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2. Morgan Stanley prime broker builds bridges

Given its heavy regulatory and enforcement burdens right now, the last thing JPMorgan Chase wants to take on is more weighty controversies, especially when they have the potential to tarnish the bank's reputation even more. Still, it was a surprise when the bank announced that it will exit the lucrative physical commodities market, including the controversial metals and energy businesses. Both of these areas have embroiled the bank in tough regulatory controversies, generating heated complaints for companies about allegedly abusive practices.

"JPMorgan said it has concluded an internal review and will explore options, including a sale, spin off or strategic partnership of the business. During the process, the company will continue to run its physical commodities business as a going concern and fully support on-going client activities," according to RTT.

"Following the internal review, JPMorgan reaffirmed that it will remain fully committed to its traditional banking activities in the commodity markets, including financial derivatives and the vaulting as well as trading of precious metals. The company will continue to make markets, provide liquidity and offer advice to companies and institutions that for years have relied on the company's risk management expertise."

JPMorgan has obviously concluded that the controversy these units generate outweigh the benefits.

The big question here is whether Goldman Sachs will make a similar move in the metals market. It has been dogged by complaints about its warehousing practices and heavy influence in markets for aluminum and other in-demand metals. Its Detroit warehousing facilities have been the target of complaints from large corporate end users for a few years. Some of those end users might also be clients. sRegulators are taking a look.

For more:
- here's the article

Read more about: commodities, JPMorgan
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By Jim Kim

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3. Big decision for Dell special committee

The prime brokerage business is as competitive as ever, and you cannot fault Morgan Stanley for wanting to make a big splash. Unfortunately, the bank has had some repair work to do as of late.

In 2008, then-CEO John Mack lobbied regulators to temporarily ban short selling. At the time, short sellers had emerged as the bane of many banks, such as Bear Stearns and Morgan Stanley. Some thought they were exacerbating a tough liquidity situation in dangerous ways.

"He succeeded. But in doing so, he made enemies among powerful hedge fund managers, for whom the practice of selling borrowed shares in a bet they will later fall is a key investment strategy. Many, such as the famed short-seller Jim Chanos, were also big clients of Morgan Stanley's prime brokerage and stock trading businesses, and expressed their displeasure by taking their money elsewhere."

But Morgan Stanley has embarked on an effort to rebuild in prime brokerage and institutional agency trading.

As part of an effort dubbed "Project Velocity," the company has made some aggressive co-location moves and other moves to "shave millionths of a second off trading speeds" aimed at winning more business from high-frequency-oriented firms. "Morgan Stanley has also retained specialty sales staff who help clients pick stocks even as some rivals have cut back on such staff to reduce costs." It also has made a big push in Japan.

The effort seems to have paid off on the equity side. Morgan Stanley now ranks No. 2 in stock trading among institutions, behind only JPMorgan Chase. A year ago it ranked No. 5.

For more:
- here's the article

Read more about: Morgan Stanley, Prime Brokerages
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By Jim Kim

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4. Does Steven Cohen face financial ruin?

The Dell LBO drama remains a nail biter. The outcome just might turn on the arcana of shareholder voting rules put in place by the Dell board's special committee. As reported by DealBook, Michael Dell and Silver Lake agreed to drop a request early on that essentially would have treated uncast votes more favorably to them.

They regret that decisions now and are doing everything they can to get it changed. Michael Dell has in fact conditioned his boosted offer, to $13.75 a share, on the board changing a rule that essentially counts uncast votes as no votes. That change is seen as critical to the success of Michael Dell's and Silver Lake's bid.

Here's how things stand now: "According to recent tallies, of the roughly 1.1 billion shares that have been cast so far, about 579 million have been cast in favor, while 563 million have been voted against the deal…. That is not enough to win at the moment, however. According to the current rules set by Dell's board, a majority of the company's 1.476 billion shares eligible to be voted must be cast in favor of the deal; that number excludes the 16 percent stake that Mr. Dell holds." The 334 million shares not voted yet are de facto no votes."

As you might expect, Carl Icahn is urging the board to stick with its original rules.

They argue that the current standard is unreasonably tough. And some experts agree.

The board has a huge decision on its hands, ahead of the vote, which has been rescheduled for Friday. One gets the idea that there will be lots of litigation flowing from this not matter what the outcome.

For more:
- here's the article

Read more about: Leveraged Buyout, Dell
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By Jim Kim

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5. Goldman Sachs CEO Lloyd Blankfein still in statesman mode

You might think that Steven Cohen, the embattled founder of SAC Capital, would be breathing easier, now that he has been spared personal criminal charges. He will not be going to jail after all. That's off the table. But in the face of another civil proceeding by the SEC and a criminal complaint against his company, he faces possible financial ruin.

The criminal charges are seeking the forfeiture of the profits earned as a result of the insider trading. "That might allow the government to make a sizable dent in Cohen's own wealth: with $9 billion, he's ranked 121st among the world's billionaires," according to Bloomberg.

"Citing laws that say it has the right to seek the forfeiture of any property involved in money laundering transactions, the government says it is seeking 'any and all assets' of SAC Capital Advisors LP, SAC Capital Advisors LLC, CR Intrinsic Investors LLC, Sigma Capital Management LLC, and more than 20 other affiliated investment funds, according to the complaint."

Prosecutors might be able to go after Cohen's personal assets as well. They just might argue that he co-mingled funds from the criminal enterprise with his personal life, opening a means at recovering hundreds of millions in personal funds.

As for the civil case, the government has another vehicle to recover billions in forfeiture. The SEC also wants Cohen barred from the industry for like.

If the government prevails, bankruptcy might be one outcome. While jail time is not a possibility, this is certainly high stakes stuff.

For more:
- here's the article

Read more about: SAC Capital, Steven Cohen
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By Jim Kim

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