SEC Advisory Group Proposes BrokerDealer Background Check Database

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Brokerdealer.com blog update profiles the SEC Investor Advisory Committee’s proposal for the SEC to develop a database of brokerdealers and investors’ information regardings secruities law violation in order to protect clients from fraud. This update is courtesy of InvestmentNews’ article, “SEC panel calls for a single database to run background checks on all financial professionals“. with an excerpt from the article below.

The Securities and Exchange Commission should develop a database that compiles information about securities law violations and is easy to use for investors, especially the elderly, an advisory group said Thursday.

In its quarterly meeting at SEC headquarters, the SEC Investor Advisory Committee floated a proposal to have the SEC work with other federal and state financial regulators to develop a single website to house disciplinary information about investment advisers, brokers and other financial professionals. As a step toward that goal, an IAC subcommittee suggested the agency provide a single portal for investors to access information in SEC and Finra databases.

The proposal likely will be voted on by the full IAC at the group’s July meeting.

“This is something from an investor protection perspective, which certainly is the mission of this committee, [that] can play a very important role for the public,” Ms. Sheehan said.

To read the entire article from InvestmentNews, click here.

 

Etsy’s IPO Plan Is Very Crafty

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Etsy is a peer-to-peer e-commerce website focused on handmade or vintage items and supplies, as well as unique factory-manufactured items. Last month, brokerdealer.com profiled  Etsy’s preperation for an IPO, now new details are emerging about Etsy’s plan for its IPO. Etsy hopes to target small investors and focus on fewer big investors as part of its plan for their IPO. By using this unusual practice, Etsy hopes to gain shareholders who share in Etsy’s commitment to socially responsible business practices. This brokerdealer.com blog update is courtesy of the Wall Street Journal’s article, “Even Etsy’s Initial Public Offering Process Is Artisanal” with an excerpt below.

Leave it to Etsy Inc. to craft an artisanal public offering.

The Brooklyn, N.Y.-based online marketplace for handmade and vintage goods has altered the playbook for its initial public offering, launching an expansive effort to attract small investors and focusing on fewer big investors, according to people familiar with the deal.

The custom-made process is intended to build a shareholder base that is on board with what Etsy says is its commitment to socially responsible business practices and its plans to spend heavily on marketing to grow its membership over the next few years, the people said.

But going off script comes with some risk. The moves include limiting the amount of stock retail investors can get in the IPO to $2,500 so more individuals can take part, and concentrating many of the shares among a relatively small number of big holders. The approach could turn off some traders whose presence can help stabilize a stock once it begins trading.

To continue reading about Etsy’s plan for its IPO from the Wall Street Journal, click here.

Bond Trading: Smaller BrokerDealers Displace Bulge Bracket Market-Makers

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BrokerDealer.com blog update profiles the emergence of specialist brokerdealers who are poised to displace the once dominant ‘bulge bracket’ aka “6-pack” firms in the world of making markets and providing liquidity across the bond marketplace.  As regulations and capital requirements upend the legacy role played by Wall Street’s biggest investment banks, technology advances coupled with modern day perspectives as to how to source actionable liquidity and secure best execution when trading bonds is providing an opportunity for smaller and savvy broker-dealers to play an important role. Coverage is courtesy of excerpt from feature story published by MarketsMedia.com.

Since 2008, there has been an increase in electronic trading of fixed income securities, along with a decrease in inventory held by larger dealers and banks.

“If we look at some of the subtle changes in market structure that have come about, we see non-traditional liquidity providers, or price makers, coming up within the marketplace,” Bill Vulpis, managing director at KCG BondPoint, told Markets Media. “By non-traditional, I mean companies other than banks and large sell-side firms, including smaller broker dealers who are reliant upon electronic platforms to make markets.”

According to a January 2015 study by Greenwich Associates, 80% of institutional investors report difficulties executing corporate bond trades of more than $15 million, reflecting decline in market liquidity caused by the pullback of fixed-income dealers in the wake of new and more stringent capital reserve requirements.

With dealer inventories shrinking, investors’ search for new liquidity providers is proving a boon to the fast-developing ranks of electronic trading platforms, according to Greenwich. All-to-all trading accounted for an estimated 6% of electronically executed U.S. trades in 2014.

To read the full article from Markets Media, click here.

 

Broker-Dealer IPO Time: Electronic Trading Firm Virtu Financial Tries Again

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BrokerDealer.com blog update profiles the second swing at the IPO bat by high-frequency-trading firm Virtu Financial Inc. The coverage is courtesy of TradersMag republishing of story from Bloomberg LP —

(Bloomberg) -Virtu Financial Inc., which delayed its initial public offering amid a furor over high-frequency traders, said it plans to raise as much as $314 million in a share sale.

The company will offer about 16.5 million shares at $17 to $19 apiece, according to a regulatory filing Monday. At the high end of the offering range, Virtu would be valued at about $2.6 billion, based on 136.5 million shares outstanding, the amount if all classes convert to Class A, the document shows. All of the shares are being sold by the company, rather that existing investors.

The filing precedes formal marketing of the deal, a process that was delayed after “Flash Boys,” the Michael Lewis book released in March 2014, alleged that high-speed traders, Wall Street brokerages and exchanges have rigged the $24 trillion U.S. stock market. Amid the heightened scrutiny caused by the book and various regulatory investigations, officials involved in the offering decided to shelve the deal.

Virtu’s revenue last year was $723 million according to the filing, an 8.8 percent increase from 2013. Net income rose to $190 million from $182 million the previous year. The 148- employee company, which uses computerized strategies to buy and sell everything from stocks to currencies, has had only one losing days in its six years of operation.

“Over a million times day, we’re not making money,” Chief Executive Officer Doug Cifu said at an industry conference last June. “But when you add up the volume of instruments that we trade, the tens of thousands of strategies that we trade in all the different marketplaces, it’s simply the law of large numbers, and, as a result, yes, we are profitable every day.”

Virtu has thrived as two decades of market reform and computer advances helped automated traders largely supplant humans on the floors of exchanges around the world. The company’s main business is market making, using software to provide standing offers to buy and sell stocks and other securities.

The past year has seen the departure of Virtu’s President, Chris Concannon. He left for Bats Global Markets Inc. in November and became CEO of the exchange operator on March 31.

Worldwide Expansion

Virtu started in 2008 by trading U.S. stocks and has since expanded worldwide and into assets including government bonds, currencies and futures. The firm makes markets in more than 11,000 securities and other financial products, trading on more than 225 exchanges in 34 countries, according to its filing.

Electronic market-making firms such as Virtu use automated systems to earn money off the prices that buyers are willing to pay and sellers are willing to offer. They depend on scale to make money given the compression between bids and offers during the past decade.

 

Indian Startups Gather Interest and Venture Funding From BrokerDealers Everywhere

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Brokerdealer.com blog update profiles  Indian start up companies collecting interest from brokerdealers around the world for comapny funding. This brokerdealer.com blog update is courtesy of Wall Street Journal’s article, “Venture Money Floods Into Indian Startups “.

Vikram Chopra spent the past three years building an online furniture-shopping site for Indian consumers that was funded mainly by annual capital injections from a German technology incubator.

But during the past few months, investor interest in the site, FabFurnish.com, has soared, said the 32-year-old entrepreneur, who is based in the New Delhi suburb of Gurgaon. Several global venture-capital firms and hedge funds have said they are interested in investing, and Mr. Chopra is now considering another round of funding that would exceed the $20 million raised so far—even though he doesn’t expect FabFurnish to be profitable for another two years and doesn’t yet need the cash.

“A few years ago, everybody wanted to see profitability upfront,” said Mr. Chopra. “Today, it is more like how much money you need to curb the competition [and] kill everyone else.”

Global money is flooding into Indian startups as investors search for a successor to Alibaba Group Holding Ltd., the Chinese e-commerce company that raised a record $25 billion in its initial public offering last year.

To read the entire article from the Wall Street Journal, click here.