Goldman Smacked: Finra Fine of $1.8mil re OATS Violation

(Bloomberg) — BrokerDealer Goldman Sachs Group Inc agreed to pay $1.8 million to resolve Financial Industry Regulatory Authority claims that one of its units submitted inaccurate trading information over a period of eight years.Goldman Sachs agreed to resolve the claims without admitting or denying the findings, Finra said in a statement Monday. Wall Street’s self-funded regulator accused the bank of sending bad data to the Order Audit Trail system, which Finra uses to monitor the trading practices of regulated firms.

“OATS data is integral to Finra’s automated market surveillance program to detect manipulative activity and other potential violations of Finra rules and federal securities laws,” Thomas Gira, executive vice president of market regulation, said in the statement.

From July 2006 to March 2015, Goldman Sachs transmitted inaccurate or incomplete information on more than 20 percent of all trading data submitted to Finra, the regulator said.

The conduct centered around the firm’s dark-pool trading venue Sigma X, which has been working on improving its technology. The New York-based bank hired Raj Mahajan, the former head of high-frequency trader Allston Trading, in January to run its equities electronic execution business, which includes the dark pool.

“We’re pleased to have concluded this matter,” Tiffany Galvin, a spokeswoman for Goldman Sachs, said in an e-mailed statement. “We self-reported many of the issues to Finra, voluntarily took steps to fix those issues, and provided substantial assistance to the Finra staff conducting the investigation.”

BrokerDealer Bent on Best Ex Via Agency-Only

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Below BrokerDealer blog post is republished courtesy of financial news curator MarketsMuse.com and spotlights institutional broker Dash Financial, a firm that is positioned as being “agency-only” , a phrase that suggests they only act as broker, not as a contra-side principal trader–a role that is typical to many investment bank trading desks.

MarketsMuse dip and dash department frequently prefers spotlighting altruists and do-gooders, including Agency-only execution firms in the brokerdealer sphere who, unlike “principal trading desks”, do not take the contra side to institutional customer orders as a means of making a profit; agency-only firms merely execute those client orders via the assortment of major exchanges and dark pools that traffic in equities and equity options. Today’s spotlight is on Dash Financial; the only position they purportedly take is a business model position by promoting the fact they act as a conflict-free agent only representing the best interest of their institutional brokerage clients in consideration for an agreed-upon commission.

BrokerDealer.com provides a global database of brokerdealers operating in more than three dozen countries throughout the free world.

The phrase “Best Execution” is therefore popular jargon among agency-only firms and implies that customers are receiving ‘the best” execution. What that means is a function of who you ask, particularly when considering the brokerdealer community has proven uniquely adept at capturing hidden revenue via rebate schemes in consideration for orders routed to those respective venues for execution. These schemes are aggressively promoted by the nearly two dozen major exchange and dark pools that facilitate trading in equities and equity options.

Courtesy of our friends at FierceFinance, today’s altruist of the week award goes to equity and options market agency brokerage Dash Financial, who asserts that being a broker in today’s fast-paced market is about being a technology expert and a consultant on clients’ execution objectives.

Below is the extract from FierceFinance’s interview with Dash Financial’s CMO:

David Karat, Dash Financial

“Everything is a tradeoff,” said David Karat, chief marketing officer for Dash Financial. “Every action you take to minimize fees, you risk losing liquidity, and for every technique to maximize liquidity it will cost you more money because it will be less relevant which venues you go to get that liquidity. It’s that balance we sit on top of and consult with our clients on.”

To that end, Dash Financial aims to help clients achieve what it calls on best net execution – execution that incorporates exchanges fees and all other associated costs.

“If there is liquidity in multiple places we are going to capture that liquidity based on the cheapest economics for the client,” Karat said. But Dash Financial has also designed its tracing architecture to couple its best execution algorithms with a focus on in-depth transparency, Karat said.

“We actually want you to see all the child orders, the millisecond time stamp of which destinations we are going to and what happened,” Karat said.

To continue reading the entire story, please visit MarketsMuse.com

Veteran-Owned BrokerDealer Mischler Financial Bolsters Structured Finance Group

mischler financial

Mischler Financial Extends Structured-Products Team

ABS Market Veteran Patrick Beranek to Lead Effort for Veteran-Owned Investment Bank

Stamford, CT—July 22, 2015—Mischler Financial Group, Inc., the financial industry’s oldest and largest minority investment bank and institutional brokerage owned and operated by Service-Disabled Veterans announced that Patrick Beranek, a 20-year industry veteran and most recently the head of Asset-Backed trading for Royal Bank of Scotland (“RBS”) has joined the firm’s capital markets division as Managing Director, Structured Products.

Mr. Beranek previously ran asset-backed trading and syndicate for Mizuho Financial Group Inc. and Bank of America Corp. Prior to those senior sell-side roles, Mr. Beranek was a portfolio manager for Federal National Home Mortgage Corp (FNMA). In this newly-created role at Mischler Financial, Mr. Beranek will oversee primary market activities of structured products. He will report to Robert Karr, Mischler’s Head of Capital Markets.

In connection with the latest expansion, Mr. Karr stated, “The ABS market has undergone a dynamic reset during the past several years, creating new opportunities. Given current economic drivers, a longer-term interest rate outlook and the demand for quality, non-core fixed income instruments, we’re confident that Pat will prove instrumental in the course of elevating Mischler’s role in the primary market for structured products and help bring compelling opportunities to our institutional investor base.”

Added Dean Chamberlain, CEO of Mischler Financial, “We are very pleased to add Pat to our team. Having worked with him before, I know that he has a unique skill-set that will further bolster our structured finance capabilities.”

About Mischler Financial Group, Inc.

Established in 1994 and is headquartered in Newport Beach, California with regional offices in New York City; Stamford, CT; Dallas, TX; Boston, MA: Chicago, IL, Red Bank, NJ; and Detroit, MI. Mischler Financial Group Inc. is a federally-certified SDVBE and the brokerdealer industry’s oldest minority investment bank and institutional brokerage owned and operated by Service-Disabled Veterans. Mischler clients include institutional investment managers, Fortune treasurers, public plan sponsors, endowments and foundations by providing capital markets services and agency-only secondary market execution across the global equities and fixed income markets. The firm also provides asset management for liquid and alternative investment strategies. The firm’s website is located at http://mischlerfinancial.com.

CONTACT: For Additional Information:Dean Chamberlain, Chief Executive Officer, Tel: 203.276.6646

Media Contact: The JLC Group

Email: jay@thejlcgroup.com or Tel: 203.255.0034

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Hong Kong IPO For China Railway: $2bil

China Railway Signal Prepares for $2 Billion Hong Kong IPO
State-owned China Railway Signal & Communication, which makes the signal systems used by China’s train network, plans to start taking orders for an up to $2 billion Hong Kong initial public offering next week in the biggest float by a mainland company since the Chinese markets’ rout.

For a comprehensive list of brokerdealers across Hong Kong and surrounding regions, brokerdealer.com offers the most extensive down-loadable directory of licensed broker-dealers

John Hancock Selects Dimensional to Manage Smart Beta ETFs

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Brokerdealer.com updates that fund giant John Hancock Investments will partner with Dimensional Fund Advisors on six “smart-beta” exchange-traded funds, according to paperwork filed with regulators early on Monday.

Dimensional, based in Austin, Texas, is one of the earliest proponents of factor investing. They blend elements of index-based investing and active investing in order to predictably exploit market returns and minimize trading costs. Many of today’s smart beta products — from index providers including FTSE Russell, WisdomTree, Research Affiliates — are based on a similar premise.

John Hancock unveiled in its preliminary prospectuses for the factor-based ETFs that DFA, the market-beating investment firm that adheres to the academic work of Eugene Fama and Kenneth French, will be the sub-advisor for its ETFs. John Hancock has worked with DFA on mutual funds and asset-allocation strategies since 2006.

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John Hancock initially filed plans for ETFs nearly four years ago, but has yet to bring an ETF to market. However, a new filing with the Securities and Exchange Commission indicates the firm is getting closer to launching its first ETFs.

The new filing provides details and expense ratios on the proposed ETFs. For example, the John Hancock Multifactor ETF, which is expected to charge 0.35% per year, will track an index comprised a subset of securities in the U.S. Universe issued by companies whose market capitalizations are larger than that of the 801st largest U.S. company at the time of reconstitution. In selecting and weighting securities in the Index, the Index Service Provider uses a rules-based process that incorporates sources of expected returns. This rules-based approach to index investing may sometimes be referred to as multifactor investing, factor-based investing, strategic beta, or smart beta.

John Hancock manages nearly $130 billion in mutual funds and money-market funds. Dimensional manages $406 billion. Dimensional already advises on John Hancock-branded mutual funds that have $3.2 billion in assets.