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from Financial Regulatory Forum:
INTERVIEW-CME’s CEO is not anxious about reform delay
By Ann Saphir and Jonathan Spicer
BOCA RATON, Florida, March 10 (Reuters) - Craig Donohue, head of the world's biggest futures exchange operator, said on Wednesday the growing number of months that regulators and politicians are devoting to revamping financial markets is a positive sign -- not something to grow anxious over.
"There's value if the additional time is resulting in the opportunity to more carefully think through what type of legislation is appropriate" to deal with gaps in regulation that may have contributed to the financial crisis, Donohue, CME Group Inc's <CME.O> chief executive, told Reuters.
"That's a positive thing," he said on the sidelines of the Futures Industry Association conference in Boca Raton.
Some 18 months after the mortgage-inspired financial meltdown that sparked a global recession, the United States, the European Union and others are still debating and crafting rules meant to avoid a repeat of the crisis.
Donohue said he welcomes some of the reform proposals being considered. CME Group could benefit as more over-the-counter products are forced through clearinghouses and exchanges, but could suffer if regulators restrict bank proprietary trading or impose steep position limits in commodities markets.
A revised bill on financial regulation is expected very soon from the U.S. Senate's Banking Committee. [ID:nN10137492]
The bill would tighten bank and capital market oversight and is expected to include measures for consumer protection, systemic risk, and an over-the-counter derivatives crackdown -- the issue central to CME Group, which recently launched a credit default swap clearinghouse and wants to clear more swaps.
"We're expecting the Senate bill reasonably shortly," Donohue said. "The process is definitely evolving, but I'm not unhappy with the fact that there's been time to actually meet with legislators."
The European Commission is expected to publish a draft law on derivatives clearing by July.
"It's hard to judge" whether the political will to reform financial markets is waning, the CEO added. "Certainly there is a clear focus on the legislation." (Reporting by Ann Saphir and Jonathan Spicer; Editing by Gary Hill) ((jonathan.spicer@thomsonreuters.com; +1-646-223-6253; Reuters Messaging: jonathan.spicer.reuters.com@reuters.net))
Keywords: CMEGROUP/
Thursday, 11 March 2010 01:08:40RTRS [nN10178974] {C}ENDS
from Financial Regulatory Forum:
US senators wrestle with Fed bank oversight issues
By Kevin Drawbaugh and Rachelle Younglai
WASHINGTON, March 8 (Reuters) - The Federal Reserve could retain oversight of large bank holding companies under a scaled-back regulatory reform plan being considered by key senators, but important questions remained unanswered, lobbyists said on Sunday.
In a retreat from a bold proposal to streamline a patchwork bank regulatory system, lawmakers were considering keeping supervision of companies such as Citigroup <C.N> and Bank of America <BAC.N> at the Fed, as Reuters reported in February.
It was still unclear, lobbyists said, if the Fed under the evolving plan would be an "umbrella supervisor," continuing to rely on other agencies for detailed bank exams, and how many companies might be put under the Fed.
One option, they said, was to assign holding companies with assets of $100 billion and up to the Fed, which would include nearly two dozen major firms.
Other, more expansive options were also being considered, with Senate Banking Committee Chairman Christopher Dodd expected to unveil legislation as soon as this week after months of negotiations with fellow Democrats and Republicans.
(For a Factbox on the keys to financial regulation reform in the U.S. Senate, double-click on [ID:nN05256609])
Regulatory reform is a top domestic priority of President Barack Obama, who wants to crack down on banks and capital markets following the worst financial crisis in decades.
Dodd in November called the Fed's past performance as a banking supervisor and consumer protection watchdog an "abysmal failure." When he made that remark, he proposed consolidating bank supervision into a super-cop for the industry to be called the Financial Institutions Regulatory Administration, or FIRA.
(For a Factbox on key players in reshaping U.S. financial rules, double-click on [ID:nN02168734])
But the FIRA proposal has unraveled as Dodd has discussed a range of compromises with Republicans and moved closer to embracing regulatory reforms watered down from a sweeping bill approved in December by the U.S. House of Representatives.
(For a Factbox on how U.S. banking regulation is structured today, please double-click on [ID:nN26145675])
The FIRA would have streamlined the bank oversight duties of the Fed, the Comptroller of the Currency, the Federal Deposit Insurance Corp and other agencies.
The Fed in recent weeks has pushed hard to preserve its role as a supervisor. Senators are discussing doing that up to a point, but stripping the Fed of its job as supervisor of a large number of state-chartered banks.
Dodd was said to be leaning toward reassigning those banks to the FDIC, which already examines many other state-chartered banks not in the Fed system, lobbyists said,
Dodd also plans to call for closing the Office of Thrift Supervision, which regulates thrift institutions.
On Friday, Dodd said he was uncertain whether bipartisan support for a compromise reform bill could be achieved. (Editing by Peter Cooney) (For a Scenarios on how the U.S. financial regulation fight might play out, double-click on [ID:nN04129297]) ((kevin.drawbaugh@thomsonreuters.com; +1 202 898 8390;
Fax: +1 202 488 3459 )) Keywords: FINANCIAL REGULATION/FED
Monday, 08 March 2010 06:06:36RTRS [nN07145510] {C}ENDS
from Financial Regulatory Forum:
Kocherlakota: Fed’s bank supervisory powers critical
By Ann Saphir
MINNEAPOLIS, March 2 (Reuters) - Supervisory powers over banks are critical for the Federal Reserve to do its job, Minneapolis Fed President Narayana Kocherlakota said on Tuesday.
In comments that largely echoed those made in St. Paul on Feb. 16, Kocherlakota said that a plan under consideration by U.S. lawmakers to remove those powers would be a mistake.
"The improvement in our economic situation is attributable in large part to actions taken by the Federal Reserve, actions that were possible because of the expertise and information that the Federal Reserve had acquired as a supervisor of the nation's banks," he said in remarks to a business group in Minneapolis.
"We avoided an economic depression this time. But stripping the Federal Reserve of its supervisory role would needlessly put a Great Depression on the menu of possibilities for our country."
While the current crisis was fueled by risk-taking at large banks, Kocherlakota said, the Fed needs to have access to information about small banks as well -- a point not included in his maiden speech as Minneapolis Fed president last month.
The government will likely respond to the recent crisis by tightening controls on larger banks, he said.
"Inevitably, these constraints will lead risk-taking to move from large financial institutions to smaller ones, and will increase the probability of a financial crisis in the small institutions," he said.
"Indeed, even now, the collective exposure of many smaller banks to commercial real estate may be exerting a significant drag on the overall economic recovery," he said.
Kocherlakota repeated his view the U.S. economy will likely grow at an annual rate of 3 percent over the next two years, and that unemployment will likely still exceed 8 percent at the end of next year.
Mitigating such trends, he reiterated, is relatively tame inflation -- suggesting he sees a smaller likelihood the Fed will need to raise interest rates to rein in unwanted price increases.
The Fed lowered its overnight bank-to-bank lending rate target to near zero in December 2008 to help fend off the worst U.S. economic downturn since the Depression, and has pledged to keep rates there for an "extended period."
Kocherlakota will rotate into a voting spot on the Fed's monetary policy-setting Federal Open Market Committee next year.
(Editing by Chizu Nomiyama)
((ann.saphir@thomsonreuters.com; +1-312-408-8592; Reuters Messaging: ann.saphir.reuters.com@reuters.net))
Keywords: USA FED/KOCHERLAKOTA
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Tuesday, 02 March 2010 19:00:32RTRS [nNYS007815] {EN}ENDS
from Financial Regulatory Forum:
US Sen Shelby: financial watchdog powers paramount
WASHINGTON, March 2 (Reuters) - The top Republican on the U.S. Senate Banking Committee said on Tuesday that the powers granted to a new financial government consumer watchdog are more important than its location in the federal bureaucracy.
"I don't think it's a question of where it's housed. I'm going to say it again, it's what it does," Senator Richard Shelby told reporters in a Capitol hallway.
President Barack Obama's plan to set up an independent Consumer Financial Protection Agency to regulate mortgages and credit cards has been the main obstacle for weeks to a bipartisan Senate compromise on financial reform. (Reporting by Kevin Drawbaugh; Editing by Leslie Adler) ((kevin.drawbaugh@thomsonreuters.com, +1 202 898 8390, +1 202 488 3459 (fax)))
Keywords: FINANCIAL REGULATION/SHELBY
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Tuesday, 02 March 2010 19:04:01RTRS [nWBT013682] {EN}ENDS
from Financial Regulatory Forum:
U.S. government to enhance municipal market regulation
WASHINGTON, March 2 (Reuters) - The Internal Revenue Service has agreed to work more closely with the Securities and Exchange Commission to regulate the U.S. municipal bond market, the IRS said on Tuesday, adding the two federal agencies had signed memorandum of understanding.
"This memorandum reflects the commitment both agencies have in using all means possible to ensure the municipal bond market operates in accordance with all the laws that govern it," said IRS Commissioner Doug Shulman in a statement.
Under the agreement, the two agencies will identify issues and trends in the municipal securities industry and "enhance performance" in regulating the $2.8 trillion market.
SEC Chairman Mary Schapiro has repeatedly said that she would like to create more investor protections in the municipal bond market, which is uniquely regulated.
Because of a part of securities law known as the Tower Amendment, the U.S. government cannot regulate how states and public entities sell their debt. Instead, it can only directly regulate the market's broker-dealers and underwriters.
The Municipal Securities Rulemaking Board, a self-regulatory organization made up primarily of employees of banks and securities firms, writes rules for the brokers that the SEC enforces. In recent years the SEC has entrusted the MSRB to create and operate a clearinghouse of information on trades and new issues.
The IRS has the power to take away bonds' tax exemption if they are used to commit fraud or generate arbitrage.
Under Schapiro, the SEC has also created a new enforcement division that focuses on misconduct in the municipal securities market and in connection with public pension funds. (Reporting by Lisa Lambert, additional reporting by Dan Margolies; Editing by Kenneth Barry) ((lisa.lambert@thomsonreuters.com; +1-202-898-8328; Reuters Messaging: lisa.lambert.reuters.com@reuters.net)) Keywords: MUNICIPALS IRS/SEC
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Tuesday, 02 March 2010 20:06:47RTRS [nN02172741] {EN}ENDS
from Financial Regulatory Forum:
U.S. Senate financial reform snags, no bill Monday
By Kevin Drawbaugh and Rachelle Younglai
WASHINGTON, Feb 28 (Reuters) - Marathon weekend negotiations in the U.S Senate on financial reform failed to result in a bipartisan breakthrough, with disagreement over how much power to give a consumer watchdog office still a key hurdle.
Key lawmakers from both parties were still hopeful for a breakthrough on an issue that is one of President Barack Obama's top domestic policy priorities, but an aide to Senate Banking Committee Chairman Christopher Dodd said no revised bill will be released on Monday.
"We continue to hope for a consensus bill," said Kirstin Brost, spokeswoman for Dodd, a Democrat.
Republican Senator Bob Corker, who has been been continuing talks with Dodd over recent weeks, was also optimistic "that we will be successful in getting a good piece of regulatory reform legislation," said his spokeswoman Laura Herzog.
(For a Factbox on the key issues in the Senate's compromise bill on financial reform, double-click on [ID:nN27194850])
Brost emphasized that consumer protection remains a key area for Dodd.
"Dodd wants a consumer watchdog with teeth," she said. "He will compromise on structure, but he will not accept anything short of real change for consumer protections."
Nearly a year and a half since a severe financial crisis tipped the U.S. economy into its worst recession in decades, financial regulation has changed little, despite repeated assertions that reform is critical to avoiding another crisis.
For Congress, time is running short. Midterm elections are approaching in early November. Between now and then, Congress will be in session for perhaps 23 weeks.
In that timeframe, a bill would have to move out of the banking committee, be debated and voted on on the Senate floor and, if passed, reconciled with a sweeping bill passed by the House of Representatives in December.
Democrats are keen to see legislation sent to Obama and signed into law before the November elections, giving them a clear achievement after disappointing outcomes on other key issue such as health care reform and climate change.
Policy analysts said Republicans increasingly sense political danger ahead of November in blocking reforms and being cast as allies of the army of bank and Wall Street lobbyists who for months have been fighting stricter rules.
"The calendar is starting to become a factor," said Brian Gardner, a policy analyst at investment firm Keefe Bruyette & Woods. "All in all, I think the banking committee is headed toward getting a bill done before the end of the year."
BILL MAY NARROW
The struggle in the Senate suggested to some that new legislation -- which many still expect from Dodd next week -- may be narrower in scope than Obama's proposals of nine months ago, and the sweeping bill passed by the House in December.
"They're going to push real hard to get something out next week," Gardner said. "There's a chance that it could be a little bit smaller" than the House bill and Obama's proposals.
Provisions that may be dropped could include over-the-counter derivatives regulation, as well as proposals to give shareholders more say in electing corporate directors and determining corporate executive pay, Gardner said.
One of Dodd's boldest proposals from a November draft bill -- to consolidate the patchwork U.S. banking supervision system into one agency -- was unlikely to make it into the committee's final bill, a source familiar with negotiations told Reuters.
Sources told Reuters on Saturday that neither Democrats nor Republicans had embraced Dodd's offer on Friday to scale back Obama's proposed Consumer Financial Protection Agency.
(For a Factbox on key players in reshaping U.S. financial regulation, double-click on [ID:nN17146028])
Dodd had circulated a proposal to make the consumer protection agency a division of the Treasury Department, instead of an independent agency, which Obama recommended. But in a setback for Dodd, his offer was rejected by Corker and Shelby, sources said.
The sources said Shelby and Corker objected to the rule-writing power Dodd proposed for the consumer division, but not necessarily to the idea of the division itself being located in the Treasury Department or another federal agency.
On the opposite side of the consumer watchdog issue, many Democrats were still holding out for an independent agency, said lobbyists and aides close to the talks.
"In our view, this language will change considerably before the bill advances to the floor of the Senate," said Jaret Seiberg, financial services policy analyst at investment advisory firm Concept Capital. (Editing by Leslie Adler) ((kevin.drawbaugh@thomsonreuters.com, +1 202 898 8390, +1 202 488 3459 (fax))) Keywords: FINANCIAL REGULATION/
Sunday, 28 February 2010 23:18:12RTRS [nN28215288] {C}ENDS
from Financial Regulatory Forum:
INTERVIEW-Banker sees U.S. failed bank tally hitting 1,000
Dunne sees up to 400 bank failures this year
By Karey Wutkowski
WASHINGTON, Feb 25 (Reuters) - About 1,000 U.S. banks could fail as a result of the recent banking crisis that saddled financial institutions with large portfolios of bad loans, a leading investment banking executive said on Thursday.
James Dunne, senior managing principal of Sandler O'Neill, said 300 to 400 banks could be seized this year, especially as institutions start to deal with deteriorating commercial real estate loans.
"This is going to be a very slow recovery," Dunne said in an interview with Reuters.
Regulators have seized 185 banks since January 2008. The Federal Deposit Insurance Corp has said the pace of failures is expected to peak this year.
The agency said earlier this week that its "problem" bank list jumped 27 percent during the fourth quarter to 702.
Historically, less than 15 percent of the banks on that list end up failing.
Dunne said the FDIC was doing everything it could to attract responsible investors for troubled banks, including private equity groups.
Dunne said he disagreed with David Bonderman, co-founder of giant private equity firm TPG [TPG.UL], who said earlier on Thursday that the FDIC's rules on private equity investment in troubled banks was scaring off potential investors.
Bonderman, speaking at a conference in North Carolina, said the FDIC was "terrified of private equity guys" and that its rules were accelerating the pace of bank failures.
Dunne, whose firm undertakes capital-raisings and advises banks on FDIC-related transactions, said FDIC Chairman Sheila Bair welcomed investment as long as it came with a solid management team for the bank and deep funding.
"I've met personally with the FDIC chairman three times in the last several months. She is open, interested and very well informed in looking for any methodology to raise capital," Dunne said.
Dunne said the FDIC was also being creative. It was not just looking at private equity groups but also at pension funds as sources of investment for troubled banks, he said.
Dunne said concerns about ownership limits that restricted private equity investments were more related to the Federal Reserve, which requires that institutions holding more than a certain percentage of a bank's voting shares be subject to stiff bank holding company regulations.
In August, the FDIC imposed new rules on private equity investment in troubled banks.
They were softened from an original proposal that investors said would scare the industry away from failed bank assets.
The rules, which include high capital requirements and long-term investments, are designed to ensure that private equity groups are interested in nursing the banks back to health and not just taking advantage of their assets.
The FDIC has been having ongoing discussions with private equity groups since putting the rules in place and has said it is considering whether any further actions are appropriate. (Reporting by Karey Wutkowski; Editing by Ted Kerr)
((E-mail:karey.wutkowski@thomsonreuters.com +1 202 898 8374))
Keywords: BANKS/DUNNE
Thursday, 25 February 2010 23:33:20RTRS [nN25254958] {C}ENDS
from Financial Regulatory Forum:
Deal on financial reform bill near in U.S. Senate
By Kevin Drawbaugh
WASHINGTON, Feb 25 (Reuters) - A bipartisan agreement on financial regulation reform was close at hand on Thursday in the U.S. Senate, with lawmakers working to overcome a key obstacle -- creating a new financial consumer watchdog.
In a sign that serious deal-making was finally getting under way, a Senate aide told Reuters that the two leaders of the Senate Banking Committee were talking again on an issue that is a major priority of the Obama administration.
Democratic Senator Christopher Dodd, committee chairman, and top committee Republican Senator Richard Shelby met on Wednesday night, Shelby spokesman Jonathan Graffeo said.
The two had reached an impasse earlier in February. Dodd's task of winning Senate passage for a bill would be much eased by a show of support from Shelby.
"Senator Shelby and Chairman Dodd met with each other just last night and will continue to seek common ground," Graffeo said. "Senator Shelby has said all along that he wants to reach an agreement on substantive and meaningful financial reform."
Dodd hopes to introduce a bill early next week, receive amendments by March 5 and hold a working session during the week of March 8, possibly leading to a committee vote.
More than a year since a severe financial crisis prompted a global push for tighter regulation, most senators concur on the basics of reform -- a better way to deal with big firms in distress that avoids bailouts; sharper detection of risks in the financial system; tougher rules to make banks stronger.
Streamlining the federal bank supervision bureaucracy and writing rules for the unpoliced over-the-counter derivatives market are key goals, as well, in what will be a huge piece of legislation. The financial reform bill approved in December by the U.S. House of Representatives was 1,279 pages long.
60-PCT ODDS OF COMPLETION
The odds of Congress sending a comprehensive bill to President Barack Obama's desk to be enacted into law this year are about 60 percent, said Charles Gabriel, policy analyst at investment advisory firm Capital Alpha Partners LLC.
Moreover, he said, the bill may "mitigate, rather than stoke, investor concerns along the way."
Through most of February, Republican Senator Bob Corker, a first-term banking committee member, has carried on discussions with Dodd in Shelby's absence. Dodd and Corker are expected to release a bipartisan compromise bill next week.
(For a Factbox detailing the Dodd-Corker bill's likely contents, double-click on [ID:nN25103579]
Meanwhile, Shelby has been drafting a Republican substitute bill, parts of which are expected to be offered later as amendments to whatever Dodd and Corker produce.
A major stumbling block in the way of agreement has been Obama's proposal to create a Consumer Financial Protection Agency. The CFPA would shield Americans from abusive mortgages, deceptive credit cards and other dodgy financial products.
Republicans and lobbyists for banks and Wall Street have been trying to kill or weaken the proposal, calling it an unwise step that would separate consumer protection from banking supervision. The CFPA also threatens bank profits.
Democrats say the CFPA is needed to protect consumers from shoddy and deceitful financial products like the wave of subprime mortgages that added so much to the real estate bubble that burst in 2007-2008, triggering the crisis.
"If we can work out the consumer product deal in some way ... then I believe we'll get together on a bill. If we don't we'll, I guess, be politically estranged," Shelby told reporters after a hearing on Capitol Hill.
CFPA MAY BE A DIVISION
To bridge the divide over consumer protection, Dodd and Corker were likely to recommend that the CFPA be set up as a division of a new bank regulatory agency, rather than an independent agency on its own.
Asked about that after a hearing on Thursday, U.S. Rep. Barney Frank, chairman of the House Financial Services Committee, defended the importance of an independent agency, which the White House favors and which is included in the House bill.
"I like what I have," Frank said. "If the Republicans want to kill that (an independent CFPA) they should be given a chance to do that with a big public debate."
White House spokeswoman Jen Psaki said: "Our top priorities on CFPA are ensuring the bill includes independent appointment, an independent budget, and an independent ability to set and enforce clear rules of road to protect American families."
Treasury Secretary Timothy Geithner met with financial industry lobbyists on Thursday amid signs that they were increasingly willing to talk after many months of stonewall resistance to the Obama administration's proposed reforms.
At a congressional hearing, Federal Reserve Chairman Ben Bernanke poured cold water on the idea of a "Volcker rule" that would ban banks from engaging in proprietary trading -- using government-guaranteed capital to make bets for their own accounts -- as the Obama administration has advocated.
"It would be difficult to do on a purely legislative basis," Bernanke said.
Congress looks unlikely to adopt the rule as proposed, in any case, leaning instead toward empowering regulators, at their discretion, to ban "prop trading" and other activities at firms judged to pose a risk to financial stability. (Additional reporting by David Lawder, Caren Bohan, Rachelle Younglai, Glenn Somerville, Tim Ahmann and Karey Wutkowski; Editing by Dan Grebler)
((kevin.drawbaugh@thomsonreuters.com, +1 202 898 8390, +1 202 488 3459 (fax)) Keywords: FINANCIAL REGULATION/
Thursday, 25 February 2010 23:56:35RTRS [nN25256740] {C}ENDS
from Financial Regulatory Forum:
ANALYSIS-US ‘dark pools’ marketplace may face pruning
By Jonathan Spicer
NEW YORK, Feb 24 (Reuters) - The surprising growth of U.S. stock trading venues is set for a pruning as regulators prepare to tighten controls on so-called dark pools and as brokers, still pinching pennies, look to narrow where they send orders.
Dark pools are a type of alternative trading system, or ATS, that allow investors to anonymously trade larger blocks of stock without tipping their hand to the wider market.
At more than 40, they've exploded in the last five years to meet investors' growing demand, fragmenting and complicating the marketplace like never before.
While the U.S. Securities and Exchange Commission is worried this fragmentation could harm public prices and long-term investors, others are concerned about the mounting costs associated with routing orders to the most appropriate of many destinations.
This all suggests that some ATSs -- particularly the smaller, independent ones -- could disappear in a consolidation, marking a significant shift from the regulation-inspired explosion that has siphoned trading volume from New York Stock Exchange, Nasdaq Stock Market and other traditional exchanges.
"It makes sense and it's made some sense for a while," said Jamie Selway, managing director of institutional broker White Cap Trading, and a BATS Exchange board member.
"Potentially the operating costs go up for (ATSs) with the regulatory tightening. There is decreasing marginal return for people running these things, and an even harder market in terms of ... less money for technology projects," he said. "Budgets are tight, particularly technology and regulatory budgets."
The last industry-wide consolidation came between 2000 and 2006 with the various mergers of alternative venues BRUT, Instinet, Island, and Archipelago, which all ended up acquired by what are now NYSE Euronext <NYX.N> or Nasdaq OMX <NDAQ.O>.
But new rules in 2005 known as Regulation National Market System (Reg NMS) forced exchanges to electronically route orders to the venue with the best price, sparking another growth spurt that the SEC hoped would curb exchange monopolies, and inspire innovation and diversity in the marketplace.
It certainly had the desired effect. Perhaps too much so.
"After having favored ATSs by exempting them from exchange requirements, the commission is now considering whether the success of the ATSs has had another effect of creating (unwanted) fragmentation," and whether they should be brought more in line with the requirements of exchanges, Robert Colby, former deputy director of the SEC's trading and markets division, told the Capital Markets Consortium this week.
Reg NMS has brought "significant fragmentation of orders and high search costs for large orders," said Colby, who is now counsel at law firm Davis Polk & Wardwell LLP.
DARK POOLS UNDER THE GUN
The public comment period ended Monday on the SEC's three dark pool proposals: to ban private electronic messages known as indications of interest, or IOIs; lower the threshold at which the ATSs must display quotes for a single stock; and require them to report trading in real time. [ID:nN04224658]
The SEC also devoted much space to dark pools in a 74-page paper on market structure and high-frequency trading that it issued last month, which also requests public comment. "Whether fragmentation is in fact a problem in the current market structure is a critically important issue ..." the SEC said.
"Undisplayed" trading accounts for about a quarter of all volume, according to the regulator. Most of that is executed in-house at banks such as Credit Suisse Group AG <CSGN.VX>, Goldman Sachs Group Inc <GS.N> and other broker-dealers that "internalize" orders in their own dark pools.
Any consolidation, rather, is likely to occur among the independent or consortium-owned ATSs that have a less stable flow of orders, and that are more vulnerable to rule changes.
"If it's a fragmented dark pool with no electronic liquidity provider, then, standing alone, it may be hard for them to gain a lot of market share," said George Hessler, an industry veteran and former executive vice president at Lime Brokerage.
There are mixed signals as to whether an ATS consolidation has begun.
NYFIX, a trading technology firm bought last year by NYSE Euronext, agreed separately in November to sell its Millennium dark pool to BNY ConvergEx Group. Headed in the other direction, trading systems provider Pragma Securities launched the ONECROSS dark pool earlier this month. [ID:nN09189539]
Big advances in brokerages' order-routing technology is probably why consolidation has not occurred over the last few years, Whit Conary, president of dark pool LeveL ATS, said of the industry in general. "It is unlikely that regulatory changes will bring about consolidation in ATSs."
But Conary, whose Level launched in 2006 and is backed by five financial companies including Citigroup Inc <C.N> and mutual fund giant Fidelity, added that mergers could work from a business perspective if the ATS models are substantially different and can expand on the offering to the customer. (Editing by Steve Orlofsky) ((jonathan.spicer@thomsonreuters.com; +1-646-223-6253; Reuters Messaging: jonathan.spicer.reuters.com@reuters.net))
Keywords: TRADING/DARKPOOLS CONSOLIDATION
Wednesday, 24 February 2010 18:22:58RTRS [nN24149666] {C}ENDS
from Financial Regulatory Forum:
U.S. SEC delays plan to adopt IFRS
By Rachelle Younglai
WASHINGTON, Feb 24 (Reuters) - U.S. securities regulators on Wednesday delayed plans to allow domestic companies to use international accounting standards because it will take businesses at least four years to switch to new rules.
The soonest U.S. companies could start using the International Financial Reporting Standards, or IFRS, would be in 2015 instead of 2014, but even that date is not certain.
The Securities and Exchange Commission is grappling with how to move to one set of high-quality, globally accepted accounting standards.
Under the previous plan, the SEC would have allowed U.S. companies to use the international rules as early as 2014. But industry and investors told the SEC that U.S. companies would need about four to five years to implement the changes successfully, thus pushing the date out to 2015.
A host of issues remain, such as whether the international rules are sufficiently developed, whether the United States is prepared to convert to IFRS and ensuring that the international rules are set by an independent standard setter.
"We do not have all the information necessary to make these decisions today," said SEC Chairman Mary Schapiro at a public agency meeting.
Next year, the SEC will decide whether to incorporate IFRS into the U.S. financial reporting system. The agency will only proceed if it is satisfied that progress is being made on issues such as improving IFRS.
The U.S. audit and business community said it was pleased that the SEC reiterated support for a single set of high-quality global accounting standards. However, the vagueness of the plan frustrated some foreign accountants.
"The current cautious approach does not offer the much-needed certainty required by U.S. companies and the many jurisdictions still in the process of making final decisions about switching to IFRS reporting," said the Institute of Chartered Accountants in England and Wales.
U.S. companies are required to use U.S. Generally Accepted Accounting Principles, or U.S. GAAP, which are considered more prescriptive than the international rules.
Meanwhile, the rest of the world is adopting the international standards, which could potentially leave the United States and global companies at a disadvantage if they have to comply with two sets of rules.
Financial centers such as Hong Kong and the European Union already require international accounting rules.
(Reporting by Rachelle Younglai; Editing by Andre Grenon and Steve Orlofsky)
((rachelle.younglai@thomsonreuters.com; +1 202 898 8411)) Keywords: SEC IFRS
Wednesday, 24 February 2010 22:00:18RTRS [nN24108779] {C}ENDS
