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It was huge news when the SEC fined Nasdaq OMX $10 million, the largest fine levied against an exchange, to settle charges related to the botched Facebook IPO. But the true costs are now coming into focus. According to media reports, Twitter is close to choosing the NYSE as its home exchange when it goes public. Some say the decision has already been made. Ouch! Nasdaq, of course, has long been the home of technology giants, such as Apple and Google. The NYSE has been chipping away for years, and it recently won the right to list social media giant LinkedIn as well as Pandora and Workday. Its cause lately has been aided immeasurably by the Nasdaq's handing of the Facebook IPO. It's no longer the case that high-profile technology companies will de facto list on the Nasdaq. This should be a wake-up call to the Nasdaq OMX, yet another sign the ship has shifted off course just a bit. That said, another huge listing battle looms. Chinese online giant Alibaba is aiming to list in the United States, and both exchanges will not want to miss out on it. Its IPO would be massive, rivaling perhaps the $16 million Facebook deal earlier. A win by the Nasdaq would certainly lessen the sting of recent defeats. A loss, however, would be seen as an extension of the massive costs still flowing from the Facebook fiasco. For more:
Read more about: NYSE, IPO 2. Wells Fargo grows investment bank in Charlotte
Wells Fargo doesn't really come to mind when thinking of the top investment banks. But by dint of its purchase of Wachovia, it has made some strides. It has been pretty clear that it intends to become a middle market powerhouse. To that end, it has been in growth mode in Charlotte. As it pares down in the slowing mortgage realm, it has been adding staff at the Duke Energy Center. "But the Charlotte securities operation, already the largest such hub for Wells Fargo, is poised for growth," according to the Charlotte Observer. "Wells Fargo Securities, made of investment banking and capital markets services, employs about 2,000 in Charlotte. That's roughly double the number in New York, its next-largest securities hub, the bank said." Wells Fargo juts might be the top investment banking operation in Charlotte, as Bank of America's Merrill Lynch remains clustered in New York. Here's some local color: "On the fourth and fifth floors of the Duke Energy Center in uptown Charlotte -- the largest trading floors in all of Wells Fargo -- hundreds of trading staff sit or stand at row after row of computer monitors, studying data and talking to clients. The bank has smaller trading floors in New York and San Francisco. "The Duke building was supposed to be Wachovia's new headquarters and house its trading operations. Wells Fargo completed the construction of the trading floors, relocating to the space its Charlotte-based investment banking and capital markets employees who had primarily worked in the One Wells Fargo building. "The two floors combined can hold up to 1,200 traders and other employees, Wells said. Roughly 1,000 work on the floors now." For more: Read more about: Wells Fargo, jobs 3. Capital relief trades still popular amid regulatory concerns
It seems like a match made in heaven. Big banks face stringent capital requirements these days, even as the definition of capital that counts toward their requirements narrows. They have every incentive to offload the risk of certain loans to third parties. At the same time, credit hedge funds have every reason to want higher yields. So a credit default swap seems to be in the best interests of everyone. A Bloomberg article on this trend notes that regulators around the world are taking a closer look. "Regulators are wary of the banking industry's renewed interest in risk shifting. The Basel Committee on Banking Supervision announced in December that it was considering new rules that would make CRTs more expensive for banks, potentially stemming the flow of deals. The new rules, which were expected to be announced in September, would have to be adopted by national regulators. Christine Lang, a Swiss banking regulator who sits on one of the committee's work groups, says it has warned banks against gaming new capital requirements." As for the United States, the trend has been underway for several years in various forms. Citigroup's deal to essentially insure shipping loans certainly generated a lot of press. My sense is that we're not seeing the volumes that would lead to macro concerns about CDSs linked to residential MBS-oriented CDOs. Banks to be sure are much healthier now than they were in the run-up to the financial crisis, even if these regulatory capital trades were to expand in volume. All in all, massive dislocation doesn't seem likely. That said, few thought massive dislocation in the residential MBS market was likely -- until it happened. For more:
Read more about: Capital Relief, Capital Relief Trades 4. Advice to CEOs: Think before you reach for historical analogies
There are times when CEOs of top companies get overly rhetorical in their views of government. These attempts often prove clumsy -- and even embarrassing. The latest example, as noted by the Financial Times: When asked about criticism of AIG bonuses during the financial crises, CEO Robert Benmosche was quoted as saying that it "was intended to stir public anger, to get everybody out there with their pitchforks and their hangman nooses, and all that – sort of like what we did in the Deep South [decades ago]. And I think it was just as bad and just as wrong." Which prompted this response from Representative Elijah Cummings: "As the leading critic of AIG's lavish spending before and after its taxpayer-funded bailout -- and as the son of sharecroppers who actually experienced lynchings in their communities -- I find it unbelievably appalling that Mr Benmosche equates the violent repression of the African-American people with congressional efforts to prevent the waste of taxpayer dollars." To underscore the scale of all this, the FT saw fit to remind is U.K. readers: "Thousands of black people were killed in the US between the 1880s and 1960s in a terror campaign fought in the name of white supremacy." So there you have it. Benmosche has wisely apologized for his gaffe. This recalls an incident in which Blackstone CEO Steve Schwarzman likened efforts to raise carried interest taxes on private equity groups to Hitler invading Poland in 1939. He, too, was forced to apologize. For more: Read more about: CEO, Ceo Job 5. How can JPMorgan Chase put its enforcement woes behind?
Perhaps the slowest route would be to litigate every action. That would hardly be wise, even if the bank could many of these trials. The better option is to settle, even if it has pay more. Cynics will of course argue that these settlements are merely the cost of doing business, but if the settlement amounts are high enough, more will likely see the costs as true deterrents. According to media reports, the beleaguered bank is now aiming for a massive settlement that would encompass mortgage fraud allegations from a host of entities, including the Justice Department, HUD, the FHFA, the New York Attorney General and probably others. During settlement talks, "proposals emerged that would require JPMorgan to pay anywhere from $3 billion to about $7 billion, people briefed on the negotiations said." Some media outlets have pegged the settlement amount at $4 billion. "Although the ultimate amount is still in flux, it is clear that any deal would dwarf the size of other settlements the bank has reached to resolve separate regulatory issues." The settlement "might also require JPMorgan to provide some financial relief for struggling homeowners." Such as settlement, which seems likely at some point, would follow on the heels of the $920 million deal to settle the London Whale trading fiasco from last year. That deal also involved multiple agencies, including one in the United Kingdom. For more: Read more about: Settlement Agreement, Enforcement Action Also NotedSPOTLIGHT ON... The new trophy wives The trophy wives of Wall Street mavens are sick and tired of crass stereotypes. They're just as sick of bitter people who are just jealous of them. Now, they are taking a stand against this sort of prejudice, noting that trophy wives today tend to be well educated, sophisticated and successful on their own. So perhaps we need to rethink what the terms means. Article Company News:
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Thursday, September 26, 2013
| 09.26.13 | NYSE to win Twitter?
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