DTCC debuts trade repository for FX market | Deutsche Boerse's interest in Euronext wanes as Nasdaq takes look | BATS addresses "system issue" that led to pricing problem
10 January 2013
CFA Institute: Financial NewsBrief

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AIG will not participate in lawsuit against U.S.
American International Group said its board of directors unanimously decided not to join a lawsuit against the U.S. government over terms imposed on the firm when it was bailed out by taxpayers. Former CEO Maurice Greenberg had asked AIG to become a party in his $25 billion lawsuit. The New York Times (free-article access for SmartBrief readers)/DealBook blog (09 Jan.), InvestmentNews (free registration) (09 Jan.)
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DTCC debuts trade repository for FX market
A global trade repository designed to store data for the foreign exchange market launches Thursday. Depository Trust & Clearing says derivatives-clearing organizations will begin reporting trades to the service, while banks and financial firms operating in the U.S. may do so but are not required to until Feb. 28. The trade repository's debut, while a positive development, is hardly a panacea, Geoffrey Rogow and William Kemble-Diaz write. The Wall Street Journal (tiered subscription model) (09 Jan.), The Wall Street Journal (tiered subscription model)/MarketBeat blog (09 Jan.)
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Deutsche Boerse's interest in Euronext wanes as Nasdaq takes look
Deutsche Boerse is abandoning pursuit of Euronext as regulatory scrutiny and technological change cut into potential profit, sources say. "The attractiveness of the shares-trading business has massively diminished," a high-ranking Deutsche Boerse manager said. Meanwhile, Nasdaq OMX Group CEO Robert Greifeld says his firm might be interested in acquiring Euronext. "We would have to take a look at it," he said. "I'm not saying we would bid on it, but we would have to take a look." Reuters (09 Jan.), Reuters (09 Jan.)
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BATS addresses "system issue" that led to pricing problem
BATS Global Markets said a "system issue" let some trades occur at less than or equal to the national best bid and offer price during the past four years, violating Securities and Exchange Commission rules. BATS discovered the issue internally and said the problem will be corrected before the end of January. Financial Times (tiered subscription model) (10 Jan.), Bloomberg Businessweek (10 Jan.), The Wall Street Journal (tiered subscription model) (09 Jan.)
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Market Activity
Asian-Pacific markets advance amid rise in Chinese exports
Asian-Pacific markets rose Thursday amid news that China's exports in December outstripped expectations. Japan's Nikkei 225, boosted by a weakening yen, rose 0.7%. Hong Kong's Hang Seng Index added 0.6%. China's Shanghai Composite gained 0.4%. South Korea's Kospi rose 0.8%. Australia's S&P/ASX 200 edged up 0.3%. Taiwan's Taiex rose 0.9%. India's Sensex was fractionally lower at midafternoon. MarketWatch (10 Jan.), The Economic Times (India) (26 Feb.)
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ArcelorMittal will raise $3.5B in offering of equity and debt
Global steel-maker ArcelorMittal hopes to raise $3.5 billion in an offering of stock and bonds that automatically convert to stock. The company said proceeds will be used to reduce debt. The offering includes $1.75 billion of common shares and $1.75 billion of mandatory convertible subordinated notes. Bloomberg (09 Jan.)
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Major firms embrace daily reporting of money-fund NAV
Goldman Sachs Group, JPMorgan Chase, BlackRock and Dreyfus are shifting to daily net-asset-value reporting for money market mutual funds. The Securities and Exchange Commission praised the asset managers for voluntarily increasing transparency for investors. Reuters (09 Jan.), InvestmentNews (free registration) (09 Jan.), Bloomberg (09 Jan.), MarketWatch (09 Jan.), The Wall Street Journal (tiered subscription model) (09 Jan.)
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Wall Street expects real estate to lead U.S. recovery in 2013
Many Wall Street strategists and economists say real estate will not only cease to be a drag on the U.S. economy but also will lead the recovery this year. Real estate investment trusts are seeing net-operating-income growth of 4% and paying dividends of 3% to 5%. CNBC/NetNet blog (09 Jan.)
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China posts healthy gain in exports
Chinese exports increased 14.1% last month compared with December 2011, the biggest gain since May, according to customs data. Imports climbed 6%. The trade surplus was $31.6 billion, almost double the amount in December 2011. Bloomberg (10 Jan.), China Daily (Beijing) (10 Jan.)
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Moody's reports drop in default rate for high-yield debt
Moody's Investors Service says the global default rate for high-yield bonds reached 2.6% in the fourth quarter, declining 0.6 percentage point from Q3. The rate was lower than the historical average of 4.8% dating to 1983. Moody's says the rate likely will hit 3.3% in Europe and 3% in the U.S. this year. Bloomberg (09 Jan.)
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U.S. tax code needs full revamp, expert says
Nina Olson, the Internal Revenue Service's taxpayer advocate, calls on Congress in her annual report to overhaul the tax code. Filing a tax return has become a "significant, even unconscionable, burden," she says. The New York Times (free-article access for SmartBrief readers) (09 Jan.)
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Advisers recommend more exposure to real estate
Many financial advisers plan to suggest that clients put more money into real estate this year, according to the InvestmentNews 2013 Investment Outlook survey. About 43% say they will recommend greater exposure to alternative investments, while 35.6% think that among alternatives, real estate will be the top performer. InvestmentNews (free registration) (06 Jan.)
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Analysis: Draghi puts personal stamp on ECB
European Central Bank President Mario Draghi is changing the culture of the ECB. The Italian has changed the way the bank is viewed across Europe by combining aggressive policies with a more laid-back work culture. Reuters (09 Jan.), The Wall Street Journal (tiered subscription model) (09 Jan.)
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U.K. lawmakers question UBS execs about Libor
Members of the U.K. Parliament questioned UBS senior executives for nearly three hours Wednesday about issues related to the London Interbank Offered Rate. UBS paid $1.5 billion, the largest fine in the investigation, to authorities worldwide for its involvement. "We all got probably too arrogant, too self-convinced that things were correct the way they were," said Andrea Orcel, head of investment banking at UBS. "I think the industry needs to change." The New York Times (free-article access for SmartBrief readers)/DealBook blog (09 Jan.), Financial Times (tiered subscription model) (09 Jan.), Reuters (09 Jan.), The Wall Street Journal (tiered subscription model) (09 Jan.)
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Authorities obtain more time to review EMIR
The European Parliament and the Council of the EU have been granted a one-month delay, until Feb. 19, to examine rules within legislation on over-the-counter derivatives. Lawmakers had noted that "adoption of the delegated regulations shortly before Parliament's winter recess made it impossible for Parliament to exercise its scrutiny rights within that period." The rules were developed by the European Securities and Markets Authority and the European Banking Authority in support of the European Market Infrastructure Regulation. The Trade News (U.K.) (tiered subscription model) (09 Jan.)
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U.S. opens low-key diplomatic initiative with Venezuela
With Venezuelan President Hugo Chavez battling cancer and unable to attend his inauguration, the U.S. has quietly begun talks with the government, aimed mainly at opening a line of communication. The U.S. State Department is focused on Venezuelan Vice President Nicolas Maduro, who is also foreign minister. The Washington Post (tiered subscription model) (09 Jan.), El Universal (Venezuela) (09 Jan.), Latin American Herald Tribune (Venezuela)/Agencia EFE (Spain) (09 Jan.)
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Analysis: Chinese leaders resist genuine democratic reform
China's new leaders have put their propaganda machine to work, aiming to give a more reformist image, but they are resisting real democratic reform, according to The Economist. They "are nervous of demands that they move faster to loosen the Communist Party's grip," the magazine notes. "Most worryingly for them, some of the boldest calls are coming from within the establishment." The Economist (free content) (05 Jan.)
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Financial Products
ProShares aims to launch ETF focused on infrastructure
ProShares filed with the Securities and Exchange Commission to introduce an exchange-traded fund that would invest in companies involved in major infrastructure projects. The ProShares Global Direct Infrastructure ETF would track LPX's NMX 30 Infrastructure Global Index. IndexUniverse.com (09 Jan.)
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