MiFID II Expected to Smack Intl Equities Traders

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(TradersMagazine) A new report from Greenwich Associates, European Equity Trading and the Consequences of Regulation reveals that European buyside traders and portfolio managers believe MiFID II provisions could increase trade execution costs and reduce market liquidity—particularly in small cap stocks.

More than 3.4 billion Euro in commission payments earned by brokerage firms on institutional trades of European equities in the year ending Q2 2015 was about evenly divided. An estimated 53 percent pay for research and advisory services and 47 percent take the form of payments for trade execution services, according to Greenwich Associates.

“The debate over MiFID II has sparked intense speculation about the future of the European equity research business. Much less attention has been paid to the potentially profound impacts of the regulatory proposals on the European cash equity trading business,” according to a press statement.

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For the full report from TradersMagazine, please click here

China Regulators Ban Derivatives For Financing Stock Purchase

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(Bloomberg) — The Securities Association of China will ban brokerages from offering financing for stock market trading using derivatives, the country’s securities regulator said.

Brokerages should provide funding to their clients using margin trading tools that comply with the rules, China Securities Regulatory Commission spokesman Zhang Xiaojun said Friday at a briefing. Swaps offered by some brokerages have deviated from their role as a risk management tool, instead becoming a way to offer unofficial margin loans for investors, Zhang said.

China’s regulators are attempting to prevent another build up of leverage in the stock market similar to the borrowing binge that took place earlier this year and helped propel the boom and then bust in Chinese share prices. Earlier this month, the country’s two mainland stock exchanges doubled margin requirements to 100 percent in another move to limit leverage in the market.

“After the stock market rout, regulators have a new understanding about leverage,” Chen Xingyu, a Shanghai-based analyst at Phillip Securities Research, said by phone. “Their measures have been focusing on deleveraging and reducing risk and this policy stance should continue. The regulators will be more conservative and prudent than before.”

Zhang was confirming a report Thursday in Caixin magazine, which said China’s brokerages were told to wind down the business of offering total return swaps, a type of over-the- counter derivative, for clients who want to trade stocks.

At the end of October, the over-the-counter derivative businesses of 39 brokerages had an outstanding nominal value of 279 billion yuan ($43.7 billion), according to data from the Securities Association of China. Of that, swaps accounted for 44 percent by value, while options contracts accounted for the rest.

The amounts involved in the swaps compare to China’s official margin finance balance of more than 1.2 trillion yuan.

The total return swaps can offer three to five times leverage because the investor pays only a deposit to the broker and then a fixed-interest payment at the end of the contract, in return for receiving a floating return on the stocks.

BrokerDealers For Sale-Glut Makes Buyers Market

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A glut of independent brokerdealers (IBDs) for sale is creating a buyer’s market, putting pressure on prices across the independent broker-dealer space.

While no “Black Friday Sale” signs are expected to appear (that’s right, Black Friday is a negative in the world of Wall Street), according to coverage from InvestmentNews.com, coupled with a further investigation by the curators at BrokerDealer.com, prices for IBDs are going lower, not higher; creating opportunities for new entrants and headaches for rumored sellers that include Cetera Financial Group.

(InvestmentNews.com) November 25 A glut of independent broker-dealer firms (IBDs) for sale is creating a buyer’s market for independent broker-dealers that could put pressure on the prices sellers are able to attract.

Firms for sale include Cetera Financial Group, AIG Adviser Group and Next Financial Group, which collectively represent 15 individual broker-dealers and more than 15,000 registered representatives and advisers.

BrokerDealer.com maintains the world’s largest directory of broker-dealers in more than three dozen countries and a robust database of those interested in buying or selling broker-dealers

“There is a higher number of potential opportunities than we have ever seen before,” said Richard Lampen, president and chief executive of Ladenburg Thalmann Financial Services, which has completed five broker-dealer acquisitions since 2007. “The $64,000 question is, how many deals are going to get done?”

“With so many potential sellers in the market, and rumors of more sellers, I’m curious to see how the market-clearing process will work,” Mr. Lampen said. “There are some willing buyers, but is there a price that’s going to work?”

Mr. Lampen said sellers are going to have a reality check when it comes to offers their properties are likely to attract. He said the industry has put behind it the outsized valuations of independent broker-dealers used in acquisitions by RCS Capital Corp., a brokerage holding company that one-time real estate mogul Nicholas Schorsch put together in a flurry of acquisitions between 2013 and 2014.

“Some sellers still think it’s 2014, and Nick Schorsch price expectations are out there,” Mr. Lampen said. “But it’s hard to imagine any one overpaying at this stage in the process.”

CETERA TOPS THE LIST

The largest of the firms reportedly in play is Cetera Financial Group, the network that Mr. Schorsch put together. It is made up of 10 broker-dealers with about 9,500 reps and advisers. Larry Roth, the CEO of Cetera and its parent company, RCS Capital, told advisers on a conference call recently that a half dozen companies had shown interest in the firm and that a new owner or significant private-equity investor would be in place by year-end.

The full story from InvestmentNews.com is here

Re-Branding Asia-Pacific Exchange Now Sydney Stock Exchange

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(Traders Magazine)-The Asia Pacific Stock Exchange (APX) is changing its name to Sydney Stock Exchange.

As first reported in Automated Trader, the new Sydney Stock Exchange’s Deputy Chairman George Wang said, “We aim to build the Sydney Stock Exchange as a bridge between Australia and Asia’s capital markets, corporates and investors.

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He added that the new name reflects both the role of Sydney as a major financial center in Australia and the Asia Pacific region and the geographic home of the exchange. It also revives and reminds of the rich heritage of the old Sydney Stock Exchange, which was an important trading place in its own right until 1987.

Sydney Stock Exchange will be a member of Asia Pacific Exchange Group (APX Group), as well as Asia Pacific Finance Institute of Australia, and the Asia Pacific Equity Exchange.

Why Advisors and BrokerDealers Should Know Crowdfunding

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BrokerDealer.com blog update courtesy of excerpt from InvestmentNews.com

The moment many advisers hear the term “crowdfunding,” they tune out. Crowdfunding is for the unwashed masses, for Kickstarter fans, for small-time investing neophytes. It’s not a place for real investing.

Well, advisers can continue to believe that, but that doesn’t mean their clients will. Especially given changes on tap for 2016 that will shower more investors with opportunities to “get in on the ground floor of the next big thing.”

The odds of your clients being drawn to new ventures rose markedly on Oct. 30, when the Securities and Exchange Commission passed Title III, part of the 2012 JOBS Act, which allows non-accredited investors to get into private equity through crowdfunding platforms.

Jeff Benjamin’s column quoted a securities lawyer, Doug Ellenoff, calling this move “the publicification of the private investment market.” And Mr. Benjamin cautioned InvestmentNews readers about the coming “aggressive push into the retail space” early next year, when these sites can begin taking non-accredited money.

BUY-IN LIMITED

Luckily for advisers, who hold tight to client assets and manage portfolios holistically, the buy-in for these offers will be limited. The deals themselves will not be able to raise more than $1 million in a 12-month period, and individuals will be able to contribute only between 5% and 10% of their yearly income.

But any chunk broken out of a financial plan to wager on these offers deserves attention. That’s not to say none of these ventures will be worth considering. And likely, if a client wants to support a community project, for example, there may be factors to weigh in addition to possible returns.

But in this new environment, advisers need to tell clients: “Bring anything that comes your way to us first.” Deals will sound too good to be true because that’s how marketing works. That’s fine when it comes to toothpaste or hamburgers, but decisions to spend even a few grand in retirement savings on crowdfunding offers would benefit from professional scrutiny.

And advisers will need to stay current during the evolution of this new retail-level private equity market and its investment structure…

For the full article, please click here