The SEC generated lots of favorable news when it asked that exchanges provide rule amendments to implement kill switches, which would shut down trading in the face of technological problems. That was a can't-miss sort of recommendation, one that goes down well with the public and politicians as well as the industry. The kill switch concept is hardly new, and exchanges likely have a good idea how to do this.
There has been a lot of analysis of the post-Lehman world this week as we passed the five year anniversary of that firm's demise. I completely understand the party-poopers who complain that Lehman wasn't the lynchpin of the financial crisis and shouldn't be celebrated as such. Fannie Mae and Freddie Mac were in receivership. Subprime mortgage lenders were imploding. There was a lot going on.
The financial crisis and its regulatory aftermath proved to be a solid business opportunity for a group of consulting firms that have risen to help banks with their compliance needs. The like of Promontory Financial Group, Rust Consulting, PricewaterhouseCoopers, Deloitte & Touche and others flew under the radar for many years. But just recently, they have found themselves in a harsh spotlight, as more people awoke to some big issues involving these "shadow regulators."
If you are of certain age in this business, you might remember the glory days of the SOES bandits. They had figured out a way to tap into the Nasdaq's small order execution system to trade in ways that took full advantage of the enormous spreads that characterized the era. Early on anyway, it was easy to make money. But that gave rise to an explosion of retail day traders that made it much harder to profit via SOES. Many bandits flamed out, in deep debt to their broker-dealers. It wasn't long before the entire industry flamed out.
A new regulation requiring dark pools to disclose their trading volumes is rumored to be about to be released, and it seems almost welcome. The two traders quoted in the article basically say there will be some questions about the specifics of disclosures (frequency, etc.) but the rule "will pass."
It's no secret that the exchange industry has undergone a radical transformation as of late. New players have emerged, volume has declined and the technical complexity of the business has intensified. These days, the risks have never been higher. A single technical glitch could easily spell catastrophe.
Verizon, which had taken out bridge financing to the tune of $61 billion to support its Vodafone deal, will attempt to market up to $30 billion in bonds soon. The proceeds will be used to partially offset the bridge financing burden, and hopefully send a strong signal to the world that the deal is right on track.
Thanks to a new law, hedge funds can now advertise and offer their services to smaller investors. And the potential for abuse is still present.
Technical glitches that wreak havoc on the markets seem to come in spurts. Earlier this year, there was reason to cheer on this front. FINRA announced over the summer that the number of "clearly erroneous" trade reports was down 84 percent over the last six months of 2012, compared with the first six months of 2009. That was hailed as great news, even as sign that Wall Street was doing much better on the QA front.
Remember when August was sleepy and dull? Nearly everyone was on vacation at the lake or the shore watching the kids play before the siren call of a new school year. Or they were dropping off the older ones at college with a few tears and instructions not to put that new pair of red socks in the load of white laundry. It was all so … dull but in a good way.