Jenice notes

Euro hits session highs vs dollar, yen on report

Thu, 20 Oct 2011 03:59:23 -0400

“That is what’s driving this stock and euro rally in the afternoon,” said Brian Dolan, chief strategist at Forex.com in Bedminster, New Jersey. “That would be what the market’s been looking for and $2 trillion seems to be in the right neighborhood.”The euro hit a session high of $1.3817 after news of the report, according to Reuters data. It last traded at $1.3798, up 0.4 percent on the day.Against the yen , the euro jumped to a session high of 106.19 and last traded at 105.94, up 0.4 percent on the day.

U.S. SEC warns brokers over market access, sub-accounts in debut risk alert

Mon, 17 Oct 2011 14:16:28 -0400

By Stuart Gittleman and Brett Wolf NEW YORK, Sept. 30 (Thomson Reuters Accelus) â The U.S. Securities and Exchange Commission (SEC) issued an unexpected warning to broker-dealers to supervise trading by customers with direct market access, especially customers that trade using master- and sub-accounts. The notice came in the first in a continuing series of risk alerts the Office of Compliance Inspections and Examinations (OCIE) staff expects to issue. The staff did not say whether OCIE found related deficiencies, or at what level, in recent exams, or in reviewing the findings of recent exams by the Financial Industry Regulatory Authority (FINRA). The new-style alert came as a surprise to many observers of securities industry regulation, who believed there were few firms with master/sub-account compliance issues. âIt was a surprise to me. I knew regulators were examining for master/sub-accounts, Iâm just not sure what precipitated the [issuance of this alert]. I assume someone is seeing something theyâre uncomfortable with,â said Betty Santangelo, a partner with New York law firm Schulte Roth & Zabel. The issue first appeared on the radar of many anti-money laundering compliance officers in September 2010 after the SEC and Treasuryâs Financial Crimes Enforcement Network took enforcement action against North Carolina-based broker-dealer Pinnacle Capital Markets LLC. FinCEN assessed a $50,000 civil money penalty against Pinnacle, alleging it failed to identify or verify the identities of the âvast majorityâ of its corporate customersâ omnibus accountsâ sub-account holders, even though the sub-account holders were Pinnacleâs customers for purposes of the customer identification rule. The sub-account holders were trading directly through the accounts. âMoney laundering, insider trading, market manipulation, account intrusions, unregistered broker-dealer activity, and excessive leverage are all potential risks associated with the master/sub-account trading model,â the SEC said in the alert. The Market Access Rule, 15c3-5 under the Securities Exchange Act of 1934, requires brokers to have controls and procedures to manage the financial, regulatory and other risks associated with providing a customer with market access. The alert said compliance with the rule, most of which became effective July 14, will be part of upcoming exams. âWhen a broker-dealer offers master/sub-accounts, this includes an obligation to reasonably design controls and procedures that address the types of risks that we identify in this report. Our national examination staff intends to scrutinize the controls and procedures at broker-dealers that offer market access to master/sub-account customers,â said Carlo di Florio, the director of the OCIE. The alert warned that customers may open master accounts with a broker, then subdivide them for use by individual or groups of traders, sometimes to such an extent that the master account customer and the firm may not know who is trading in the sub-accounts. The potential risks of this model include money laundering, insider trading, market manipulation, account intrusions, unregistered brokerage activity, and excessive leverage and inadequate minimum equity for pattern day traders as defined by NASD rule 2520. âAlthough master/sub-account arrangements have legitimate business purposes, some customers may use them as vehicles for illegal activity, or in an attempt to avoid or minimize regulatory obligations and oversight,â di Florio said. Santangelo said she thought the SEC alert âsort of described master/sub-accounts in a negative way when they are used for many good purposes.â She added: âObviously there is some form of this that concerns [regulators] and itâs good that we know that.â The alert suggested controls and procedures for limiting the risks associated with offering market access to customers, including those with master/sub-accounts, such as: Creating written descriptions of all controls and procedures for sub-account due diligence and monitoring, including a description of the review process, the frequency of reviews and the identity of those responsible for conducting them. Obtaining and maintaining the names of all traders authorized to use each master account, including all sub-accounts; verifying their identities using background checks, interviews and fingerprints if appropriate; and periodically checking their names through criminal and other databases, including the special designated nationals list of the Treasury Department Office of Foreign Assets Control. Establishing requirements that validate each traderâs identity, such as effective password management and IP address identification. Monitoring trading patterns throughout the accounts for indications of insider trading, market manipulation or other suspicious activity. Physically securing information of customer or client systems and technology. Logging and tracking incidents of attempted hacking or other unauthorized system penetration by outside parties. Determining that traders with access to the brokerâs trading system and technology have received training in areas relevant to their activity, including market trading rules. Regularly reviewing the effectiveness of all controls and procedures around sub-account due diligence and monitoring. The alert said regulators have severely sanctioned firms and have piled on for egregious AML violations, noting the Pinnacle fines. The alert also noted that the SEC charged another broker, GLB Trading, and its former CCO over day trading within the master account of a customer, Tuco Trading, and fined Warrior Fund for acting as an unregistered broker for day traders. The alert said OCIEâs national exam program (NEP) will examine for compliance with the Market Access Rule by scrutinizing the brokerâs system of risk management controls and supervisory procedures, and whether the firm is appropriately vetting the accounts with access to the brokerâs market identifier, and trading system and technology. The NEP may require brokers to document their risk assessment process and how they support its conclusions, including evidence that persons associated with the master account are not themselves customers for purposes of Exchange Act rule 15c3-3. This may include partnership or shareholder agreements, or documentary evidence that the relationship between the customer and the sub-account traders is an employment or trading, rather than a customer, relationship. The alert also said OCIE will examine the so-called âblue sheetsâ required by rule 17a-25 for evidence of insider trading or market manipulation.

IMF says China has scope to respond to global risks

Thu, 13 Oct 2011 02:31:59 -0400

Worries have mounted in Japan that yen strength would damage the country’s export-reliant economy.Singh was speaking at a briefing on the IMF’s regional economic outlook report for the Asia-Pacific region, which warned that an escalating European debt crisis and U.S. slowdown could bring severe spillover effects into Asia.

US STOCKS-Wall St higher ahead of earnings season

Wed, 12 Oct 2011 03:44:03 -0400

* Slovak parliament to vote on euro zone rescue fund* Indexes up: Dow 0.1 pct, S&P 0.2 pct, Nasdaq 0.7 pctBy Ashley LauNEW YORK, Oct 11 (Reuters) - Wall Street stocks rose on Tuesday as traders took positions in beaten-down shares ahead of the start of the earnings season.But gains were held in check as investors were cautious before a key vote by Slovakia on expanding the euro zone rescue fund.The S&P 500 has risen 8.7 percent in the last five days, the best move in that period of time since March 2009, recovering from steep losses tied to worries about the euro zone debt crisis.With earnings season beginning after the close of trading with Alcoa’s report, investors hoped for more gains.”We’re seeing positive momentum ahead of earnings season here,” said Wayne Kaufman, chief market strategist at John Thomas Financial in New York. “The market was overshot on the downside and now we’re making it up to a certain degree. Valuations are at levels where stocks should be much higher.”The Dow Jones industrial average was up 7.26 points, or 0.06 percent, at 11,440.44. The Standard & Poor’s 500 Index added 2.15 points, or 0.18 percent, at 1,197.04. The Nasdaq Composite Index put on 17.25 points, or 0.67 percent, at 2,583.30.Europe remained a wild card. With all the other euro zone states having ratified a pact to boost the size and powers of the European Financial Stability Facility bailout fund, all eyes turned to Slovakia.Slovakia’s lawmakers began debate on the issue and its finance minister said the country was expected to approve the changes this week.Any more delays in coming up with a plan intended to stem a financial crisis could give the market an excuse to sell down the road.Investors shifted their focus to upcoming earnings, with results due from top U.S. aluminum producer Alcoa Inc after the closing bell. Alcoa’s stock was up 2.7 percent to $10.35, making it the best performer on the Dow.”Expectations are so low that Alcoa doesn’t have to say a lot in order to beat expectations,” said King Lip, chief investment officer at Baker Avenue Asset Management in San Francisco. “Everyone expects a double-dip recession, so all you need is a little bit of good news and markets could take off on that.”In the past week, analysts have lowered their consensus earnings estimates for Alcoa, citing a precipitous drop in metals prices in recent months sparked by global economic concerns.At midday, about one stock advanced for every decliner on the New York Stock Exchange and the Nasdaq. About 2.87 billion shares were traded on the New York Stock Exchange, NYSE Amex and Nasdaq, lower than average.

Jenice notes

Euro hits session highs vs dollar, yen on report

U.S. SEC warns brokers over market access, sub-accounts in debut risk alert

IMF says China has scope to respond to global risks

US STOCKS-Wall St higher ahead of earnings season

U.S. SEC warns brokers over market access, sub-accounts in debut risk alert