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FSA REPORTS: “abnormal pre-announcement price movements” in 21.2% of 2010 UK deals

19 Jun

Via Bloomberg:

“Unusual share price movements in the two days before takeovers announced by U.K. companies last year fell 9.4 percent, in a sign that insider trading may be decreasing.

There were ‘abnormal pre-announcement price movements’ before 21.2 percent of the 118 deal notices in the U.K. in 2010, the Financial Services Authority said in its annual report, published yesterday. That was down from 30.6 percent in 2009, and the lowest rate since 2003.

Factors other than insider trading, such as speculation by analysts or the press about an upcoming deal, or information leaks, could be the cause of the share price movements, the regulator said. The FSA has made market abuse and insider trading by top bankers a focus of its enforcement efforts.”

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Can You Trust Your Bank? UK High Street Banks Still Misleading Pensioners

12 Jun

From the BBC:

http://www.bbc.co.uk/programmes/b0120ydb

“The Panorama team goes undercover to test whether staff in Britain’s high street banks have learnt the lessons from the massive penalties imposed for mis-selling insurance and investment products. Financial journalist Penny Haslam meets savers who have lost out because they were persuaded to put their money into risky investments, and talks to former staff about the pressure they faced to sell.”

The full documentary will air on 13 June 2011, BBC One, 20:30.

Here is a preview:

CLEARING HOUSE BUBBLE: Who is watching it?

4 Jun

LCH.Clearnet is one of the leading global clearing houses worldwide.

A brief description from their website explains the role of LCH.Clearnet and the function of a clearing house more specifically:

‘LCH.Clearnet is the leading independent clearing house group, serving major international exchanges and platforms, as well as a range of OTC markets. It clears a broad range of asset classes including: securities, exchange traded derivatives, commodities, energy, freight, interest rate swaps, credit default swaps and euro and sterling denominated bonds and repos; and works closely with market participants and exchanges to identify and develop clearing services for new asset classes.

A clearing house sits in the middle of a trade, assuming the counterparty risk involved when two parties (or members) trade. When the trade is registered with a clearing house, it becomes the legal counterparty to the trade, ensuring the financial performance; if one of the parties fails, the clearing house steps in. By assuming the counterparty risk, the clearing house underpins many important financial markets, facilitating trading and increasing confidence within the market.

Initial and variation margin (or collateral) is collected from clearing members; should they fail, this margin is used to fulfill their obligations. The amount of margin is decided by the clearing house’s highly experienced risk management teams, who assess a member’s positions and market risk on a daily basis. Both the soundness of the risk management approach and the resilience of its systems have been proven in recent times.’

LCH.Clearnet is 83% owned essentially by the investment banks and 17% by the exchanges. The company’s website states that their ‘market leading interest rate swap clearing service, SwapClear, has cleared over 1.5 million OTC IRS trades since launch in 1999. It currently has 49 clearing members and its portfolio contains 850,000 trades with a notional value in excess of $266 trillion.’ The $266 trillion is the net notional and it is important to highlight that this is not the exchanged principals.

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7 Ways The Investment Banking Industry Is Built On Fraud, Lying, And Stealing

1 Jun

The asymmetry of information in research, mergers and acquisitions, trading volumes and patterns, buy-side and sell-side orders provides investment banks with vast resources of information that they leech to drive profitability. This should be vexing everyone in the country right now and yet we don’t even see. Banks blowing their own smoke were behind the curve and they represent the very core of our systemic economic problems. The deception continues. Although this article focuses on hedge funds it is more relevant to investment banks. Via disinfo.com:

1. Insider Trading. If the Feds could tape every hedge fund we’d get an earful of how hedge funds use “expert networks” to transfer bits of illegal information that provide hedge fund managers with knowledge of events that are sure to move markets and make them a bundle.

2. Ponzi Schemes. Madoff isn’t the only one. Hedge funds and Ponzi schemes are made for each other since the funds are designed to evade so many disclosure regulations. It’s virtually a sure thing that every new year will reveal another Ponzi scheme through which a hedge fund steals money from investors and then uses new investor money to pay returns to the old investors.

3. Tax Evasion. No surprise here. Wherever you find billionaire financiers, you’ll find schemes to move money around the globe to dodge taxes. Fortunately, Rudolf M. Elmer, a Swiss banker, has blown the whistle on an international web of rich investors, banks and hedge funds that evade taxes by illegally shifting money to low-tax jurisdictions. There’s something particularly slimy about hedge fund tax dodging, given that they only pay a 15 percent federal tax rate no matter how much they make.

4. Front-running trades. With their high-speed trading systems and algorithms that sense ever so slight market moves, the biggest hedge funds and banks are able to trade just a fraction of a second before the rest of us do. The SEC is also worried that brokers leak information about large trades by institutional investors to hedge funds so that favored hedge funds can pull off the trade just a split second sooner, thereby earning a quick, easy, and illegal profit.

5. Late Trading. When Eliot Spitzer was New York Attorney General (and earned the handle, “Sheriff of Wall Street”), he uncovered hedge funds maneuvering around trading rules like a Ferrari speeding around the hapless shmoes stuck in midtown traffic. In violation of all rules, hedge funds were allowed by mutual fund managers to jump in and out of mutual funds many more times than normal investors, enabling them to score high returns at the expense of regular mutual fund customers. They even got away with booking trades hours after the market closed for the day—a real perk, since market-moving announcements often are made right after closing.

6. Accounting Irregularities. Boring stuff, but the stuff of big money. Hedge funds and banks cook the books to avoid showing losses and to artificially inflate profits. Hedge funds are also deeply involved in helping other companies—like Enron and WorldCom—bend their books. According to a study by Bing Liang at the University of Massachusetts, as of 2004, 35 percent of all hedge funds cited no dates for their last audit. Hmmm.

7. Setting up bets that can’t fail. I just can’t get enough of how banks and hedge funds collude to rig securities so that they are designed to fail. The best part is that in order to win their negative bets, they have to market the securities to chumps as if they were pure gold. This ploy always seems to involve a big investment bank and a hedge fund. You have Goldman Sach’s dancing with Paulson and Company, and then there’s JP Morgan Chase doing a two-step with Megatar.

Global Witness unveils Libyan Investment Authority holdings and the key bankers

26 May

From the Global Witness website:

“Global Witness has been leaked a draft presentation that appears to show the investment position for the Libyan Investment Authority (LIA) as of 30 June 2010, which stood at $53 billion. The information shows the diversity of Libyan assets held by major financial institutions:

  • HSBC holds $292.69 million across ten accounts and Goldman Sachs has $43 million in three accounts. The funds are in U.S. dollars, British pounds, Swiss Francs, Euros and Canadian dollars.
  • A much larger portion of the LIA’s deposits – $19 billion – are held in Libyan and Middle Eastern banks, including the Central Bank of Libya, the Arab Banking Corporation and the British Arab Commercial Bank.
  • Almost $4 billion of the LIA’s funds are held in structured products with banks, hedge funds and private firms such as Societe Generale ($1 billion), JP Morgan ($171 million) and OCH-ZIFF ($329 million).  
  • The LIA owns billions of dollars of shares in household name companies such as General Electric, BP, Vivendi and Deutsche Telekom.”

Download the full document here

High Frequency Trading represents more than 50% of total NYSE Volume

26 May

No commentary required.

Source: NYSE Market Data

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