Today's Top Stories Also Noted: Kaseya News From the Fierce Network:
Today's Top News1. Behind the scenes of Knight Capital rescue
The effort to save Knight Capital capped a frenetic 24 hours of high-alert activity, one that pushed the company to the brink of bankruptcy court and tested the bankers at Jefferies to secure a White Knight deal in little time. As the New York Times tells it in a behind-the-scenes, blow-by-blow account of events, it was a white-knuckle ride that put more than a few years on the executives of Knight, especially CEO Thomas Joyce. The firm "consulted restructuring lawyers at Kirkland & Ellis on a potential Chapter 11 filing, according to people with direct knowledge of the matter who did not want to be identified because the negotiations were not public. The lawyers worked on the filing until about 4 a.m. on Monday, when a deal was mostly done. As the firm's health soured, the S.E.C. kept a closer watch. The agency dispatched officials to the firm's Jersey City offices. In the agency's Washington headquarters, senior officials worked through the night in offices without air-conditioning to monitor the firm's liquidity position. The office's air-conditioning bad been programmed to shut off before midnight as an energy-saving measure. But events soon turned in the firm's favor." In the end, Jefferies had little trouble attractive investors to the deal, and they stand to make out well if the company's stock recovers. But now the board has some big decisions to make. Joyce has a lot to answer for and we'll likely see him at hearings in Washington soon. Some have suggested his job is on the line. For more: Related articles: Read more about: Market Makers, Knight Capital
2. Why retail investors avoid equities
A narrative started forming a few years ago and has held up remarkably well. It''s become the conventional wisdom that ordinary investors have fled the stock market, scared away by algorithm-driven trading that has made the stock market an inhospitable place. Many have argued that retail investor order flow exists for the pickings of the big boys. One pundit calls the high-frequency traders parasites, but the respected DealBook columnist writes, "Let me offer a more straightforward explanation of why investors have left the stock market: it has been a losing proposition. An entire generation of investors hasn't made a buck." He notes that technology has inspired fear in retail investors on several occasions in the past. But they always came storming back. So here's a modest prediction: They will come storming back again. It might take a few more years, but if you believe the economy will someday pick up again, lifting individual fortunes, creating more investable income, Americans will get over their risk-averseness and invest again. And they'll likely be rewarded. At some point, if history is any guide, the seeds will be sown for a new bubble that will crash at some point after a decade or two. At this point, critics will point to Japan and the fact that it just never recovered after generations of malaise. True, there's no guarantee that my prediction will hold true. But I'm nothing if not optimistic. Is there any other way to live? For more:
Read more about: Retail Clients, High Frequency Trading 3. Advisor SRO debate kicks up
In the aftermath of the Bernard Madoff scandal, a huge debate broke out over how registered investment advisors should be regulated. The traditional Series 7 broker types are treated much differently than the Series 65 investment advisor types. The former are regulated by Finra, while the latter are not, and they are bound by a suitability standard, while advisors are government by an actual fiduciary duty. The idea that Finra should become the SRO of advisors--an idea that has not gone over well with advisors, but is not completely anathema--has already sparked a lot of debate. That debate kicked up again just recently when two bills were introduced into Congress. One would authorize the SEC to charge fees to advisors to fund examinations. The other would authorize a new SRO to regulate advisors. Neither one would appear to have an easy path toward becoming passed into law. It's clear that some sort of compromise is what's needed. The SEC is overburdened, while Finra has little experience in the RIA arena. In the end, it should be noted that it many of the RIAs, who often point to their fiduciary duty as a key differentiator, have a legitimate gripe when they say that they have been tainted unfairly by the Madoff scandal. He certainly was not an RIA in the conventional sense. For more: Related articles: Read more about: Registered Investment Advisers, brokers 4. Analysts react to Knight Capital bailout
The Knight Capital bailout will keep the company alive in the short-term, but the market has not shown any enthusiasm about the deal, which calls for a group of investors to buy convertible preferred shares that will be quickly turned into common shares for just $1.50 each. The number of outstanding common shares will soar by 267 million, meaning that current shareholders, who have already seen the value of the stock plunge, will be significantly diluted. I noted the view by JPMorgan analysts that the deal merely presages an eventual breakup of the company. Deal Journal notes the views of other analysts, who have similarly bold predictions. Raymond James predicts that CEO Thomas Joyce may be vulnerable, as he "had responsibility for Knight's risk management practices and we would not be surprised to see a leadership change at Knight given that the investing consortium will own roughly 70 percent of Knight following debt conversion. At a minimum we would expect Knight to name a new, independent chairman of its board." MKM Partners is much more optimistic saying that, "As we await the disclosure of the precise terms of the KCG financing to allow the firm to continue operating, we recall a number of instances in which convertible securities were issued with favorable terms to the buyers. In many of these instances, the issuing companies have gone on to do well in the market despite the onerous terms and the resulting dilution." I think there may be some potential for shareholders suits, given the massive dilution. There are still a lot of uncertainties here. For more: Related articles:
Read more about: Market Makers, Knight Capital 5. Sports can lead to Wall Street career
Wall Street firms have long had a penchant for hiring athletes. The thought is that grueling training over long hours is a great way to train for a career in finance. Professional athletes indeed often seek out Wall Street careers once their playing days are over, but that doesn't mean getting a job at a top firm will be easy. Consider U.S. water polo player Peter Hudnut, one of 11 members of the American's silver medal-winning Olympic squad. Bloomberg reports that he will join Goldman Sachs' private wealth management division following the London Games. That's a great gig to be sure, but the company found time to put him through 28 interviews. "The job at Goldman may never have happened if a back injury, multiple fractures in two vertebrae and shoulder problems hadn't sidelined the 32-year-old Stanford University graduate before the 2004 Games in Athens. While surgery and months of rehabilitation hampered his athletic career, they gave him time to get work experience," Hudnut said, in an interview with the San Francisco Chronicle His string of positions, along with his Stanford degree were enough to convince his many interviewers at the gilded bank that he'd be good fit. He told the paper that, "I know it's going to be a tough year and that's one of the things that inspires me. From a challenge perspective, my desire to succeed and do well gets me up in the morning. I hope that Goldman is a true career path for me." Sports is one of those resume items that interviewers notice, a fact that has actually been documented by academics. If you want to work on Wall Street, it indeed helps to have sports on your resume. For more: Read more about: employees, jobs Also Noted
SPOTLIGHT ON... London bankers take a low profile at Olympics The WSJ notes that the once-high rolling bankers in London are rolling in less ostentatious fashion at the Olympics. One banker even took a commuter train to swimming events. This makes a lot of sense, but it does represent a big come-down from the past. The fact is that most banks have to rationalize their marketing dollars, and a big schmooze-fest at the Olympics may be hard to justify. Article Company News: And Finally … Apple's secrets revealed. Article
©2012 FierceMarkets This email was sent to kumaresan.selva.blogger@gmail.com as part of the FierceFinance email list which is administered by FierceMarkets, 1900 L Street NW, Suite 400, Washington, DC 20036, (202) 628-8778. Contact Us Editor: Jim Kim Advertise Advertising: Jack Fordi or call 202.824.5040 Email Management Unsubscribe from FierceFinance Explore our network of publications: | ||||||||||||||||||||||||||||||||||||||
Wednesday, August 8, 2012
| 08.08.12 | Behind the scenes of Knight Capital rescue
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment