Wednesday, November 9, 2011
Wednesday, July 20, 2011
Wall Street Regulation in the Digital Age
A new type of regulation is gathering steam on Wall St., and it’s bound to alarm the keyboard-happy traders who now dominate the securities industry. Regulators are asking Wall Street firms to hand over the proprietary algorithms they use to make speedy, high-volume deals each day.
The Securities and Exchange Commission wants the information as part of its eternal quest to ensure compliance, it says. And the Financial Industry Regulatory Authority (FINRA), perhaps trying to outdo its sometimes-competitor, is pursuing its own investigation of what it calls “suspicious market activity.”
But these computer codes depend on hundreds of hours of research and calculations, and are considered a “special sauce” that firms aren’t eager to share, as this Reuters report explains.
By the time the market experienced the flash crash of May 6, 2010, wherein runaway computer trades drove the Dow Jones Industrial Average down by 1,000 points in just minutes, some investors had already begun to worry about the consequences of high-frequency trading. High-frequency trading is a type of algorithmic trading often used to exploit price differentials in global markets. By buying and selling huge volumes at lightning speeds, traders turn small differentials into huge profits.
Observe the crash here:
The first investigations into these trades began soon after that startling wake-up call, but so far regulators only dipped a proverbial toe into the sea of high frequency trading. Now they’re diving in.
Concerns over high frequency trading aren’t limited to potential repeats of the flash crash. In fact, that’s already been somewhat guarded against. Instead, some think that high-frequency trading, even when done right, is bad for the market.
Computers can’t consider nuances like recent changes in company management or complex historic trends, and so any algorithmic trading allocates capital less wisely than a human trader would, opponents say. That in turn does an injustice to the market by wasting capital on investments that are less than ideal. A survey by Liquidnet found that investors are “clearly concerned that their long-term investment styles are at odds with the speculative, nano-second profit taking approach utilized by high frequency traders."
And the proliferation of warp-speed, automated trading certainly handicaps independent investors. As this piece on 24/7 Wall St. notes, the strategy “excludes Joe Public, leaving the typical investor at a huge disadvantage against the professionals.”
Thursday, October 28, 2010
The Recession is Over! ...for Billionaires
CNBC reports that the newly-released Porsche 911 GT2 RS (that's a cool $329,000, for those of you who are in the market) sold out within two months of its debut.
Without getting into all the numbers, I'll just say that this car is really, really fast and really, really pretty. Apparently people like that. For a little tasty check out this video with intense German narration.
So during a (non) recovery, why were so many people wiling to spring for a $329,000 toy?
Well, the same article quotes a report by economist Neil Dutta, which found that luxury spending is up for several reasons, one of them being that "post mid-terms, if Republicans don’t capture the Senate, taxes for the wealthy are likely to go higher for investments, estates and income."
“We see several reasons for optimism about spending on luxury items,” wrote Dutta, saying that higher savings, less exposure to housing, rising equity investments, and a tighter job market for the college-educated create “a secular story that bodes well for those catering to upper income earners.”
In related news, millionaire optimism hit a 3-year high this month.
At least someone's feeling good.
Without getting into all the numbers, I'll just say that this car is really, really fast and really, really pretty. Apparently people like that. For a little tasty check out this video with intense German narration.
So during a (non) recovery, why were so many people wiling to spring for a $329,000 toy?
Well, the same article quotes a report by economist Neil Dutta, which found that luxury spending is up for several reasons, one of them being that "post mid-terms, if Republicans don’t capture the Senate, taxes for the wealthy are likely to go higher for investments, estates and income."
“We see several reasons for optimism about spending on luxury items,” wrote Dutta, saying that higher savings, less exposure to housing, rising equity investments, and a tighter job market for the college-educated create “a secular story that bodes well for those catering to upper income earners.”
In related news, millionaire optimism hit a 3-year high this month.
At least someone's feeling good.
Tuesday, October 5, 2010
Personal Income Fell For New Yorkers
From The Economic Times:
The recession put a 3.1 per cent dent in the personal incomes of New York state residents, who endured their first full-year decline in more than 70 years, according to a report released on Tuesday. Paychecks or net earnings tumbled 5.4 per cent, while dividends, interest and rent slid 8.4 per cent, to a grand total of nearly $908 billion, the state comptroller's report said.
Not only did New Yorkers' personal incomes fall "almost twice" as much as they did in the nation as a whole, but they have yet to recover to pre-recession levels, Comptroller Thomas DiNapoli said. The drop occurred even though the job-destroying recession was milder in New York than in the rest of the country. One reason for the hit to New Yorker's pocketbooks is Wall Street's dominance among the state's employers; pay and job security are often highly volatile in the securities industry.
The recession put a 3.1 per cent dent in the personal incomes of New York state residents, who endured their first full-year decline in more than 70 years, according to a report released on Tuesday. Paychecks or net earnings tumbled 5.4 per cent, while dividends, interest and rent slid 8.4 per cent, to a grand total of nearly $908 billion, the state comptroller's report said.
Not only did New Yorkers' personal incomes fall "almost twice" as much as they did in the nation as a whole, but they have yet to recover to pre-recession levels, Comptroller Thomas DiNapoli said. The drop occurred even though the job-destroying recession was milder in New York than in the rest of the country. One reason for the hit to New Yorker's pocketbooks is Wall Street's dominance among the state's employers; pay and job security are often highly volatile in the securities industry.
Wednesday, September 22, 2010
Scammer Flips Free Kitties For Profit
The next time you're worried about making rent, do try to resist the temptation to turn to Craigslist in search of something furry to sell. Because you might get caught.
Recently a Park Slope battle was born when one woman found out that the cats she'd given away were being sold by a serial "cat flipper."
The best part is the "flipper"s response to being confronted:
"I just decide to find them homes...You still gave them away to me for free, no contract, once in my hand their [sic] initially mines. That means if I wanted to give them to my nieces, stranger walking the street, dad, or grandmother thats initially on me. ... I'm not gonna sit here going back and fourth with you, then get excited and have an asthma attack."
...Fair enough?
Tuesday, September 21, 2010
Your Guide To The (New) Maze of Credit Card Reforms
My latest on Brokelyn.com:
Credit-card regulation may have taken effect earlier this year, but don’t rest on your free-spending laurels just yet. The card companies are still out to get you. That’s kinda their job. Although the new rules outlaw many decades-old predatory practices, the companies have quickly come up with sneaky ways around the rules and new strategies for fleecing their customers, thus continuing to earn huge profits and the hatred of all people. We thought it’d be helpful to spell out exactly what card companies can’t do and what we all need to watch out for.Here’s what’s forbidden under the new law, the CARD Act. It’s important that you know this so that you can spot potential violations by your card issuer (such violations have already been recorded by the Consumer Federation of America):
Your credit card company cannot:
-Increase your interest rate on an existing balance, or within the first year an account is open.
-Charge you a fee for inactivity.
-Charge you a fee for making transactions that exceed your credit limit or overdraw your bank account. Instead, your purchase will simply be denied (unless you “opt in” to overdraft “protection”—aka fees. This makes overdraft protection the exception, where it had been the rule).
-Maximize your interest charges by using “two-cycle” billing (imposing interest charges on balances in a past billing cycle or bundling payments).
-Charge you a late fee without warning.
-Raise your interest rates or other fees without first giving you 45 days’ notice and the option instead to cancel the card.
-Charge you annual fees that exceed 25 percent of your credit limit (excluding penalty fees).
-Allow a minor to open an account without a co-signer or proof of means.
-For a given late fee, charge you more than $25 or the amount of your minimum payment due. The one exception allows for higher penalties if the cardholder has multiple late payments within the past six months.
Now, the loopholes—or, what to look out for:
Professional cards
These are part corporate card, part consumer card and fully exempt from the new law. Companies have sent out an unprecedented number of these cards since the law passed.
Rebate cards
These are also exempt from the new regulation.
Annual fees
Even though annual fees can’t total more than 25 percent of your credit limit, 25 percent can be a lot. And many companies are making sure to get as close as possible to that 25 percent, even if their previous annual fees were low. (The 25 percent cap on annual fees does not apply to penalty fees, such as late payment fees, or to “processing” fees, which are charged upon initiating the account.)
Balance-transfer fees and minimum finance charges
These apply when you transfer your credit-card balance to get a lower interest rate; and to balances that remain on the card month-to-month (respectively).
Unfair calendar-driven late fees
That nearly criminal late fee if the due date of your payment falls a holiday or weekend, when the bank doesn’t process payments.
For more detail, and some history behind the legislation, see the suggestions here, here and here.
A credit-card-reform survival guide
9.2.10
Credit-card regulation may have taken effect earlier this year, but don’t rest on your free-spending laurels just yet. The card companies are still out to get you. That’s kinda their job. Although the new rules outlaw many decades-old predatory practices, the companies have quickly come up with sneaky ways around the rules and new strategies for fleecing their customers, thus continuing to earn huge profits and the hatred of all people. We thought it’d be helpful to spell out exactly what card companies can’t do and what we all need to watch out for.Here’s what’s forbidden under the new law, the CARD Act. It’s important that you know this so that you can spot potential violations by your card issuer (such violations have already been recorded by the Consumer Federation of America):
Your credit card company cannot:
-Increase your interest rate on an existing balance, or within the first year an account is open.
-Charge you a fee for inactivity.
-Charge you a fee for making transactions that exceed your credit limit or overdraw your bank account. Instead, your purchase will simply be denied (unless you “opt in” to overdraft “protection”—aka fees. This makes overdraft protection the exception, where it had been the rule).
-Maximize your interest charges by using “two-cycle” billing (imposing interest charges on balances in a past billing cycle or bundling payments).
-Charge you a late fee without warning.
-Raise your interest rates or other fees without first giving you 45 days’ notice and the option instead to cancel the card.
-Charge you annual fees that exceed 25 percent of your credit limit (excluding penalty fees).
-Allow a minor to open an account without a co-signer or proof of means.
-For a given late fee, charge you more than $25 or the amount of your minimum payment due. The one exception allows for higher penalties if the cardholder has multiple late payments within the past six months.
Now, the loopholes—or, what to look out for:
Professional cards
These are part corporate card, part consumer card and fully exempt from the new law. Companies have sent out an unprecedented number of these cards since the law passed.
Rebate cards
These are also exempt from the new regulation.
Annual fees
Even though annual fees can’t total more than 25 percent of your credit limit, 25 percent can be a lot. And many companies are making sure to get as close as possible to that 25 percent, even if their previous annual fees were low. (The 25 percent cap on annual fees does not apply to penalty fees, such as late payment fees, or to “processing” fees, which are charged upon initiating the account.)
Balance-transfer fees and minimum finance charges
These apply when you transfer your credit-card balance to get a lower interest rate; and to balances that remain on the card month-to-month (respectively).
Unfair calendar-driven late fees
That nearly criminal late fee if the due date of your payment falls a holiday or weekend, when the bank doesn’t process payments.
For more detail, and some history behind the legislation, see the suggestions here, here and here.
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