Investors’ Anticipation Grows As They Wait For Tadawul To Become Public

Posted on March 6, 2015 by admin

Brokerdealer.com blog update profiles the much anticipated wait for the Tadawul market to foriegn investors. The Tadawul market is the Saudi stock market that has always been closed off to foreign investors. Much speculation has led many investors to believe that Tadawul should open by April. The update is from Institutional Investors, and here is a snippet from their article:

Anticipation is growing that a long awaited opening of Tadawul, the Saudi stock market, to foreign investors will come as early as next month. Analysts believe the move will provide fresh momentum for the $500 billion market, which has risen by nearly 30 percent since mid-December. “This will be the event of the year in emerging markets,” says John Sfakianakis, a veteran economist and investment strategist in Riyadh who opened an office there in September for the London-based emerging markets specialist Ashmore Group.

Oil was trading at more than $100 a barrel in July when the government first announced its intention to open the market at some point in 2015. Since then the Tadawul has been on a roller coaster ride, hitting a peak of 11,149 in early September, then plunging more than 34 percent over the next three months as oil prices collapsed before staging a recovery. The partial rebound of oil prices since January has helped. So has the government’s ability to draw on its $750 billion in reserves, which has helped keep the economy flush.

Growth has slowed but remains positive. The International Monetary Fund projects that the economy will expand by 2.8 percent this year, down from 3.6 percent in 2014. Nonoil sectors, which account for virtually the entire stock market, should expand by 5 percent, says Bassel Khatoun, Franklin Templeton’s head of equities for the Middle East and North Africa, based in Dubai.

To read the full article from Institutional Investors on the Saudi Arabian stock market’s opening, click here.

A Handmade IPO for Bankers, BrokerDealers and Maybe Investors

Posted on March 5, 2015 by admin

BrokerDealer.com blog IPO update and profile of Etsy.com pending initial public offering is courtesy of extract from 5 March story by Bloomberg View’s Matt Levine, “The Etsy IPO and the Triangle Document.” Brokerdealers and bankers alike have been anticipating Etsy’s IPO launch as it could be a big test for companies that have growing businesses and devoted followings and are considering launching their own IPOs. Etsy is a peer-to-peer e-commerce website focused on handmade or vintage items and supplies, as well as unique factory-manufactured items. Now from Bloomberg View’s Matt Levine…

How twee.

You occasionally read about banks’ pitches to take hot companies public, and they are often cringe-worthy: Bankers wore band t-shirts to pitch Pandora, and UBS dressed “around 75 of its employees in Lululemon gear and had them descend upon Central Park for a ‘flash mob’ yoga session” to pitch Lululemon for some reason. What do you think Goldman Sachs, Morgan Stanley and Allen & Company did to win the Etsy initial public offering? Did they hand-write the pitchbooks in fountain pen? Crochet them? Or just produce them normally in PowerPoint on their computers, but they were wooden computers? Did everyone else know about this?

The company was founded by Rob Kalin, a carpenter making handmade wooden computers with nowhere to sell them.

So obviously the Internet beckoned. Anyway, Etsy filed its preliminary prospectus yesterday, without a lot of capitalization numbers; Bloomberg reports that it’s seeking to sell about $300 million of stock, while DealBook estimates its pre-money valuation at about $322 million, so, that’s kind of weird. Use of proceeds is “general corporate purposes,” as one does, plus putting $300,000 — 10 basis points of the deal? — into the company’s Etsy.org nonprofit. But unlike a bunch of the internetty companies that I make fun of for going public for no particular reason other than cashing out insiders, Etsy is growing, had a $15.2 million net loss last year, and could probably use the money. (It’s also cashing out some insiders obviously.) The filing also emphasizes “authenticity” and includes this graphic explaining why Etsy works:

To continue reading Matt Levine’s article from Bloomberg View, please click here

Royal Bank of Scotland to Cut Significant Percent of Employees

Posted on March 4, 2015 by admin

Brokerdealer.com blog update is courtesy of The Economic Times.

The Royal Bank of Scotland (RBS) with over 700 branches with most mainly in the UK and Ireland have announced massive job cuts to their investment banking division.

Britain’s state-rescued Royal Bank of Scotland will axe up to 14,000 jobs by 2019 in a retreat from investment banking, the Financial Times reported Wednesday.

The daily business newspaper, which cited people familiar with the matter, said the lender could shed as much as 80 percent of its investment banking division, which employs a total of 18,000 people.

A spokeswoman for RBS, which is about 80-percent state-owned, declined to comment on the press report.

The Edinburgh-based bank had already announced last week that it would end investment banking in the Middle East and Africa and “significantly” reduce its presence in Asia and the United States after posting its seventh successive annual loss.
Losses after tax totalled £3.47 billion ($5.40 billion, 4.74 billion euros) last year after a £4.0-billion writedown on Citizens bank, part of its US operations.

The performance was however much better than in 2013 when RBS had posted an annual net loss of almost £9.0 billion. Stripping out the writedown and other items, RBS recorded an operating profit of £3.5 billion for 2014.

Push For More Transparency Exposes Broker-Dealer Profit Centers

Posted on March 3, 2015 by admin

Brokerdealer.com blog update is courtesy of Think Advisor. With a push for more transparency in the brokerdealer industry, profit centers are being exposed.

There’s nothing wrong with broker-dealers being profitable, but how those profits are obtained could use a good dose of disclosure. Representatives deserve to know that what they are paying is a true cost and what they are receiving is the best possible commission from a vendor.

First, let’s look at the profit centers that are relatively obvious to reps. In addition to the spreads broker-dealers receive from payout grids, there are two other primary sources of broker-dealer profit: revenue sharing and markup.

REVENUE SHARING BETWEEN BDS AND VENDORS

Revenue sharing happens between the broker-dealer and the product vendors, so it’s of little concern to reps. For example, on mutual funds and variable annuities, broker-dealers will negotiate with vendors to earn basis points (bps) on assets or sales of products their reps sell.

Broker-dealers will typically make 1 to 10 bps on either assets or sales of products, with small firms making only 1 or 2 bps and larger firms making 8 or more. Larger firms also have the ability to make these basis points on both assets and sales as they leverage their scale to obtain more.

On REITs and alternative investments, BDs earn between 1% and 1.5% extra in commissions on those product sales, which is called “marketing reallowance.” You may have noticed the increasingly large REIT and alts presence at BD conferences over the last five years—it’s simply because these vendors are currently willing to spend more to get in front of reps.

MARKUP CHARGES ON CLEARING FIRM COSTS

Markups, such as ticket charges, are something that representatives recognize as a profit center when they look at their various costs and see that firms differ on what they charge for them. It may not be apparent how much the markups are, or how extensively the costs incorporate overall costs, but reps recognize that there is a spread between clearing firms’ costs and what broker-dealers charge the representative.

For example, a clearing firm commonly charges $1 for postage and handling fees, and the broker-dealer charges between $4 and $7. A stock ticket charge from the clearing firm may be $9, but they charge the rep $19. BD scale is a primary factor in how low a firm is able to negotiate with the clearing firm: Small broker-dealers may be able to negotiate perhaps $12 from the clearing firm on stock ticket charges, while a large broker-dealer can negotiate down to $5.

For the rest of the article on ThinkAdvisor, click here.

Goldman Sachs Seeks to Turn Chit Chat Into A Symphony

Posted on March 2, 2015March 2, 2015 by admin

symphony goldmansachs BrokerDealer.com blog update courtesy of extract from eFinancialCareers.com profile of Goldman Sachs foray into displacing Bloomberg LP’s dominance of chat and instant messaging tools used by brokerdealers throughout the world via Symphony

Ever since it became apparent that bankers were using chat rooms and instant messaging for things other than business-like communication with clients and conversations about their weekends, banks have been clamping down. J.P. Morgan, Citi and Goldman Sachs were all said to make instant messaging services out of bounds to some of their traders in the wake of the LIBOR and FX fixing scandals. In turn, banks have been seeking to develop new, compliant, heavily-monitored, systems of their own.

Among these is Symphony, a ‘a cloud-based, compliant platform for instant communication and content sharing ‘ developed by a consortium of financial services firms led by Goldman Sachs. Developed from the instant messaging and chat provider Perzo, which Goldman bought into last year, Symphony is an instant messaging platform that provides regulators with, ‘an unaltered, auditable and retrievable record of all information flows with demonstrable, proven controls and surveillance.’ Based upon open-source customizable code, the product is due to become available across the market this year.

For a full directory of global brokerdealers who may be embracing this new platform from Goldman Sachs, please click here.

In the meantime. this is what a Symphony spokeswoman told us about the company and its plans.

To continue reading the full story from eFinancialCareers. please click here