BCS Financial Group, one of Russia’s biggest brokerdealers, agreed in October to purchase a New York-based unit of AO Alfa Bank. It expects regulatory approval by the end of 2015. Should that happen, BCS aims to use the acquired business to give American automated trading firms and other clients increased access to the Moscow Exchange.

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The Securities and Exchange Board of India, the nation’s market regulator, is examining a lock-in proposal that prevents traders from canceling an algo order for a given period of time, the people said, asking not to be identified as they aren’t authorized to speak on the subject. Sebi is evaluating proposals to better manage algo trading, Chairman U.K. Sinha said Tuesday, without elaborating.

If you are interested in ivestment overseas in India, click here. Brokerdealer.com is the leading database for brokers looking to help you.

Regulators around the world are probing high-frequency trading structures after a series of mishaps and an illegal practice known as “spoofing” convulsed financial markets. In India, the CNX Nifty suddenly fell 2 percent on May 6 amid speculation algo trades sparked a sell-off, triggering closer scrutiny. The rising share of algo orders poses “systemic risks,” the Reserve Bank of India said last month.

High frequency orders worsened the so-called flash crash of May 2010, briefly wiping $862 billion from American equities, when Navinder Singh Sarao helped send the Dow Jones Industrial Average on a wild 1,000-point slide, according to U.S. authorities.

According to SEBI, the share of algo orders in total orders and the share of cancelled algo orders in the total number of cancelled orders was around 90 per cent. It also observed that volumes in algo trading and high-frequency trading increased substantially in the cash segment of the equity market to about 40 per cent of total trades in both the exchanges in March 2015.

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(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.

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US regulators have moved to close a loophole that allows some high-frequency trading firms that trade equities away from regulated exchanges to operate with light supervision.

The Securities and Exchange Commission on Wednesday proposed requiring proprietary traders to become members of the Financial Industry Regulatory Authority, a markets regulator.

The change would give authorities greater oversight for the day-to-day operations and recordkeeping for many high-speed traders and electronic market makers who dominate much of trading on US equity markets.

“Today’s proposed rules would close a regulatory gap by extending oversight to a significant portion of off-exchange trading,” said SEC chair Mary Jo White.

It is the first move by the US regulator to tighten monitoring of high-speed electronic traders, which aim to profit from rapid-fire moves in the market, following intense scrutiny on the industry a year ago. Flash Boys, a book by author Michael Lewis, alleged that high-frequency traders were among the beneficiaries to a market structure that was “rigged”. That led to calls for greater oversight of HFTs and off-exchange trading which had been building as equity trading increasingly moved to venues outside the traditional exchanges.

The SEC’s proposal would amend a rule that exempts certain brokers and dealers from membership in a national securities association. The existing rule reflected practices more than two decades ago, when equity markets were dominated by floor-based exchanges which could more easily regulate all of their members’ trading activity.

That world has largely disappeared as the emergence of high-speed technology and alternative trading venueshas helped usher in a new breed of proprietary traders that dominate trading. Although some have registered as broker-dealers at Finra, such as RGM Securities, Quantlab Securities and Tradebot Systems, there are also many that have not.

To read the entire story from FT, click here

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Subsequent to BrokerDealer.com being contacted by IEX communications executive Gerald Lam in his effort to set the record straight re: erroneous news media coverage, this blog has kept an eye on IEX; below are extracts from an op-ed article written by IEX CEO Brad Katsuyama to Bloomberg LP and published on Aug 3

‘Flash Boys’ and the Speed of Lies

65 Aug 3, 2014 6:03 PM EDT

By Brad Katsuyama

IEX CEO Brad Katsuyama, Image Courtesy of Wall St. Journal

In the last few months, I have had a strange and interesting experience. In early April, I found myself the main character in Michael Lewis’s book “Flash Boys.” It told the story of a quest I’ve been on, with my colleagues, to expose and to prevent a lot of outrageous behavior in the U.S. stock market.

Many of us had worked at big Wall Street brokerdealer firms or inside stock exchanges, and many of us believed something was amiss in the market. But it took the better part of five years to discover exactly how the market had been organized to benefit financial intermediaries, rather than the investors, the companies or the economy it was meant to serve. Only after looking at a flurry of market innovations — 40-gigabit cross-connects, esoteric order types, microwave towers — did we understand that the market’s focus was less about capital formation and more about giving certain market participants an advantage over others. In the end, we felt that the best way to solve these problems was to build a stock market of our own, which we did.

After the book, our stock market, IEX Group Inc., became a topic of discussion — some positive, some negative, some true and some false. Fair enough. If you’re in the spotlight and doing something different, you should take the heat along with the light.

It’s for this reason that we have done our best to resist responding publicly to misinformation about our company — even when we read memos circulated inside banks that “Michael Lewis has an undisclosed stake in IEX” (he does not); that “brokers own stakes in IEX” (they don’t); or articles in the Wall Street Journal that said we let “broker-dealers jump to the front of the trading queue,” putting retail investors and mutual funds at a disadvantage (in reality, all orders arrive at IEX via brokers, including those from traditional investors). Our hope in staying quiet was that the truth would win out in the end. But in recent weeks, the misinformation campaign has hit a new high (or low), and on one particularly critical matter, we feel compelled to set the record straight.

For the entirety of IEX CEO Brad Katsuyama’s Aug 3 op-ed piece to Bloomberg News, in which he seeks to dispel the erroneous information published by industry news media and select broker-dealer industry analysts, please visit the Bloomberg site at http://www.bloombergview.com/articles/2014-08-03/flash-boys-and-the-speed-of-lies

For those who are challenged with reading, Katsuyama was interviewed on Bloomberg TV Aug 5…The link to that video is http://www.bloomberg.com/video/iex-s-katsuyama-on-hft-full-exchange-ambitions-B0MB~4T7SIiBquvLC8nbLQ.html

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NY AG Eric Schneiderman

Less than two months after N.Y. Attorney General Eric Schneiderman levied charges against Barclays that it deliberately misled investors in its dark pool, regulators are reportedly looking into operations at five more investment banks. No specific allegations have been revealed, but several firms have confirmed that either Schneiderman’s office or another agency is investigating their practices.

The latest additions to the list of firms under scrutiny by the N.Y. attorney general’s office are Goldman Sachs and Morgan Stanley, according to The Fox Business Network, which cited people with direct knowledge of matter as sources. Neither firm has publicly acknowledged an investigation, but they also would not deny the scrutiny, according to the report.

Press officials at both firms as well as at the N.Y. attorney general’s office all declined comment.

One week ago, Credit Suisse revealed that regulators have asked the firm for information about its alternative trading system (ATS) as part of an investigation into dark pools. Credit Suisse said it was cooperating with “various governmental and regulatory authorities” regarding its ATS but would not specify which regulators were investigating, according to the Wall Street Journal. The bank further said that it is one of 30 defendants named in lawsuits related to high-frequency trading or other alleged violations filed with the U.S. District Court for the Southern District of New York.

Days earlier, UBS and Deutsche Bank disclosed that they were the subject of inquiries. UBS said that it was being investigated by the Securities and Exchange Commission, the N.Y. attorney general’s office and other regulators as part of an industry-wide investigation, according to the New York Times.

“These inquiries include an SEC investigation that began in early 2012 concerning features of UBS’s ATS, including certain order types and disclosure practices that were discontinued two years ago,” the firm said, according to the New York Times article.

At the same time, it was reported that Deutsche Bank separately disclosed it had been contacted by regulators. Deutsche Bank did not reveal which regulators had contacted the firm, but the New York Times report cited an unnamed source familiar with the matter as saying that the N.Y. attorney general’s office was investigating.  Deutsche Bank and UBS both said they were cooperating with authorities.

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From: Gerald Lam <gerald.lam@iextrading.com>
Date: July 9, 2014 at 6:26:32 AM PDT
To: brokerdealer.com@gmail.com
Subject: Contact email from Gerald Lam

I work at IEX, managing media & communications. I read your blog post on us from Monday, July 7 with concern.

Unfortunately, Bradley Hope’s article was misleading. And some of his inaccuracies have bled onto your piece.

For one thing, the “scheme” as you put it, is nothing new. We’ve offered it since the day we launched: October 25th, 2013.

Secondly, your second paragraph is wrong. Broker-dealer orders would not jump to the top of the order book over orders submitted by buy-side investors. Every buy-side investor (retail included) must be represented by a broker-dealer at IEX. There are no broker-dealer orders competing with non-broker-dealer orders here because every order at IEX is submitted by a broker-dealer.

Who does get “jumped”? Orders from other broker-dealers who are not providing both buyer and seller for a particular order at a particular price.

At the same time, investors (i.e. retail, mutual funds) who are represented by the internalizing broker-deal stand to benefit when they’re represented by the internalizing broker-dealer…their orders receive priority on the order book!

The bigger picture here is liquidity fragmentation — namely it’s detrimental impact to the investor experience. Our feature Broker Priority was designed to encourage brokers to internalize in once central, neutral (i.e. not owned by broker-dealers) venue.

I hope this sheds light on where the WSJ article got it wrong. I’m happy to talk through any of these issues.

I’d be grateful if you could address these clarifications in your blog.

Thank you,
gerald

The post Electronic Exchange Venue IEX’s Corporate Communication Exec Speaks Out re: BrokerDealer.com Blog Post appeared first on BrokerDealer Blog.

According to the proposal, which is “expected to be submitted imminently” to the U.S. Securities and Exchange Commission in connection with IEX’s plan to move from its current status as an ECN (electronic communications network) and towards becoming a full-blown stock exchange, broker-dealer orders would receive priority in the IEX order book, meaning those orders would jump to the top of the order book if the price to buy or sell a stock was at least equal to the prevailing orders entered by non broker-dealers aka buy-side investors that include high-frequency trading firms, mutual fund firms and retail investors. In addition to brokerdealer orders being provided priority over other same-priced orders sent to the platform by non BD’s, broker-dealers would be able to execute commission-free.

In a move that is purposefully intended to disrupt the current market structure status quo and challenge the viability of loosely-regulated and so-called “dark pools,” in which pricing transparency is purposefully hidden so as to mitigate gaming of orders submitted by large institutions, IEX is embracing an approach that has become widely-embraced in Canada’s equity marketplace, whose primary equities trading is administered by TMX Group, that country’s largest stock-exchange provider. Noted TMX Group CEO Thomas Kloet, “The virtue of having more bids and asks consolidated in a few order books, rather than scattered across dozens of venues [such as what takes place in US markets) makes markets more transparent and provides for greater price efficiency.”

The IEX proposal comes close on the heels of recent events in which dark-pool operators have been accused by regulators and law enforcement agencies of various charges, including accusations filed against Barclays PLC by New York State Attorney General which alleges Barclay’s misleads its clients about the way its dark pool favors high-tech “high frequency traders.” Barclay’s system “Barclays LX” was the industry’s largest dark pool used by a broad universe of investors and competing banks, until those charges were filed last month. Since that time, Barclay’s has supposedly experienced a large exodus of clients using their platform, presumably because of concerns they too will be on the receiving end of New York AG subpoenas.

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