Data Fees, Citigroup Trups, Spanish TV: Compliance

U.S. stock markets must prove that competition limits the fees they charge brokers and other firms for real-time quotation data, after a court rejected the Securities and Exchange Commission’s approval of charges proposed in 2006, a lawyer for Nasdaq OMX Group Inc. said.

Competition among U.S. equity exchanges is enough to keep any one firm from setting prices too high for their feeds, which are sold to individual and professional investors and data providers, said Jeffrey Davis, Nasdaq’s deputy general counsel. A group of companies including Google Inc. and Yahoo! Inc. sued to block the SEC’s reliance on “market-based” pricing when it approved fees in 2008, arguing that the agency should consider the cost of producing the information.

A U.S. appeals court overturned the SEC’s clearance of a 2006 fee application from NYSE Arca on Aug. 6, saying the agency didn’t have enough evidence that competition would hold down prices.

The case was brought by NetCoalition, a policy group representing about 20 companies including Mountain View, California-based Google and Yahoo of Sunnyvale, California, as well as the Securities Industry and Financial Markets Association, the largest trade group for U.S. broker-dealers. Its aim was to get the SEC to use cost-based considerations in evaluating whether exchange fees are “fair and reasonable” instead of relying on market forces to limit the charges.

Bloomberg LP, the parent company of Bloomberg News, is a member of NetCoalition and had independently asked the SEC to set fee standards for market data in 2006.

NYSE Arca, owned by NYSE Euronext, asked the court on Sept. 17 to reconsider its withdrawal of the SEC’s fee approval.

At issue is the private, or non-core, data that exchanges can choose to sell to brokers, vendors, high-frequency traders and investors. It’s separate from the core, or public, data they must provide to so-called securities information processors, which aggregate the information and sell it to companies such as New York-based Thomson Reuters Corp. and Bloomberg LP.

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Compliance Policy

South Africa Targets Sasol, Arcelor in Bid to Break Cartels

South Africa is stepping up efforts to fight an unexpected legacy of apartheid: cartels in industries from supermarkets to steel that push up prices, deter investment and damp competition.

The Competition Amendment Act, signed into law by President Jacob Zuma in August 2009, will put South Africa among a minority of countries willing to put executives in jail for knowingly committing antitrust violations. Only one-third of the members of the Organization for Economic Cooperation and Development impose such penalties.

The Competition Commission got Sasol Ltd., the world’s biggest producer of motor fuel from coal, to sell almost all its fertilizer plants in July to boost competition. The agreement was the first in South Africa to require a company to divest units rather than pay a fine for breaking antitrust rules.

The initiative may help spur investment in South Africa. The government says exports must be boosted to create jobs for the one in four South Africans without work.

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Treasury to Sell $2.2 Billion Citigroup Bailout Trups

The U.S. Treasury Department plans to sell $2.2 billion of Citigroup Inc. securities under a plan to lock in profits from the bank’s 2008 bailout.

The Treasury will sell the trust preferred securities, or Trups, through a public offering managed by Bank of America Corp., JPMorgan Chase & Co., Morgan Stanley, UBS AG and Wells Fargo & Co., the department said yesterday in a statement. Citigroup will “act as global coordinator but not as an underwriter or a sales agent,” the Treasury said.

The government received the securities from Citigroup as payment for $301 billion of asset guarantees, provided to help shore up investor confidence in the bank as its share price plunged in November 2008. Citigroup agreed to terminate the guarantees in December 2009. The Treasury kept $2.2 billion of the securities as compensation for the risk it took while the guarantees were in place.

The government is trying to show a profit on the preferred and common stakes it took in banks and other companies that got capital infusions under the $700 billion Troubled Asset Relief Program.

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Vietnam Cuts Compulsory Reserve Ratios for Some Banks

Vietnam will lower compulsory reserve ratios for state commercial banks that have at least 40 percent of their outstanding loans used for agriculture development, according to a document posted on the central bank’s website yesterday.

For lenders that have 40 percent to 70 percent of loans used for agriculture and rural development, the mandatory reserve ratios, will be one fifth of the usual ratios, according to the circular. The mandatory reserve ratio is the amount of money that banks need to set aside to cover dong-denominated deposits.

For banks that lend more than 70 percent in agriculture loans, the compulsory reserve ratios will be one twentieth of the usual ratios.

The new rule does not apply to Bank for Agriculture & Rural Development, Vietnam’s biggest bank by assets. The regulation is effective from yesterday, the State Bank of Vietnam said.

Traders Say Uncertainty Over CERs Is ‘Unsustainable’

“Complete regulatory uncertainty” over the use of United Nations carbon offsets from 2013 in the European Union is unsustainable, the European Federation of Energy Traders said yesterday.

The EU is considering quality restrictions on carbon credits from projects that cut industrial gases, including hydrofluorocarbon-23. UN Certified Emission Reduction credits, awarded on projects that lower emissions in developing nations, can now be swapped one-for-one with permits in the EU cap-and- trade program, the world’s largest. Emitters can also use for compliance another type of UN-sponsored credits, called Emission Reduction Units.

EU climate chief Connie Hedegaard said earlier this month she asked her staff to come up with a proposal by early November on the use of offsets in the next phase of the bloc’s emissions trading system. The proposal will then be discussed by representatives of national governments in the Climate Change Committee, a procedure known as comitology.

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U.S. Adopts Children’s Product Rule; More Testing Expected

The U.S. Consumer Product Safety Commission adopted a definition of children’s products that are subject to new safety rules over opposition of industries from furniture makers to distributors of school science kits.

The commission split 3-2 along party lines yesterday after weeks of negotiations among commissioners and two postponed votes as the five members sought a compromise.

Companies that make rugs, furnishings and sporting goods opposed having their goods, which are often used by adults, defined as a children’s product and subjected to extra testing.

The commission opted not to give exemptions, so manufacturers will need to seek advice on a case-by-case basis, CPSC Chairman Inez Tenenbaum said. Manufacturers’ claims about the nature of their products will be checked against their packaging and advertising, she said.

CFTC May Limit Banks to 20% Stakes for Clearinghouses

The Commodity Futures Trading Commission is considering limiting banks and investors to owning no more than 20 percent of swaps clearinghouses, exchanges and trading systems, three people familiar with the matter said.

The CFTC, which will present its first proposed rules Oct. 1 for the $615 trillion over-the-counter derivatives market, may not grant exemptions for existing holdings, said the people, who declined to be identified because the talks haven’t been made public. Groups made up of bank holding companies, non-bank financial firms, major swaps users or dealers may not own more than 40 percent of clearinghouses, the people said.

The rules are still being formed and may change before they’re released, one of the people said.

Scott Schneider, a CFTC spokesman, declined to comment. Clayton McGratty, a Tradeweb spokesman, and Eric Ryan, an NYSE spokesman, declined to comment.

The CFTC plans to ask for public comment on whether there should be a collective ownership level established for regulated exchanges and swap-execution facilities, similar to the aggregate level for clearinghouses, the people said.

U.S. lawmakers sought to regulate swaps through the Dodd- Frank bill passed in July after the trades complicated efforts to solve the financial crisis. In most cases regulators have until July to write the new guidelines, which mandate that most interest-rate, credit-default and other swaps be processed by clearinghouses after being traded on exchanges or swap-execution facilities.

Compliance Action

RBS, Barclays Get U.K. ‘Procedural’ Complaint in Loan Case

Royal Bank of Scotland Group Plc and Barclays Plc received a complaint from the U.K. Office of Fair Trading related to an investigation into disclosure of confidential loan-pricing information.

The statement of objections was a procedural step, the OFT said in a statement yesterday. Edinburgh-based RBS agreed in March to pay a 28.6 million pound ($45.3 million) fine after two employees disclosed commercially sensitive data to counterparts at Barclays from October 2007 to at least February 2008.

Barclays told the OFT about the improper disclosures, so the London-based bank won’t face any penalty unless it ceases to cooperate, the agency said.

The statement of objections means the banks will have a chance to respond to the agency before it issues any final decision on the matter.

Health Insurance Exchanges Seen as New Market for Web Vendors

Companies that operate insurance shopping services, led by EHealth Inc., are creating a new market from a provision in the U.S. health overhaul that requires each state to create an online exchange in which consumers can compare and buy coverage.

The federal government is preparing to award states up to $1 million each next month to study setting up the exchanges. The health legislation requires they be operating by 2014. States can run the sites themselves under the law signed by President Barack Obama in March, or leave the task to the U.S. government.

Private companies can’t operate statewide exchanges under the health law. That job is designated to a government entity or nonprofit.

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Spain’s Plans for Terrestrial TV Network Face EU Probes

The European Commission opened in-depth investigations into whether two plans to finance the digitization and extension of the terrestrial television network in Spain are in line with EU state-aid rules.

One investigation concerns the Spanish plan to finance the transition to digital terrestrial television, or DTT, the commission said yesterday in an e-mailed statement. The commission, the European Union’s Brussels-based antitrust regulator, has concerns the measure “favors certain technologies to the detriment of others,” which would violate the principle of technological neutrality, it said.

The second case concerns the transition plan in the region of Castilla-La Mancha, “where, in addition to a possible technological discrimination, there are allegations of a discrimination against regional and local terrestrial platform operators,” the commission said. Interested third parties may submit comments on the proposed measures.

Eni Ends EU Antitrust Case With Offer to Sell Pipelines Stakes

Eni SpA averted possible antitrust fines after European Union regulators accepted its offer to settle a competition case by selling stakes in natural-gas pipelines.

Eni’s proposal to sell stakes in three pipelines was made legally binding, the European Commission said in an e-mailed statement yesterday. Under the settlement, Italy’s largest oil and gas company will avoid the risk of EU fines for restricting access to its transmission network.

The case is the latest in a series of European Commission probes of energy companies including RWE AG, E.ON AG and Electricite de France SA. The Brussels-based commission, the 27- nation EU’s antitrust regulator, said last year that Eni may have abused its dominant position by limiting its investment in a network that brings Russian gas into Italy from Germany and Austria.

EU Approves Restructuring of Savings Bank Sparkasse KoelnBonn

The European Union said yesterday it approved the restructuring of German savings bank Sparkasse KoelnBonn.

The European Commission, the EU’s executive branch, has approved under EU state aid rules, a 650 million-euro recapitalization provided by Germany “in the context of the restructuring of Sparkasse KoelnBonn,” the commission said in a statement released in Brussels.

“According to the restructuring plan the bank will concentrate on providing traditional retail banking services to retail customers and small and medium-sized firms, withdraw from other activities and divest non-core subsidiaries,” the commission said in the statement.

WTO Rules Against U.S. Ban on Chinese Poultry Imports

U.S. restrictions on imports of Chinese chicken, turkey and duck that are no longer in place broke global commerce rules, the World Trade Organization said.

WTO judges in Geneva agreed with China that a congressional spending bill preventing authorities from processing shipments of cooked Chinese poultry unfairly closed the American market. China, the third-biggest market for U.S. farm goods, called the measure discriminatory and protectionist.

The U.S. measure has expired, negating the need for judges to order the Obama administration to bring the law into line with WTO rules. Judges also opted not to issue a recommendation, as China had requested, that the U.S. avoid language similar to the disputed measure in future legislation, stating the measure are “outside” its “terms of reference.”

China, once the second-largest buyer of U.S. chicken, and the U.S. outlawed each other’s poultry in 2004 after an outbreak of bird flu. While China rescinded its ban, it now imposes tariffs on chicken imports from U.S. producers. The Department of Agriculture partly lifted the ban in 2006 by permitting China to ship cooked poultry to the U.S.

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U.S. Chamber of Commerce Sues SEC Over Proxy-Access Rule

The U.S. Chamber of Commerce, the nation’s biggest business lobby, and the Business Roundtable have sued the Securities and Exchange Commission to overturn a rule that makes it easier for shareholders to oust corporate directors.

The groups filed a petition for review with the U.S. Court of Appeals for the District of Columbia, asking it to review a final rule of the SEC, according to the Sept. 29 petition posted yesterday on the Chamber of Commerce’s website.

The two groups decided to sue after completing a legal analysis of the regulation, they said yesterday at a news conference in Washington. The rule, which allows investors owning 3 percent of a company to nominate board members on corporate ballots, was passed by a divided SEC last month.

David Hirschmann, president of the chamber’s Center for Capital Markets Competitiveness said the rules are “unnecessary.”

The chamber has said that labor unions and public pension funds would hijack companies and push political agendas if given more power to nominate directors. SEC Chairman Mary Schapiro has said the 2008 credit crisis, which cost financial firms more than $1.82 trillion, shows shareholders need more clout in picking board members to oversee companies.

The case is Business Roundtable v. U.S. Securities and Exchange Commission, U.S. Court of Appeals, District of Columbia Circuit (Washington).

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Pegasus Ex-Finance Chief Settles Stock-Dumping Case

Pegasus Wireless Corp.’s former chief financial officer, Stephen Durland, agreed to obey securities laws and pay a fine to resolve securities regulators’ allegations that he bilked investors in a $30 million stock-dumping scheme, according to court records.

Durland, sued by the Securities and Exchange Commission in May 2009, didn’t admit or deny wrongdoing in the settlement. He agreed to be permanently barred from serving as an officer or director of a public company, according to a Sept. 28 filing in federal court in San Francisco. Durland also agreed to disgorge ill-gotten gains and pay a civil fine that will be decided by a judge after the SEC files a request in court, according to the filing.

A phone number for Durland in West Palm Beach, Florida, that was listed in court papers wasn’t in service.

The case is Securities & Exchange Commission v. Pegasus Wireless Corp. 09-02302, U.S. District Court, District of Northern California (San Francisco).

SEC Sues Investment Adviser for Failing to Disclose Conflicts

California investment adviser John Leo Valentine and his San Ramon, California, firm, Valentine Capital Asset Management, will pay $470,000 to resolve Securities and Exchange Commission claims that they switched clients between two related investments without telling them the change would boost commissions, according to an e-mailed statement by the SEC yesterday.

Valentine and the firm, which agreed to settle without admitting or denying the findings, will return more than $400,000 in excess commissions and pay a $70,000 penalty, the SEC said.


Constancio Says Public ESRB Warnings ‘Won’t Be The Norm’

European Central Bank Vice President Vitor Constancio commented on the role of the European Systemic Risk Board in monitoring financial stability and shielding the economic system from shocks.

He made the remarks at the annual Eurofi Financial Forum conference in Brussels yesterday.

“The challenges of designing and implementing this new European Union-wide macro-prudential policy function are considerable,” Constancio said. “However, with appropriate preparations, which are already ongoing in close cooperation with all the parties involved, a smooth start of the ESRB may be envisaged” in 2011.

European Union lawmakers last week approved the creation of the ESRB, chaired by ECB President Jean-Claude Trichet, to monitor markets and send warnings to nations on economic and financial risk.

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To contact the reporter on this story: Carla Main in New Jersey at

To contact the editor responsible for this report: David E. Rovella at

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