BrokerDealer Bastion Up For Sale: Iconic NYSE Rumoured To Be On Auction Block blog update below is courtesy of the NY Post, the Rupert Murdoch-owned publication best known for incendiary headlines and its “Page 6″ gossip column. The veracity of this story by reporter John Aidan Byrne is therefore yet-to-be confirmed by any officials of NYSE owner InterContinental Exchange.* (Editor note: as of 08.40 ET, the NYSE did issue a statement: “This story is completely unfounded and simply not true.”

The New York Stock Exchange is back in play — and it may be sold lock, “stock” and building as soon as next year, The Post has learned.

Big Board owner Intercontinental Exchange (ICE) is laying the groundwork. The latest all-out drive to make it more profitable, powered by better and faster technology — and a regulatory overhaul to regain market share — is pure window dressing, according to analysts and knowledgeable exchange watchers.

This window-dressing could presage the once unthinkable: the closure of the Big Board’s iconic trading floor.

“There is only one move, and that is a sale or spinoff of the NYSE,” said Jim Osman, chief executive of the Edge Consulting Group in London, a research firm that specializes in spinoffs and special situations.

nyseOsman, speaking to The Post in the wake of the NYSE’s latest plans to slash trading fees and punch high-speed competitors and dark pools in the gut, said the rationale made sense now that ICE has divested most of its stake in Euronext.

The Atlanta-based ICE, led by Jeffrey Sprecher, retained the prized international derivatives portion of Euro-next. That prompted Osman to conclude the next step could see it parting company with the Big Board’s equities franchise in lower Manhattan.

“We believe post-divestiture of the European business, it might now look to divest NYSE — the cash equities exchange — considering the fact that its core interest area [is] the [London International Financial Futures and Options Exchange] business that provides a duopoly for ICE in the European derivatives market along with [rival] Deutsche Boerse’s Eurex platform,” according to Osman.

Despite efforts to fortify the NYSE’s struggling stock-trading business, Osman’s view gained traction last week. The exchange’s latest multimillion-dollar renovation to spruce up its famous neoclassical building fronted by Corinthian columns is also seen as more pre-sale window dressing.

For the full story from the NY Post, please click here.

Next Generation BrokerDealers Dare to Displace Old Guard Banks and Brokerages

Start-up broker-dealer “Aspiration” aspires to succeed via “pay us what you think we deserve” model; Palo Alto’s “Robinhood” offers “commission-free trading” and wants to make money the old-fashioned way: interest on deposits and margin loans (in a near-zero interest rate environment).  For those inspired by this new trend, provides a forum by which start-ups in the finance industry can network with prospective investors. blog update is courtesy of below extracts from 23 Dec NYT DealBook story by William Alden.

Editors note: For those not aware, the notion of “commission-free trading” is often a fallacy and a term that financial industry regulators somehow allow service providers to use, despite Finra’s self-acclaiming focus for cracking down on deceptive advertising. Few brokerdealers offer anything for ‘free’. Those who offer ‘commission-free’ trading for customers typically receive rebate payments aka payment for order flow checks in consideration for routing customer orders to the various electronic exchanges who dangle kickbacks in consideration for brokers delivering orders to their venue.

Andrei Cherny, Aspiration CEO

Andrei Cherny, Aspiration CEO

From Dealbook: “..A number of new financial start-ups are trying to reach younger and middle-class Americans by upending the customary fee structure of traditional brokerage firms and money managers. They are backed by deep-pocketed venture capital investors — and even celebrities like the rapper Snoop Dogg — who are wagering that these upstarts can challenge the Wall Street establishment…

Aspiration, a start-up wealth manager on Sunset Boulevard here, which had its official debut last month, is asking customers to pay whatever they think is “fair.” That can be as much as 2 percent of their assets, or as low as zero. Reflecting its high-minded goals, the company has also pledged to donate 10 percent of its revenue to charity.

Robinhood, a new brokerage firm based in Palo Alto, Calif., whose founders were inspired by the Occupy Wall Street movement, introduced an app this month that lets customers trade stocks without paying commissions. (The firm plans to make money by offering margin loans and by collecting a portion of the interest earned on customer money invested in money market funds.)

Big banks and brokerage firms haven’t been sitting still. Charles Schwab, for example, recently said it would introduce an automated investment service that doesn’t charge advisory fees. But many are constrained by new regulations or their own inertia. The public’s persistent skepticism of these institutions in the wake of the financial crisis hasn’t helped, either.

Some industry experts have voiced skepticism about the viability of the new business models, including those of Aspiration and Robinhood. But venture capitalists have been happy to bet that technology-focused start-ups can offer more appealing products for buying stocks or managing savings. Continue reading

Industry Regulators Block Disclosure of Bad Actor BrokerDealers; BrokerCheck System is Broken

California, Nevada , Arizona, Florida, New York & NJ have highest number of bad apple brokers. blog update courtesy of extract from Dec 26 WSJ story by Jean Eaglesham and Rob Barry …

brokercheckIn what can best be described as a Faustian tale taken from Alice in Wonderland, it should be no wonder that bad apple brokers continue to prey on investors, with no thanks to the archaic system overseen by financial industry regulators, most notably the “self-regulated” Financial Industry Regulatory Authority aka Finra. WSJ reporters Jean Eaglesham and Rob Barry provide insight into the dumb data system employed by the industry’s watchdog:

Wall Street’s own national watchdog doesn’t make public all the regulatory red flags it has about brokers, prompting calls from state regulators for more expansive disclosure.

Investors checking disciplinary records from the Financial Industry Regulatory Authority, or Finra, can see that in Bennett Broad ’s 35-year career as a stockbroker, he has faced 25 customer complaints involving alleged trading abuses, and that 15 ended in payouts to clients.

What they won’t see is that a former employer, UBS AG , launched an internal investigation into Mr. Broad’s business practices back in 2003 and then, according to state regulators, “permitted” him “to resign.” At least eight of his 25 complaints involved conduct after that investigation.

Finra, an industry-funded overseer of brokers, encourages investors to check its BrokerCheck Web page to look for regulatory red flags about individual brokers, including complaints, regulatory actions, terminations for cause and personal bankruptcies. Mr. Broad’s BrokerCheck reveals neither the UBS investigation nor his resignation—even though they show up on his state regulatory record.

A Wall Street Journal examination of federal and state regulatory data revealed that a wealth of information about brokers is reported to the national regulator but not made public by it. The Journal found at least 38,400 brokers have regulatory or financial red flags that appear only on state records, which in most states aren’t available without contacting state regulators. Of those, at least 19,000 had completely clean BrokerCheck records. A comprehensive database of brokerdealers registered in the US and major countries throughout the globe is available here.

California, Nevada , Arizona, Florida, New York & NJ have highest number of bad actor brokers.

The Journal’s analysis included 6,527 registered stockbrokers with offices in Fort Lauderdale and Boca Raton, Fla., highlighted on the adjacent map. Of those, 342, or 5.2%, reported three or more red flags on their disciplinary records. For every 10 brokers in this area, there were 4.9 disclosures, 126% higher than the rate among all brokers in the Journal’s data.

Brokers with troubled regulatory records were often found in areas with wealthy, elderly populations. In this hot spot, the share of households headed by people aged 65 and up with incomes in excess of $100,000 was about 39% greater than the nation as a whole.

For the entire article from WSJ, please click here.

Japan’s 2nd Biggest BrokerDealer Bolsters Plan For Myanmar Stock Exchange blog update courtesy of excerpts from 23 Dec story published by the WSJ, with reporting by Alexander Martin and Shibani Mahtani

myanmar exchangeJapan’s Daiwa Securities Group Inc., its research arm and Japan Exchange Group Inc. said Tuesday they signed a joint-venture agreement with Myanma Economic Bank to establish Myanmar’s first-ever stock exchange in Yangon.

The deal is the latest tangible sign that plans for Yangon’s stock exchange, which the government aims to have up and running by October 2015, are moving forward.

Japan Exchange Group and Daiwa Institute of Research would “continue to contribute to the development of Myanmar’s capital market and the expansion and deepening of economic relations between Japan and Myanmar through the establishment of Yangon Stock Exchange,” the companies and Myanmar’s state-owned bank said in a joint statement.

The deal followed an agreement signed in May 2012 between Daiwa Securities and the Tokyo Stock Exchange to help set up the exchange after Myanmar began opening up the previous year following nearly five decades of military rule.

In November, the former headquarters of Myawaddy Bank in Yangon was chosen to house the stock exchange. Building renovations will be finished by June or July, according to Myanmar’s deputy finance minister, Maung Maung Thein, in preparation for the exchange’s launch.

Despite the progress, analysts have said they remain skeptical that the timeline for the exchange is achievable, given the multiple delays in overhauling Myanmar’s once military-dominated financial system.

In a note to clients earlier this month, political risk consultancy Vriens & Partners wrote that “serious doubts remain as to whether the stock exchange will be ready to move forward” by mid-2015. The consultancy also said that “questions remain around technical know-how” required to set up the exchange.

For the entire story from the WSJ, please click here.

Expert Lawyer Says SEC Broken Windows Approach to Enforcement is Broken blog update courtesy of extracted opinion piece published Dec 22 by Pensions & Investments Magazine and submitted by Andrew Stoltmann, a partner at Chicago-based Stoltmann Law Offices PC, who represents investors in securities litigation and FINRA arbitration claims.

brokenwindows1“..The Securities and Exchange Commission is unfortunately pursuing a fundamentally flawed strategy to police the capital markets and protect investors.

Last year, SEC Chairwoman Mary Jo White disclosed she intends on pursuing a “broken windows” strategy for securities enforcement. The SEC intends on prosecuting even minor violations of the federal securities laws in order to prevent wrongdoers from engaging in even more egregious conduct.

The theory is that when a window is broken and someone fixes it, it is a sign that disorder will not be tolerated. When a broken window is not fixed, it is a signal that no one cares, and so breaking more windows, and more serious crime, will follow. This approach is the one taken in the 1990s by New York City’s then-Mayor Rudy Giuliani and Police Commissioner Bill Bratton back when Ms. White was the U.S. attorney for the Southern District of New York, which includes Manhattan.

Unfortunately, the “broken windows” strategy championed by Ms. White is fundamentally flawed. By going after minor offenses, it artificially inflates the SEC’s enforcement actions and gives the appearance of being tough on bad actors. In reality, it is a mirage. Continue reading