.
Preparing for a future of complexity helen lofthouse by-lined article b-wre...Keira Ball
The document discusses how new regulations for OTC derivatives will lead to significant changes in the market structure and increased complexity. Regulations will drive standardization and migration of OTC activity to exchanges and electronic trading platforms. This will fragment liquidity across dozens of potential new venues. It will also increase costs for customized OTC transactions. To prepare, market participants need to focus on accessing advanced technology to find liquidity across venues, optimizing margin and collateral usage, and managing increased operational complexity of the changing market structure. Dealers that can help clients solve these challenges will be well positioned to deliver value in the new environment.
How blockchain could disrupt wall street Ian Beckett
The document discusses how blockchain technology could disrupt stock exchanges and Wall Street. It notes that active management has underperformed, fees are decreasing, and liquidity provided by high-frequency trading may shift away from exchanges. Blockchain eliminates third parties like exchanges by allowing direct trading between parties on distributed ledgers with no fees and immediate settlement. This could lead to new global blockchain-based exchanges handling multiple asset classes within 10 years that circumvent the traditional exchange model.
Real-time, high-frequency trading (HFT) is placing increasing pressure on regulatory compliance teams to keep up with and monitor the industry's widening pools of structured and unstructured data. Emerging technologies can help capital markets firms use big-data analytics to collect, classify and analyze high volumes of data to formulate strategies for better surveillance, compliance and spot abuse.
The document discusses arguments for and against raising the minimum core capital base for commercial banks. Key points include:
- Raising capital promotes stability by reducing risk-taking and providing a buffer against losses. Better capitalized banks lead to lower credit volatility and increased resilience to financial downturns.
- However, smaller banks and micro-lenders may be discouraged from entering the market or expanding if capital requirements are increased. Higher requirements could also reduce lending and economic growth.
- The document also provides background information on several major stock exchanges, including their distinguishing characteristics and operations.
DATA SCIENCE APPROACH TO STOCK MARKET ANALYSISIRJET Journal
This document discusses using data science techniques to analyze stock market data. It begins by defining stock analysis as a tool used by investors and traders to research historical and recent data to make informed investment decisions. It then discusses two strategies for stock market prediction - using technical indicators to predict stock trends and using a Hidden Markov Model which takes a probabilistic approach. The document provides an introduction to understanding the stock market, how it functions as both a primary and secondary market, and some common technical indicators and metrics used in stock analysis like stochastic oscillator and momentum index.
The document summarizes key topics discussed at the 23rd annual FIA Law & Compliance Division Workshop, including security futures, access to foreign exchanges, and block trading. Regarding security futures, it outlines the new regulatory framework established by the Commodity Futures Modernization Act which designates them as both commodities and securities. It also discusses ongoing rulemaking efforts between the SEC and CFTC. For access to foreign exchanges, it compares the CFTC and SEC approaches. The CFTC allows direct customer access through automated order routing systems while the SEC focuses on best execution. It also notes the CFTC grants no-action letters to foreign exchanges while the SEC requires registration. Finally, it discusses the emergence
This document summarizes a panel discussion on the impact of regulations on the over-the-counter (OTC) derivatives market. The panelists represented different parts of the OTC transaction value chain, from trade execution to reporting and clearing. Key points discussed included the uncertainty created by various US and European regulations; differences between the Dodd-Frank Act and European regulations; challenges around defining what can and cannot be cleared; and how regulations may change trade execution and post-trade processing. The panelists expected significant changes to systems, business models, and the relationship between buy-side and sell-side firms as a result of new OTC derivatives regulations.
Algorithmic trading involves using computer algorithms to automate and execute trades electronically. It began in the 1970s with the introduction of electronic trading systems and has grown significantly, making up over 70% of US equity trading by 2009. Algorithmic trading allows for dividing large orders into many smaller trades to minimize market impact and risk. It provides benefits like lower costs and more control over the trading process, but also raises concerns about its role in increased volatility and events like the 2010 Flash Crash.
This Document Includes Literature on The Stock Exchange - The New York Stock Exchange (NYSE) and Defines the New York Stock Exchange, Its Participants, Purpose, and also Regulatory Organs of the Stock Exchange
Chapter 02_Overview of the Financial SystemRusman Mukhlis
This chapter provides an overview of the financial system, including the functions of financial markets and intermediaries in channeling funds from lenders to borrowers. It describes the structure of markets, such as debt versus equity, and primary versus secondary markets. It also discusses the internationalization of markets and the role of regulation in ensuring stability and transparency.
Ad Industry Holding Company Report Premium Versionttgoods
This report summarizes investment opportunities in the advertising holding company industry. It finds that advertising agencies are well-positioned to benefit from an economic recovery through increased client spending. The adoption of new technologies such as mobile, internet, and interactive media are expected to drive revenue growth above consensus estimates. As the recovery strengthens, multiples are forecasted to expand, attracting more institutional investment to the industry. Emerging markets and potential for further consolidation also provide opportunities for growth.
Al Fried Llc Custom Analytics Report Mdca (2711 Exempt) 062409ttgoods
1) The analyst initiates coverage of MDC Partners (MDCA) with a Buy rating and $9 price target, seeing upside of 57% from the current price.
2) Key reasons for the positive outlook include MDCA's strategic position and prospects for market share gains in 2009-2010 from increased spending on creative advertising.
3) Risks include potential declines in MDCA's customer relationship management revenue, though the analyst expects other areas of the business to offset this.
Al Fried Llc Analytics Report CVC 070909 Ak Markedttgoods
The analyst initiates coverage of Cablevision Systems Corp. (CVC) with a BUY rating and $23 price target. Some key points from the summary:
- CVC has a recurring revenue model from telecom services that will see strong retention in a weak economy.
- Madison Square Garden is viewed as a hidden asset not fully reflected in CVC's stock price.
- A sum-of-the-parts valuation estimates CVC's equity is worth $22.86 per share, representing 30% upside to the target price.
The document discusses how dividend yields on some stocks have increased substantially due to recent market declines, making some dividend-paying stocks more attractive. However, it cautions that dividend payments may be cut for some companies as corporate profits fall. It provides examples of stocks with high dividend yields but varying levels of risk, such as utilities, consumer staples companies, and materials companies. Investors are advised to look beyond just dividend yields and consider underlying business fundamentals and risk of dividend cuts.
Tivo Pops On Premiere Ces Tech Talk Fidelityttgoods
1) TiVo shares surged as its Premiere set-top box gains recognition at the upcoming Consumer Electronics Show, with analysts anticipating the box will establish TiVo as the leader in integrating online and cable TV content.
2) The Premiere allows users to access Netflix, Amazon, YouTube, and social media through their TV and integrates 1 terabyte of storage for live and on-demand content from various sources with a single remote.
3) Analysts maintain buy ratings on TiVo and see the Premiere as superior to other DVRs, with a key upcoming legal decision potentially providing TiVo with $75-200 million in additional revenue.
Richard Tullo has over 20 years of experience in institutional research, investment analysis, portfolio management, and trading across various roles in investment banking, hedge funds, and independent research firms. He holds an MBA in finance and has published research covering various industries. His objective is to apply his skills and experience in institutional research and investments.
Six Steps Necessary For A Successful Activist Investment Campaignttgoods
The document outlines 6 steps for a successful activist investment campaign based on principles developed by the US Naval War College for insurgent campaigns. The steps are: 1) Define the critical issue to address such as revenues, earnings, governance or capital structure. 2) Gain shareholder support by building a coalition of 20-40% of shareholders and developing an alternative vision. 3) Build up the campaign by hiring an attorney, recruiting directors and management. 4) Use attrition tactics like soliciting votes and negotiating seats. 5) Transition by co-opting the board and pursuing the shareholder agenda. 6) Take over completely by pursuing a second proxy vote, removing directors and the CEO, and executing the strategic alternative.
Richard Tullo has over 20 years of experience in financial analysis, investment research, and institutional trading. He has held positions as a research analyst covering technology companies, co-founding an independent research firm, and working as a vice president for institutional trading firms. He holds an MBA and securities licenses, and seeks to apply his skills and experience in institutional investing.
The document discusses reforms needed to the mark-to-market accounting rule (FASB 157) to help address the financial crisis. It argues that FASB 157, which requires securities to be valued based on their last sale price, even if that does not reflect intrinsic value, has led banks to post losses on mortgage securities and curtail lending. Reforming the rule to value securities based on their "call price" (the price a bank would sell them at) would result in prices closer to intrinsic value and support markets. While the Treasury plan addresses some issues, a complete overhaul of securities regulations is still needed to prevent future crises.
The document discusses relational investing and corporate governance. Relational investing involves committing to not tender shares to a hostile bidder in exchange for improved board representation and internal controls. Relational investors aim to generate excess returns by focusing on long-term investment strategies and acting more like owners of companies through board representation, proxy contests, and relationships. While relational investing can provide asymmetrical rewards and insights, it also involves high costs, retaliation risks, low liquidity, and long holding periods. Good corporate governance, including independent boards and accountability, promotes good decision making and returns for investors.
Rich Tullo Editorial on Mark To Market and FASB 157ttgoods
The document discusses reforms needed to the mark-to-market accounting rule (FASB 157) to help address the financial crisis. It argues that FASB 157, which requires securities to be valued based on their last sale price, even if that price does not reflect true value, has led banks to post losses on mortgage securities and curtail lending. Reforming the rule to value securities based on their "call price" (the price a bank would sell them at) would result in prices closer to intrinsic value and support markets. While the Treasury plan addresses some issues, a complete overhaul of securities regulations is still needed to prevent future crises.
Journal Communications, Inc. is a media company that operates newspapers, television stations, radio stations, and websites across 12 states. The company generates most of its revenue from advertising sales. The analyst initiates coverage of Journal Communications with a Neutral rating and $8 price target due to concerns about weak advertising spending in 2008 and the company's exposure to struggling real estate markets. However, the company is transforming its business model and expanding its faster-growing internet and broadcast segments. The analyst expects the company's performance to improve in late 2008 and 2009 as the economy recovers and advertising spending increases.
A financial model is a quantitative or accounting logic chain designed to forecast future outcomes based on data inputs. Models allow for better forecasting than guessing by incorporating assumptions, economic data, and other variables. Common types of financial models include econometric models, industry models, and earnings models. An example regression model correlates housing starts to population estimates to forecast new home construction. Good analysts spend most of their time developing and interpreting financial models.
- The water industry is a $400 billion global business that has provided market-beating returns but remains overlooked by many investors.
- The Gateway Water Economy Index has outperformed major stock indexes like the S&P 500 and Nasdaq over 5-year and 20-year periods.
- The report analyzes trends in the global and domestic water industries and introduces a Water Economy Model Portfolio of companies involved in water utilities, infrastructure, chemicals, technologies, and bottled water.
The document discusses how the recent stock market plunge has increased the dividend yields of some stable companies, making their shares more attractive. However, it cautions that not all high-dividend stocks are safe, as corporate profits fall and dividends may be cut. It provides examples of companies with relatively secure dividends, such as Coca-Cola and Merck, as well as those whose dividends may be at more risk, such as Bank of America, CIT Group, and newspaper companies. Investors are advised to look beyond just dividend yields and consider the underlying business fundamentals and risk of dividends being reduced.
Zodiac Signs and Food Preferences_ What Your Sign Says About Your Tastemy Pandit
Know what your zodiac sign says about your taste in food! Explore how the 12 zodiac signs influence your culinary preferences with insights from MyPandit. Dive into astrology and flavors!
Industrial Tech SW: Category Renewal and CreationChristian Dahlen
Every industrial revolution has created a new set of categories and a new set of players.
Multiple new technologies have emerged, but Samsara and C3.ai are only two companies which have gone public so far.
Manufacturing startups constitute the largest pipeline share of unicorns and IPO candidates in the SF Bay Area, and software startups dominate in Germany.
Brian Fitzsimmons on the Business Strategy and Content Flywheel of Barstool S...Neil Horowitz
On episode 272 of the Digital and Social Media Sports Podcast, Neil chatted with Brian Fitzsimmons, Director of Licensing and Business Development for Barstool Sports.
What follows is a collection of snippets from the podcast. To hear the full interview and more, check out the podcast on all podcast platforms and at www.dsmsports.net
Part 2 Deep Dive: Navigating the 2024 Slowdownjeffkluth1
Introduction
The global retail industry has weathered numerous storms, with the financial crisis of 2008 serving as a poignant reminder of the sector's resilience and adaptability. However, as we navigate the complex landscape of 2024, retailers face a unique set of challenges that demand innovative strategies and a fundamental shift in mindset. This white paper contrasts the impact of the 2008 recession on the retail sector with the current headwinds retailers are grappling with, while offering a comprehensive roadmap for success in this new paradigm.
How to Implement a Real Estate CRM SoftwareSalesTown
To implement a CRM for real estate, set clear goals, choose a CRM with key real estate features, and customize it to your needs. Migrate your data, train your team, and use automation to save time. Monitor performance, ensure data security, and use the CRM to enhance marketing. Regularly check its effectiveness to improve your business.
Digital Marketing with a Focus on Sustainabilitysssourabhsharma
Digital Marketing best practices including influencer marketing, content creators, and omnichannel marketing for Sustainable Brands at the Sustainable Cosmetics Summit 2024 in New York
The 10 Most Influential Leaders Guiding Corporate Evolution, 2024.pdfthesiliconleaders
In the recent edition, The 10 Most Influential Leaders Guiding Corporate Evolution, 2024, The Silicon Leaders magazine gladly features Dejan Štancer, President of the Global Chamber of Business Leaders (GCBL), along with other leaders.
Storytelling is an incredibly valuable tool to share data and information. To get the most impact from stories there are a number of key ingredients. These are based on science and human nature. Using these elements in a story you can deliver information impactfully, ensure action and drive change.
At Techbox Square, in Singapore, we're not just creative web designers and developers, we're the driving force behind your brand identity. Contact us today.
Best practices for project execution and deliveryCLIVE MINCHIN
A select set of project management best practices to keep your project on-track, on-cost and aligned to scope. Many firms have don't have the necessary skills, diligence, methods and oversight of their projects; this leads to slippage, higher costs and longer timeframes. Often firms have a history of projects that simply failed to move the needle. These best practices will help your firm avoid these pitfalls but they require fortitude to apply.
Event Report - SAP Sapphire 2024 Orlando - lots of innovation and old challengesHolger Mueller
Holger Mueller of Constellation Research shares his key takeaways from SAP's Sapphire confernece, held in Orlando, June 3rd till 5th 2024, in the Orange Convention Center.
Anny Serafina Love - Letter of Recommendation by Kellen Harkins, MS.AnnySerafinaLove
This letter, written by Kellen Harkins, Course Director at Full Sail University, commends Anny Love's exemplary performance in the Video Sharing Platforms class. It highlights her dedication, willingness to challenge herself, and exceptional skills in production, editing, and marketing across various video platforms like YouTube, TikTok, and Instagram.
3 Simple Steps To Buy Verified Payoneer Account In 2024SEOSMMEARTH
Buy Verified Payoneer Account: Quick and Secure Way to Receive Payments
Buy Verified Payoneer Account With 100% secure documents, [ USA, UK, CA ]. Are you looking for a reliable and safe way to receive payments online? Then you need buy verified Payoneer account ! Payoneer is a global payment platform that allows businesses and individuals to send and receive money in over 200 countries.
If You Want To More Information just Contact Now:
Skype: SEOSMMEARTH
Telegram: @seosmmearth
Gmail: seosmmearth@gmail.com
Structural Design Process: Step-by-Step Guide for BuildingsChandresh Chudasama
The structural design process is explained: Follow our step-by-step guide to understand building design intricacies and ensure structural integrity. Learn how to build wonderful buildings with the help of our detailed information. Learn how to create structures with durability and reliability and also gain insights on ways of managing structures.
Structural Design Process: Step-by-Step Guide for Buildings
Reg Nms S7 10 04
1. .
.
.
.
16 Park Avenue
.
. New York, New York 10016
.
.
.
From The desk of: Richard Tullo
William H. Donaldson
Chairman
Securities and Exchange Commission
450 Fifth Street Washington, DC 20549
February 26, 2004
Dear Mr. Donaldson;
The four proposals under Regulation NMS do little to modernize equity market structure while sowing
the seed for a new series of future regulatory crises and expanding the regulatory subsidy that the ECN
oligarchy currently enjoys. The fear is that Regulation NMS is a well meant, but ill advised , response to the
NYSE intra-positioning scandal which is a symptom of poor regulatory enforcement by both the SEC and the
SRO’s. Regulation NMS is like offering a bandage to a hemophiliac; it’s just a settlement that attempts to cure
a disease that will require more effort and resources to heal. Mr. Donaldson, your market acumen is beyond
reproach and you may be surprised by the support you receive from investors and traders if you take action to
promote viable reforms.
According to a review of SEC’s the press release Regulation NMS
proposes:
Allows orders, with customer approval, to trade-through when
competing markets are posting better prices
Allows orders that are traded through to be executed at prices that
are as much as 5 cents worse than the best price
Forces the exchanges and market centers to implement expensive
technological projects for the benefit of their competition
Eliminates sub penny pricing
Mandates that exchange centers distribute their own proprietary
information assets and customer intentions to the public
............................
2. February 26, 2004
Page 2
Trade-Through
The Securities and Exchange Commission (SEC) has stated that “when an agent acts on behalf of a
customer in a transaction, the agent is under a duty to exercise reasonable care to obtain the most
advantageous terms for the customer.”(NASDAQ Traders Manual, Chapter 12, pg 2 See Exhibit 1)
Regulation NMS is redefining best execution by allowing customers to opt out of trade through
protections. The SEC seems to be saying that price can be ignored by customers as an ‘advantageous term’.
It is understandable that several trading constituencies are frustrated with the negative consequences of
decimalization. It has been estimated that decimalization is responsible for slowing execution time for the
average institution trade -on average- by about eight minutes. Decimalization has disrupted institutional
trading desks and created an environment where their orders are traded against by day traders, computer
programs and other market participants. It is also understandable that the ECN’s whose competitive
advantage may be speed would seek to change regulations to favor their business models. Regulation NMS
is an attempt to placate these two constituencies at the expense of the investing public.
All ethical and professional traders fight everyday to provide their customers the best timely
executions given the circumstances they face today. Regulation NMS will give traders the ability trade
faster but at what cost? The SEC has not provided any guidance in regards to the time parameters that will
define best execution and under what specific conditions customers can opt out of trade through protections.
This new market structure can open an entirely new set of market abuses when the SEC has not
demonstrated that it has control over the markets as they exist today. (SEE EXHIBIT II)
It is very likely large market making firms and ECN’s will offer economic incentives or rebates to
their customers institutional and retail alike to encourage opting out. It is also equally likely that fund
management companies and electronic brokerages will keep the rebates while mutual fund investors pay the
price in the form of inferior equity prices.
The NYSE trading scandal (when not accounting for unprofitable intra positioning trades) allegedly
cost investors 1.1 billion dollars. It has been estimated that the scandal cost those investors roughly .004
cents per share or 40 cents per thousand shares. Forty cents seems like a small amount of money -candy
bars cost more- but it adds up when aggregated across the billion of trades handled by the securities
markets. Allowing exceptions to trade through can potentially cost invests more money than the NYSE
scandal and the earlier NASDAQ scandal combined.
3. February 26, 2004
Page 3
For Example:
Jane Doe opens a discount brokerage account and signs an agreement to receive ten free trades and
in the process legally agrees to opt out of trade through protections.
Jane then enters a market order to buy 1000 shares of TESTA.
The inside market for TESTA is bid $10 offered at $10.03 and the order is routed to an ECN.
Her order is not routed to the best price market or markets but instead depletes the ECN’s order
book
She receives fills of 100 shares at $10.04, 100 shares at $10.05 and eight hundred shares at $10.08
Resulting in an average price of $10.073 on her 1000 shares
The inside market simultaneously changes when she receives she last fill and is now $10.00 bid
offered at $10.01
This so called best execution trade has cost Jane about $60.00
But that is OK because her brokerage firm receives a 1/2 penny per share rebate for ever trade that
is sent to the ECN
When Jane’s trade is aggregated over a billion transactions Reg. NMS could cost investors eight
billion dollars; assuming an average ticket size of 400 shares and average ‘de minimis’ price of just two
cents per share.
Reg. NMS also penalizes traders that enter marketable limit orders. Traders that enter bid or offer
side limit orders will receive no price improvement if ‘de minimus’ trades are executed away from the
market where they entered their order. A likely response from traders will be to pull their orders and enter
limit orders away from the inside market and respond to bids by hitting them with market orders. This
defensive pulling of limit order will result in wider spreads, less order matching, slower executions and the
increased occurrence of random walks. These resulting market characteristics are good for day traders and
institutions that make their profits by paying for order flow. However, wider spreads and chaos is generally
not accepted by any rational investor as good for the market.
4. February 26, 2004
Page 4
Mandates
Reg. NMS also mandates that market centers provide access to ‘persons’ but without mandating
hard linkages. This particular proposal is saying that the NYSE –primarily- and the NASDAQ –potentially-
has to build infrastructure in order to allow competing markets, like ARCA, the ability to siphon off
liquidity. Since nothing has been done to address ECN fees charged to market participants, ARCA most
assuredly will charge the NYSE member for his own order flow. So, not only has the SEC done nothing to
eliminate this subsidy enjoyed by the ECN’s but is attempting to expand the subsidy. This is equivalent to
forcing Dell to build and pay for a new factory for Gateway. This is not true capitalism but crony
capitalism which may be fine for a country like China or India but Americans expect more from their
government.
Reg. NMS also mandates that market centers distribute proprietary information; such as a market
makers limit order book. The SEC does not say to whom this information must be distributed. That is
troubling and the SEC should clarify why that information needs to be distributed and to whom. This
mandate is also troubling because the Federal Government is forcing persons to expose their customer’s
intentions to the public.
The SEC’s 1996 NASDAQ market maker investigation focused on market makers communicating
their customer’s intentions to other market participants. Hundreds of market makers were sanctioned for
communicating orders they had in their books. It now seems that ECN’s are also lobbying to have that
aspect of market integrity redefined to suit their needs.
SUB-Decimalization
Almost as an afterthought the SEC has finally address the problem of sub decimalization. Traders
should be encouraged by this prohibition and any revision of Reg. NMS should include the ban. Sub-
Decimal quoting is a tool used by some traders to step ahead of orders that should receive time priority in a
fair trading market, and by some market centers that use rebate schemes to compete.
Conclusions:
The corporate governance failures of 2001- 02 are in part the result of a faulty long term pricing
mechanism gave corrupt corporate executives asymmetrical rewards for inflating the prices of their
companies. The capital loss due to the governance failures has been in excess of 500 billion dollars and
continues to contribute to the national budget deficit. Second rate market structure has also resulted in
5. February 26, 2004
Page 5
larger small company discounts due to declining research coverage (SEE EXHIBIT III). Financial industry
layoffs totaling 80,000 has had a major impact on the economy and has resulted in loss tax revenues
estimated to be 8 billion dollars. Regulation NMS does nothing to improve the equity markets’ ability to
price stocks to better reflect economic value and will likely hamper the pricing mechanism. Nor does the
regulation improve the ability of the equity markets to match buyer with seller.
The SEC should go back to the drawing board and come back with proposals that promote liquidity
while leveling the playing field for all market participants. By improving market breath instead of depth or
execution time the end result will:
Encourage Entrepreneurship
Disable corporate crooks
Result in faster executions
Create Jobs
Create long term wealth for investors
I encourage the SEC, the SRO’s and Congress to revise Regulation NMS. Any proposed regulation
must eliminate the current subsidy provided to the ECN’s and explore market structures that encourage the
placing of limit orders and allow liquidity providers to make risk based economic profit. Only when the
fundamental root causes of inefficient markets are addressed will its symptoms stand a chance of being cured.
If you need to contact me I can be reached at (212) 679 3016. Thank you for you consideration and have a great
day.
Sincerely,
Richard R Tullo
6. February 26, 2004
Page 6
Exhibit I
Best Execution Requirements
The duty of “best execution” arises from the common law duty of loyalty owed by a broker
to its retail customers. The Securities and Exchange Commission (SEC) has stated that “when an
agent acts on behalf of a customer in a transaction, the agent is under a duty to exercise reasonable
care to obtain the most advantageous terms for the customer.” This principle has been incorporated
into case law and SEC decisions under the federal securities laws and must be adhered to whether
acting as agent or in a principal capacity.
It is important to note that the application of “best execution” involves analysis of the
“facts and circumstances.” Actions that in one set of circumstances may meet your firm’s best
execution obligation, may not meet that standard in another set of circumstances. It should also be
noted that the best execution obligation evolves as rules and systems change. Your firm should
review its execution practices, as appropriate, to ensure compliance with new rules, systems, or
market conditions.
The SEC has stated that, as a general matter, the duty of best execution refers to your duty
to seek to execute your customer’s order in the best available market. NASD Conduct Rule 2320
states that in any transaction with or for a customer, a member and its associated persons must use
reasonable diligence to ascertain the best inter-dealer market for the security and buy or sell in
such market so that the price to the customer is as favorable as possible under prevailing market
conditions.
Among the factors that will be considered in applying the standard of reasonable diligence
are as follows:
Character of the market price, volatility, relative liquidity, and pressure
on available communications;
Size and type of transaction;
Number of primary markets checked; and
Location and accessibility to the customer’s broker/dealer of primary
markets and quotations sources.
7. February 26, 2004
Page 7
Exhibit II
Fine tuning Decimalization: Creating Markets that Price Securities
Fairly for All Investors.
Overview
Since the advent of new technologies the US equities markets have undergone more structural change in
the last ten years then at any given time in history. Since 1996, regulators and the principal equity markets have
introduced a series of reforms with these principal goals:
Mandate limit order driven pricing
Minimize human interaction with equity orders
Decrease price increments
The SEC and the SRO’s have for the most part succeeded in implementing these structural changes to
the equity markets. These changes were driven by a report written by a committee formed after the 1987 stock
market crash called “Markets 2000”. A second influence on the regulatory bodies has been the 1994 NASDAQ
stock market anti-trust scandal. It appears today that the current New York Stock Exchange investigation will
also usher in new reforms. The problem is that thousands of new lines of regulation and billions of new lines of
computer code have been written and those regulations and computer programs may be based on faulty
premises. The market structure, as it exists, today has resulted in market inefficiencies and is generating
unintended externalities that are silently hurting investors, workers and the US economy.
Increased mutual fund expense ratios
Decreased competition in equity trading
Decreased competition for financial services
Less equity research
Higher cost of capital for issuers
Increased portfolio turnover
Decreased liquidity in lower capitalized stocks
80,000 lost jobs in the financial industry
Eight Billion Dollars in lost federal tax revenues
Decrease in economic opportunity
Decimalization as it exists today has the potential to undermine the US economy for the sake of
modernity. Just because decimalization exists in Germany, France, Italy and England doesn’t mean it is better.
In fact anyone who has traded ordinary shares on foreign bourses can testify to the fact that these markets do not
even remotely provide the limit order protection that the major US exchanges provides for its customers. The
US economy has out performed its European counter parts in part because the US equity markets are superior.
This is the reason why major foreign companies from around the world seek to list on the NYSE and NASDAQ.
Recently, Bill Donaldson has made public comments regarding reforming decimalization and if he is serious
about change then there are two market structure alternatives that would be an improvement over the existing
trading environment that is currently thin and fragmented for most issues.
Multiple tiered minimum price incremented markets
Multiple tiered minimum spread incremented markets
Both alternative market structures have benefits over the current decimalization regime and if adopted they offer
the promise of better market efficiency and better prices for all market participants.
8. February 26, 2004
Page 8
Bring Back the Breath
Since the introduction of tick reform breath, the amount of shares available on the best Bid or Offer size
of the market, has declined for stocks not represented in the major market indexes such as; S&P 100 or the
NASDAQ 100. The decline in breath was expected when tick increments were reduced from 1/4 share to 1/16
fractional increments because it was expected that overall breadth across all price quotes would be greater and it
was believed that the reduction in trading costs outweighed the loss of liquidity. What wasn’t expected was the
decline in tradable orders. The reduction of price increments allowed speculators to post prices ahead of larger
institutional orders, in essence competing against the posted order for liquidity. The institutional response (that
started when stocks traded in 1/16’s and was exacerbated by decimalization) was to pull their orders from the
floor of the exchanges and from NASDAQ Market Maker desks. Today when an institution wants to buy 50,000
shares of stock they are just as likely to enter five hundred 100 share orders on an ECN as to enter a single
50,000 share order with a Specialist or Market Maker. This type of trading is enabled by reserve books and
average price trading programs. The result is that liquidity for stocks is found in electronic cues and governed
by algorithms and is often not available to trade freely with the other side.
As a result of reduced liquidity, liquidity providers like NASDAQ Market Makers or NYSE Specialist
are less likely to provide capital to trade and institutions are less likely to provide liquidity to the primary market
as they buy and sell positions. These trading practices have resulting in fragmented markets as traders execute
their orders based on technology and rebates and not price and liquidity.
Stock markets just like any other markets have a supply and demand curve. In a stock market the
demand curve is represented by market buy orders and bids. Most economists believe that as prices increase
demand declines, provided that all other economic variables remain constant. Since the reductions in the
minimum trading increment demand, as represented by the NASDAQ bid side market montage has changed.
Clearly decimalization has changed trading behavior and these changes have created unintended consequences.
Fractional Demand Curve
Decimalization Dem Curve
and
5000 12000
4000 3900 10000 10000
es 3000
Shar 8000
2400 Shares
2000 6000
5000
1000 4000
400 500 500
2000 2500
0 200 100 100
1000
0
67.2 67.22 67.24 67.26 67.28 67.3 67.25 67.38 67.25 67.13
Price Price
In the charts above bid size increases then declines dramatically under decimalization. Typically under
decimalization few orders are reflected at any point on the montage and barely any orders are reflected out side
the first ten price levels (ten cents). By comparison under the old fractional system typically more size was
reflected in the montage at lower price levels and overall more stock was bid for across the total price horizon.
Recently, trading in Corinthian Colleges Inc. (ticker symbol COCO) has created a lot of controversy on
Wall Street. On December 5, 2003 a trader inadvertently placed a large sell order on Bloomberg’s ‘Trade Book’
ECN and flooded the market in COCO with sell orders and hit all the bids posted at that time. COCO stock
traded from $57.45 to as low as $38.97 in twelve minutes. While many on Wall Street are reviewing
NASDAQ’s and ARCA’s actions regarding their regulatory responses to the trading activity perhaps the more
interesting question is: How could just one trader pressure a stock down almost twenty points? That is a market
9. February 26, 2004
Page 9
structure issue; not a regulatory issue! Cleary if there was more breath in the market for COCO, then even a two
million share order should not have been able to pressure the stock down twenty points. The COCO event is
more than an anomaly; the event highlights a fundamental weakness in market structure that creates smaller but
serious price gaps everyday due to poor market structure.
Alternative Minimum Price Increments (AMPI)
The idea of trading in price increments greater than a penny has been put forward by economists, traders
and even Bill Donaldson. The idea behind AMPI is that if there are less price increments than orders would be
aggregated at the remaining tick sizes. Also, the AMPI by definition would create larger spreads due to the
increase in tick size. It is hoped that under the AMPI, incentive will be created for Specialists and Market
Makers to provide liquidity and the practice of penny-ing ahead would be curtailed. AMPI has already been
adopted by the option markets; they trade in nickel increments. It seems that the nickel increment on the options
market offers both low cost execution and the incentive for options traders to provide liquidity.
The stock market is often not just one market but a market of markets. The stock market by nature is
segmented across industries and market capitalization. That is why stocks trade higher after it is announced that
they are being added to or deleted from the S&P 500 index. One big concern of those that oppose the AMPI is
that it would inflate trading costs for large capitalized issues like MSFT. That concern is valid to an extent but
even MSFT would be more liquid under the AMPI and the added liquidity would offset the increased tick size
thus giving the investor an overall lower cost of execution under some circumstances. The real issue in regards
to AMPI when applied to larger companies is what tick size maximizes liquidity and minimizes costs; the
answer for MSFT may very well be a penny.
The introduction of the AMPI should ideally go hand in hand with the introduction of multiple tiered
markets based on market capitalization. Ideally, ticks sizes of one penny for large capitalized stocks, a nickel for
mid sized companies and ten cents for small capitalized stocks should add liquidity to the market place and
reduce overall trading costs. Moreover, the increased trading revenues generated by the AMPI could provide an
incentive for financial industry to cover more stocks on a trading and a research basis and as a result more value
would be generated by the industry for investors and issuers.
Alternative Minimum Spread
A less understood but interesting alternative to decimalization is the Alternative Minimum Spread
(AMP). In an AMP market a stock would have a minimum spread set by the primary exchange. For example, if
the minimum spread is set at ten cents then the differences between the best bid and ask price would always be
ten cents or greater (Example 1). Limit orders with prices better than the inside market can be given price
improvement but their existence would be aggregated at the best bid and offer (Example 2).
Example 1: Bid Ask
$50.50 TESTA 5000 shares ---------- 5000 shares TESTA $50.60
Example 2: Bid Ask
$50.50 TESTB 1000 shares ---------- 5000 shares TESTB $50.60
(500+4500)
(Assume in the market in the above example 500 shares is offered at $50.55 but is aggregated in the $50.60 offering.)
Customer enters $50.60 bid for 5000 shares then 500 shares would be executed at $50.55 and 4500 at $50.60.
The AMS market structure offers many benefits over both decimalization in its current form and
minimum price increments. AMS markets that allow price improvement offer investors low cost execution at
any decimal increment while providing traders with incentives to enhance liquidity. AMS markets also allow for
low cost adoption and the cost savings is eventually passed along to all market participants. Moreover,
customers concerned about penny-ing would be protected to some degree since the AMS market encourages
10. February 26, 2004
Page 10
liquidity while giving the investors the opportunity for price improvement. If the AMS market is successful, the
spread would be transformed from a penalty (or toll) applied to market orders to a continuously trading crossing
exchange. Also under both the AMS market and the AMPI market the bid and ask represents real trading intent
not the bait and switch markets that currently exist in today’s market structure.
Why No Change?
While it is obvious to most traders and market professionals that the current trading system is
aggravating, time consuming and costly; why haven’t the powers that regulate trading sought reform. The
reasons are:
Politics
Economists
Special Interest Groups
Lack of focus
The trading community has done a poor job in educating the public and justifying its role in the
financial markets. This lack of understanding has opened the door for regulators, economists and business
interests to influence market structure to further their own ends. While the claims of these constituencies are
popular the results of just some of their reforms have undermined commerce and resulted in less competition in
the equity research and trading services. The principle argument used by reform advocates is that markets
charge economic rent and if that rent is reduced the market as a whole benefits. This logic is the same logic used
by socialist thinkers to justify housing rent controls in New York and other major US Cities. Under rent controls
New York City declined from 1946 to 1980 and became virtually uninhabitable. Industry left the major cities
and their economies declined even though the economists predicted that rent controls should have stimulated
more economic activity under their estimates.
Just as converting from rent control to rent stabilization restored housing markets in New York and
San Francisco revising decimalization should allow more investors to benefit from a stronger market
structure. By adjusting decimalization more jobs will be created in the financial industry and investors will
benefit from improved execution and service
Exhibit III
Large corporations can attract more capital because an institutional investor can only invest in companies that
offer liquidity. This liquidity discount has always existed but is more pronounced today because of decimalization. The
liquidity discount is further aggravated by reduced institutional research available for investors. Institutional investors are
also less likely buy stocks that have limited research coverage by Wall Street.
Ticker Price Difference Average MCAP PE Analyst Industry
High/Low Volume Coverage
BSTE 45.92 71% 372,000 .7b 29 8 Biotechnology
BGEN 39.59 55% 1,760,000 1.760b 34 24 Biotechnology
LWSN 7.94 63% 400,000 .7b na 3 CRM Software
ORCL 13.00 53% 59,000,000 68.00b 30 37 CRM Software
ECLP 14.83 4.29% 731,000 .6b na 7 Healthcare Systems
CERN 35.71 241% 1,200,000 1.2b 34 11 Healthcare Systems
RT Asset Management