Transaction tax splits EU, angers U.S. bankers, threatens jobs | SEC files insider trading suit over Heinz options trades | Obama works on backup plan for immigration reform
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18 February 2013
CFA Institute: Financial NewsBrief
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G-20 commits to "market-determined" exchange rates
Group of 20 finance ministers have vowed to allow "market-determined exchange rate systems and exchange rate flexibility" amid concerns about a possible currency war. "We will refrain from competitive devaluation," according to a statement from the ministers. "We will not target our exchange rates for competitive purposes." The New York Times (tiered subscription model) (16 Feb.), Bloomberg (18 Feb.), The Moscow Times (18 Feb.)
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Transaction tax splits EU, angers U.S. bankers, threatens jobs
Europe's proposed tax on financial transactions is already dividing the EU, threatening jobs in financial hubs and frustrating U.S. bankers, experts say. EU Taxation Commissioner Algirdas Semeta has defended the proposal, calling it "unquestionably fair and technically sound." Critics, however, warn that the levy would create a bureaucratic nightmare and hinder economic growth. United Press International (15 Feb.), Bloomberg (14 Feb.)
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SEC files insider trading suit over Heinz options trades
The Securities and Exchange Commission filed a lawsuit against unnamed traders accused of using insider knowledge to trade options on H.J. Heinz immediately before the announcement that Berkshire Hathaway and 3G Capital would be acquiring it. The trades took place through accounts in Switzerland, the agency said, and sent the price of the options traded up 1,700%. Reuters (15 Feb.), The New York Times (tiered subscription model)/DealBook blog (15 Feb.), The Wall Street Journal (tiered subscription model) (16 Feb.)
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Obama works on backup plan for immigration reform
President Barack Obama is drafting a backup proposal for U.S. immigration reform in case bipartisan negotiations in Congress over such a bill collapses, White House Chief of Staff Denis McDonough said. Under Obama's draft plan, it would take about eight years for an illegal immigrant to become a legal permanent resident of the U.S. Reuters (17 Feb.), USA Today (17 Feb.)
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China reportedly will help build Iranian rail project
China's State Council gave the go-ahead for the nation to help construct a high-speed rail project in Iran that is expected to cost at least $1 billion, two people familiar with the matter said. The companies that will build the system haven't been selected yet, they said. Bloomberg (18 Feb.)
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Japan posts strong advance amid mixed Asian-Pacific markets
Asian-Pacific markets were mixed Monday, but Japan's Nikkei 225 jumped 2.1% in response to a falling yen and the conclusion at a Group of 20 nations meeting that did not criticize Japan's stimulus efforts. Australia's S&P/ASX 200 gained 0.6%. South Korea's Kospi ended fractionally higher. Taiwan's Taiex rose 0.5%. Hong Kong's Hang Seng Index slid 0.3%. China's Shanghai Composite fell 0.5%. India's Sensex was up 0.2%. MarketWatch (18 Feb.), The Economic Times (India) (26 Feb.)
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Foreign demand rises for U.S. stocks, bonds, other assets
The U.S. Treasury Department says international purchases of U.S. financial assets, including stocks and bonds, increased from November to December. "The significant increase in December is a reflection of the heightened concern among global investors about the U.S. economy being pushed into a recession by the 'fiscal cliff,' " said Millan Mulraine, senior U.S. strategist at TD Securities. "Investors who feared the adverse impact of a U.S. economic slowdown on global activity fled to the safe haven of Treasurys." Bloomberg (15 Feb.)
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Economics
Future U.S. retirees could face tough times, research shows
For the first time since Franklin D. Roosevelt was president, a majority of Americans approaching retirement can expect to be financially less well off than their parents when they leave the workforce, according to research. Because of their limited resources, retirees may have to share homes with younger relatives or turn to government agencies for support. The Washington Post (tiered subscription model) (16 Feb.)
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Tech sector sees online gambling as next growth opportunity
High-tech firms are focusing on online gambling as their next billion-dollar business. Although most of the games have been created for the foreign market, Silicon Valley is counting on dramatic growth in the U.S., where the Justice Department recently smoothed the path for states to approve Internet gambling. The New York Times (tiered subscription model) (17 Feb.)
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Job Corps suspends enrollment amid cost overrun
Days after President Barack Obama spoke about the importance of employment training during his State of the Union address, the Labor Department said it is temporarily shutting down enrollment in Job Corps, the biggest job-training program for low-income youth in the U.S. The department cites cost overrun. The Washington Post (tiered subscription model) (16 Feb.)
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Analysis: U.S. minimum wage is low by global standards
President Barack Obama's proposal to raise the U.S. minimum wage by 24% comes at a time when America's minimum is one of the lowest among developed economies, according to The Economist. Proponents say the plan would increase the poorest workers' spending power and reduce poverty. Critics say it would decrease jobs for low-skilled workers. Economists traditionally have opposed minimum wages, but research questions that view. The Economist (tiered subscription model) (16 Feb.)
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Study: Young investors with advisers are more informed
Generation X and Y investors who work with a financial adviser are more knowledgeable about investing than those who don't, according to a study by LIMRA. Overall, 1 in 5 young consumers seeks help from a financial professional, the study found. Financial-Planning.com (14 Feb.)
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U.K. enjoys strengthening asking prices for houses
Asking prices for U.K. homes are at their highest for any February since 2008, according to the Rightmove House Price Index. Real estate agents say they are busier than they have been at any time since the beginning of the financial crisis. Market News International (17 Feb.)
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Geopolitical/Regulatory
Global coordination on benchmark rules is sought by industry
Europe's financial-services industry is seeking international coordination on rules governing benchmark interest rates, such as the London Interbank Offered Rate. Comments from market participants are coming as the International Organization of Securities Commissions is urged to play a bigger role. Financial News Online (U.K.) (subscription required) (18 Feb.)
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Proposed Libor-related rules draw opposition
Providers of benchmark equity indexes are voicing concern about two consultation papers published by European and international securities regulators calling for regulation of benchmarks using a definition that includes indexes, such as the Standard & Poor's 500. The papers argue that manipulation of the London Interbank Offered Rate has shaken trust in benchmarks, but providers say the definition does not distinguish between public and proprietary indexes. Risk.net (subscription required) (18 Feb.)
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Regulators close in on rules for outlier swaps trades
The Basel Committee on Banking Supervision and the board of the International Organization of Securities Commissions have released "near final" proposals for the small percentage of swaps that don't require clearing. The rules, which would be phased in from 2015 to 2019, would apply to only the biggest traders. Reuters (15 Feb.), The Sydney Morning Herald (Australia)/Bloomberg (16 Feb.), Financial Times (tiered subscription model) (16 Feb.), The Wall Street Journal (tiered subscription model) (15 Feb.)
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China opens OTC market to more investors
The Chinese National Equities Exchange and Quotations has published rules giving individual investors more access to the over-the-counter market. Additional classes of institutional investors as well as retail investors with at least 3 million yuan in securities and more than two years of investment experience will have access. Reuters (18 Feb.)
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SEC anti-fraud software is set to debut this year
The Securities and Exchange Commission will launch this year fraud-detection software to find accounting anomalies and hedge fund performance that don't line up with investment strategies. The software analyzes real-time data streamed to the agency from exchanges and uses a model that the SEC has been developing since 2011. "It is a model that allows us to discern whether a registrant's financial statements stick out from the pack," Chief Economist Craig Lewis said. The Washington Post (tiered subscription model) (15 Feb.), Financial Times (tiered subscription model) (13 Feb.)
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Financial Products
First Chinese gold ETF is expected this year
China likely will introduce its first gold exchange-traded fund this year, the World Gold Council says. The move is part of the government's encouragement of domestic investment in gold. Chinese demand for gold grew from 15 metric tons in 2006 to 274 metric tons in 2012. Morning Whistle (China) (17 Feb.), ETF Trends (14 Feb.)
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