Tuesday 13th October 2015
NEWS TICKER, OCTOBER 12TH 2015: Segulah IV LP has sold Etraveli Holding AB to ProSiebenSat.1 Media AG for some €235m. For ProSiebenSat.1, Etraveli represents its largest international investment in eCommerce to date and it complements its travel portfolio brand 7Travel. Etraveli is one of Europe’s largest Online Travel Agents and is headquartered in Uppsala, Sweden, and operates in 40 countries and four continents. In 2014, Etraveli generated around €900m in Total Transaction Value and €69m in net revenue. In the first six months of 2015, net revenue growth was 34% year on year. Arma Partners acted as exclusive financial advisor to Segulah IV - Joint venture partners Lionstone Investments (Lionstone), a privately owned, US-based real estate investment company, and Hermes Investment Management, the £29.8bn manager focused on delivering superior, sustainable, risk adjusted returns to its clients – responsibly, have acquired One Bunker Hill, a landmark Art Deco office building located in the heart of Downtown Los Angeles. Lionstone and Hermes Investment Management will renovate the 273,000 sq ft building, preserving its character while converting its more traditional offices into creative workspaces suitable for technology, media and entertainment companies desiring a downtown location. Jane Page, CEO at Lionstone, says, “The resurgence of the Downtown submarket of Los Angeles, along with the unique features of this historical property, make this investment very attractive. The partnership will embark on an extensive capital renovation program to reposition the building and transform conventional office space into a creative, amenity-rich environment.” - Morningstar has moved the Morningstar Analyst Rating™ for the Royal Corporate Bond fund to Silver. The fund’s rating was previously Under Review. Prior to being placed Under Review, the fund held a Gold rating. Ashis Dash, manager research analyst at Morningstar, says, “Following a recent Morningstar Analyst Ratings meeting, we have moved the Royal London Corporate Bond fund to a Morningstar Analyst Rating™ of Silver. The fund’s rating was previously Under Review following the announcement that manager Sajiv Vaid would be leaving Royal London Asset Management (RLAM). Prior to being placed Under Review, the fund held a Gold Rating. Jonathan Platt, the co-manager of the fund and head of fixed income at RLAM, took over sole managerial responsibility for the fund in May 2015. Platt joined RLAM in 1985 and has been instrumental in developing RLAM’s fixed income expertise and shaping the fund’s investment approach. While we view Vaid’s departure as a significant loss, the continuity to the investment process provided by a seasoned manager in Platt and the support he receives from a close-knit fixed income team at RLAM continue to drive our positive view on the fund.” - Fidessa group plc (LSE: FDSA) says it is providing CIMB Securities (CIMB), with its derivatives platform. Justin Llewellyn-Jones, Global Head of Derivatives at Fidessa, views the expanded partnership with CIMB as timely given the current trends in global derivatives. "Interest in Asian derivatives is on the rise with exchanges, clearing houses, brokers and vendors all making significant moves in the region," he said. "CIMB's implementation of an integrated system will enable their local, regional and global clients to participate fully in global markets in any way they choose, and take advantage of our real-time monitoring and reporting capabilities as well as our sophisticated algorithms and controls." With the futures and options platform co-located with SGX in Singapore, CIMB's clients will enjoy low-latency access to Asian derivatives markets. They will also be able to take advantage of Fidessa trading screens themselves, enabling them to both monitor order progress and execute their own DMA trades. David Polen, Global Head of Electronic Execution at Fidessa, adds: "Managing execution in Asia has always been a nuanced business. There is a tremendous velocity of regulatory and technical change across all jurisdictions. On top of this, buy-sides require flexibility in how their orders are handled.” – Emerging markets’ foreign exchange reserves have dropped about $650bn (7% of total reserves) since reaching a peak of $9.4trn in June 2014 says Jan Dehn, head of research at Ashmore. Emerging markets control nearly 80% of the world’s FX reserves. Currency movements are the big determinant of reserve levels. Huge shifts in exchange rates, particularly in the value of the USD have affected central bank reserves since mid-2014. Nonetheless, Dehn suggests that reserves in many emerging economies are of a level that any appreciation in the US dollar is unlikely to pose a major risk to their overall reserve position. Dehn says the dollar is now so strong that it is hurting US growth and its strength has become the most important factor influencing the Fed’s decisions on rates. “This means that the two most compelling reasons for the dollar to continue to rally – higher growth and higher rates – are losing steam,” he states - National wealth manager Bellpenny says it has completed two more transactions involving IFA businesses. The deals bring combined funds under management of over £150m and more than 500 active clients. This takes Bellpenny’s total number of acquisitions since launch to 32. The acquisition of Cambridge-based IFA, Ashton KCJ Financial Planning LLP, encompasses around £60m of funds under management. The business was jointly owned by Ashton KCJ Solicitors and Price Bailey LLP. The second purchase is that of Horsham-based IFA, Principals in Practice Limited (PIP) and involves £90m of funds under management - ETF Securities and ISE ETF Ventures have launched an equity index ETF, the ETFS ISE Cyber Security GO UCITS ETF from the ETF Securities product family, in partnership with ISE ETF Ventures on Xetra and Börse Frankfurt. The ETF’s ISIN is DE000A14ZT85. The ETFs’ total expense ratio is 0.75%, has an accumulating distribution and is benchmarked against the ISE Cyber Security UCITS Index. The ETF gives investors access to companies around the world whose business focuses on cyber security, including protecting websites and networks against unauthorised access, developing the requisite hardware and software as well as offering advisory services in this area. The new ETF only includes companies with a minimum market cap of $100m and a minimum daily value traded of $1m. ISE, which is part of Deutsche Börse Group, has calculated the underlying index since August 26, 2015 with a base date of December 31st 2009 - Stocks in China and Hong Kong rallied Monday on stimulus measures from Beijing and signals of reform in the country's telecommunications sector. The Shanghai Composite Index rose 3.3% while Chinese firms in Hong Kong led theHang Seng Index up 1.3%.China's central bank announced over the weekend that it would expand a pilot program that would boost banks' lending abilities. The plan, currently in place in Shandong and Guangdong, allows banks to pledge certain assets to secure loans from the central bank. It will be expanded to nine provinces including Shanghai and Beijing. The Straits Times Index (STI) ended 51.47 points or 1.75% higher to 2998.5, taking the year-to-date performance to -10.90%. The top active stocks today were DBS, which gained 1.55%, SingTel, which gained 2.12%, Noble, which gained16.05%, Keppel Corp, which gained3.91% and UOB, with a 1.84%advance. The FTSE ST Mid Cap Index gained 1.32%, while the FTSE ST Small Cap Index rose 0.93%. - Glencore--the world's largest copper supplier and third-largest copper miner—is reported to have initiated the sale of its Cobar underground mine in Australia's New South Wales state and its Lomas Bayas open-pit operation in northern Chile. The company is reported to have begun the sales in response to a number of unsolicited expressions of interest from various potential buyers. Interested parties will be able to place an offer for one or both of the mines. Cobar was valued at $329m by Glencore at the end of 2013 following a $137m write-down on a revised mining plan, while Lomas Bayas mine, located in northern Chile's Atacama region is valued at $335m. Australian press reports say Bank of America Merrill Lynch and UBS are advising Glencore on the sale. - In Turkey, headline inflation accelerates to 7.9% year on year in September, due to a stronger FX pass-through and higher food prices, says National Bank of Greece. The country’s trade balance improved significantly in August, mainly on the back of a lower energy bill and weaker domestic demand, while core inflation rose to an 8-month high in September, reflecting a stronger pass-through from a weaker TRY (the depreciation of the TRY against the basket of “50%*TRY/EUR+50%*TRY/USD” accelerated to a 1½-year high of 20.9% year on year in September from 16.6% in August). The CBRT’s favourite core inflation measures, i.e., CPI-H (that excludes energy, unprocessed food, alcohol, tobacco and gold) and CPI-I (that also excludes processed food) rose to 8.3% year on year and 8.2% year on year, respectively, in September from 7.8% and 7.7% in August. Furthermore, food prices (comprising 24.2% of the CPI basket) increased by a 4-month high of 10.7% year on year in September against 9.7% year on year in August (adding 0.3 percentage points to headline inflation). – The European Investment Bank has filed a notice with the Luxembourg Stock Exchange that it will redeem all the outstanding notes of its $50m callable zero coupon bonds due October 31st 2042 (ISIN: XS0847990768) at a redemption price of 112.4864000% at the end of this month – Bulgaria reports that its consolidated budget recorded a surplus of 0.7% of GDP in the first eight months of 2015 compared with a deficit of 1.6% in the same period in 2014. This was the best performance since 2008, and was mainly driven by an across-the-board improvement in budget revenue (up 2.2 percentage points of GDP year on year in between January and the end of August). Specifically, tax revenue surged in 8M:15 (up 1.3 percentage points of GDP year on year), largely attributed to strong base effects.

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Regulatory Update

Traders Beware, Focus Could Shift Quickly in Your Direction

Monday, 16 July 2012 Written by 
Traders Beware, Focus Could Shift Quickly in Your Direction Some unsettling stories continue to unfold. One is Peregrine Financial Group, which managed to combine some of the most memorable red flags of the Madoff and MF Global scandals without attracting a regulatory response from the CFTC. (PFG represented that it held more than $220 million of customer funds when in reality it held approximately $5.1 million.) http://www.ftseglobalmarkets.com/

Some unsettling stories continue to unfold.

One is Peregrine Financial Group, which managed to combine some of the most memorable red flags of the Madoff and MF Global scandals without attracting a regulatory response from the CFTC. (PFG represented that it held more than $220 million of customer funds when in reality it held approximately $5.1 million.)

The second involved information stemming from the Barclay’s Libor scandal—in particular, exactly how much was known, when, and by what regulators.  The NY Fed, confirming that it received reports about Libor issues in 2007 and 2008, on Friday released documents showing it took “prompt action four years ago to highlight problems.”  The actions of Treasury Secretary Timothy Geithner, who headed the New York Fed from 2003 until 2009, may be heavily scrutinized.  So will those of the U.K. authorities.

And then there is the recent announcement by JPMorgan of possible valuation discrepancies by its traders. According to JPMorgan’s chief financial officer, a restatement may be necessary based upon facts uncovered “regarding the CIO traders’ intent as they were marking the book. And as a result, we questioned the integrity of those trader marks.”

What impact will this have on the regulatory climate?  Clearly, the regulators will be under tremendous pressure.  Richard Shelby, the top Republican on the U.S. Senate Banking Committee, noted Peregrine “raises serious questions about our current regulators and whether they are capable of doing their jobs.”  Others are also voicing concerns.  In turn, the regulators are likely to respond by increasing their oversight.

And as they do so, traders in particular may be in the line of fire.  Reflecting on LIBOR, Warren Buffett is quoted as saying, “the idea that a bunch of traders can start e-mailing each other . . . and play around with . . . [the Libor] rate . . . is not good for the system.”  This is the type of concern that prompted the CFTC this past April to pass rules for swap participants, which basically wall off traders from the rest of the firm.  Traders cannot supervise or influence the compensation of research analysts or clearing unit employees.  In some cases, communications with traders are prohibited unless the communication is made through the firm’s compliance department.  Both the Libor scandal and the J.P. Morgan trading loss, coupled perhaps with a few new situations brewing in the background, might give this type of thinking a major boost.

Deborah Prutzman

Deborah Prutzman is the founder and CEO of The Regulatory Fundamentals Group (RFG), a New York-based firm that designs and implements business and risk solutions for alternative asset managers and institutional investors. RFG's senior-led team employs a robust suite of tools, including practical alerts on new and potential industry developments and its powerful RFG Pathfinder® knowledge management platform which simplifies the challenges of operating in a regulated environment.  To learn more about The Regulatory Fundamentals Group call (212) 537-4058, email a representative at Information@RegFG.com or visit RegFG.com

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