Monday, August 24, 2009

Senator Wants Broad SEC Market Review

There are now potential conflicts of interest on trading desks serving both retail and high-frequency trading clients: Delaware senator Ted Kaufman is asking the SEC to review stock market structures, part of a debate over the impact of computer-based trading. WSJ.

These days, about half of all the equity stocks traded in the US are handled by nimble computers. has a feature on Jersey City-based Direct Edge and notes how the NYSE plans to consolidate existing Secaucus and Brooklyn data centers in a huge Mahwah site. has photo of a Trader on the support desk at Direct Edge with a Glossary of terms such as • High frequency trading • Flash orders • Liquidity • Dark pools • Best bid and offer.

Wednesday, August 12, 2009

Guaranteed Bonuses Back and Face Scrutiny

WSJ 8/13 $100 Million for Mr. Hall?
As trading has been the main source of recent Bank profits, the biggest bonus commitments are being made to Bond Salesman, Currency and Derivatives Traders, and computer programmers and others who support those operations. “Is Wall Street again going to overpromise, and then when the market turns down, we’ll have another set of pay problems?” asked pay consultant Alan Johnson?

Guarantees are roughly a third smaller than at the 2007 market height, although they are bigger than last year, Johnson said. “The absolute levels are by historical standards moderate, but it is a big change from where we were at the beginning of the year”.
Summary of some well-known Employers:
Citi and B of A have offered guarantees, arguing that they are necessary to attract new employees and keep existinG. Foreign banks like Nomura (Japan), Credit Suisse (Switzerland) and Barclays (Britain) making guarantees in hopes of poaching talent.

Stronger banks that have repaid bailout money and not subject to restrictions — Goldman, JPMorgan Chase and Morgan Stanley — have also begun offering guarantees.

Former Goldman partner in London, signed a multimillion-dollar contract recently with B of A that she told former associates was worth $15 million a year for two years and included a guarantee, according to a person with knowledge of her pay.

In the last few months, Citi has lured several senior derivatives traders — including Dan Petherick, Rachel Lord and Stefanos Bitzakidis — away from MS with multimillion-dollar, multiyear guarantees. Citi spokesman said that attracting and retaining the best talent was “very important” to the success of Citi and all stakeholders, including taxpayers.

Morgan Stanley, after posting dismal second-quarter trading results, has been canvassing Wall Street trading desks. After picking off currency and rate traders at JPMorgan and Deutsche Bank, MS recently used one-year guarantees to hire three Citi traders and approached several more with similar offers.

Obama administration pay czar, Kenneth Feinberg
(pictured) is preparing to review how compensation should be structured at seven companies that received two or more federal bailouts. Resurgence of bonus guarantees underscores how difficult it is to control Wall Street pay, despite the public outcry over how taxpayer money is being spent. Feinberg amust decide how much overall compensation is too much, even when the pay is tied to performance, like the $100 million package that Citi promised to trader Andrew Hall. (See WSJ 8/13)

Companies must each submit 2009 compensation plans for their top 25 earners by Thursday, and Feinberg has 60 days to rule on them. He has the authority to single out any of those employees and adjust their pay packages. Some rivals of the bailed-out have already benefited from being out of reach of the government’s pay czar. Jeff Michaels, head of Citi’s US interest rate trading, found Nomura knocking with an offer that would guarantee him as much as $10 million for 2009 and 2010. That’s nearly twice the $6 million bonus he received last year when he joined Citi from Lehman.

Summary courtesy of Dealbook. Click for access to Full NYT article here to see 293 comments as of 8/10 August 10th 3:53 pm

Tuesday, August 11, 2009

SEC Says No More Messin’ Around

WSJ story: that you ain’t gonna have the SEC to kick around anymore — at least if Mary Schapiro (pictured smiling in a pearl necklace) has her way. Quotes Paul Weiss Attorney: Clearly the message going out is that the SEC is going to be much tougher with regard to settlement postures, in terms of penalties. They want to demonstrate there is a tough, new cop on the beat. Headline courtesy WSJ Law Blog.

Monday, August 3, 2009

Will Stockbrokers Exist After This Generation?

FINRA reports that registered reps have seen their job numbers dwindle. 25,810 reps have lost their jobs. Registered Rep magazine reports Smith Barney--now Morgan Stanley Smith Barney following its sale from Citigroup saw its number of financial advisers fall 17% 1Q 2009.

A broker can be a "mentor" for investors to guide them. Others hold out less hope for brokers. In a Forbes article, Bill Singer foresees stock brokers not existing after this generation and instead the market will have commission-paid phone operators who dole out information. If there are going to be brokers and other investment advisers in the future, Singer advocates each professional to take exams with more emphasis on product knowledge and CE than on one's ability to make cold calls. Since the retail investor doesn't often know the difference between a financial consultant and a financial adviser, Singer wants to eliminate those distinctions. More at Forbes' Intelligent Investing Panel.

Read here to see someone disagree: who writes to announce the death knell of the advice business is as ludicrous as saying there will no longer be a demand for teachers or doctors. Are educational or medical websites robust and helpful enough to do away with those professions? How about self-diagnosing and self-medicating in times of illness?
The Reformed Broker also tackles the claim that most investors will just do it themselves: "We were told that online brokerages would be the death of the full-service broker in 1999. Most of those online brokerages have since disappeared or have been swallowed up and the ones remaining now charge zero dollars or so for trade execution. Nice business model:E*Trade’s stock looks like Mickey Rourke’s face, currently hovering around a buck, with flies buzzing around it’s sunken eye sockets. Read more at The Reformed Broker.

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