Odd Lot Tally, EU Tobacco Rules, Danish Sifi: Compliance
A plan to start including U.S. stock trades of fewer than 100 shares, known as odd lots, in the official tally of American volume was delayed by seven weeks.
The change, which was supposed to take effect on Oct. 21, will now start on Dec. 9, pending regulatory approval, according to notices on the websites of New York-based Nasdaq OMX Group Inc. and NYSE Euronext.
U.S. Securities and Exchange Commission Chairman Mary Jo White has set a mid-November deadline for market owners to devise suggestions for preventing outages like Nasdaq’s three-hour halt on Aug. 22. That shutdown was caused by an error in Nasdaq’s securities information processor, or SIP, the same system exchanges are updating to accommodate odd lots. The Oct. 21 date for the odd lot transition was announced two weeks before the Nasdaq malfunction.
Rising share prices and the spread of computer strategies have reduced the size of stock trades, making more transactions ineligible for inclusion in the public record.
EU Parliament Dilutes Proposal for Tougher Tobacco Rules
The European Union assembly rejected a proposal to regulate nicotine-containing goods like electronic cigarettes as medicines, opting instead to apply rules on general product safety. As part of a plan to ban the sale of cigarettes and roll-your-own tobacco with characterizing flavors, the 28-nation Parliament also voted to phase out menthol cigarettes over eight years rather than three years agreed by EU governments.
The stance by the EU’s only directly elected institution follows months of industry lobbying over the latest bid to prevent young people from starting to smoke in Europe, where tobacco-related illnesses are estimated to kill one person every minute.
British American Tobacco Plc (BATS), Europe’s largest cigarette maker, praised what it called “sensible modifications” by the European parliamentarians to the draft EU law while saying it is still too tough.
A deal on the draft legislation, known as a directive, could be reached by year-end, said Linda McAvan, a U.K. Socialist who steered the draft law through the EU Parliament. While she opposed the looser provisions for electronic and menthol cigarettes, she expressed satisfaction that the assembly upheld two central positions of governments regarding labels.
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Danish Lawmakers Extend Sifi Talks After Agreeing on Most Points
Danish lawmakers will continue talks on a bill for systemically important banks this week after initially targeting a deal planned for as early as yesterday.
Members of Denmark’s parliament committee overseeing banks ended yesterday’s meeting after agreeing on a number of key points including which banks are too big to fail and how much capital the lenders must hold, two lawmakers who participated in the talks said. They asked not to be identified by name because the content of the talks is private.
The final bill, which would require a group of lenders led by Danske Bank A/S (DANSKE) to hold more capital than their smaller competitors, is based on a proposal put forward by a government-appointed committee in March. Once parliament’s business committee agrees on the wording of the legislation, the bill’s passage into law is a formality.
An accord would mark the latest example of Scandinavian legislators moving faster on bank regulation than the rest of Europe as near record-low interest rates distort credit and housing markets in some of the world’s richest economies.
Lawmakers in Denmark are discussing imposing a 3 percent additional buffer on Danske Bank -- less than recommended in the March proposal, according to a different person close to the talks who asked not to be identified by name because the terms of the accord aren’t yet public. All other systemically important banks will probably be asked to build extra capital in line with levels in the March proposal, the person said.
Lawmakers are still struggling to hammer out the final text, the person said.
Danish talks on too-big-to-fail banks have been hampered by lawmaker disagreement over trigger levels at which debt converts to equity and at which management loses its freedom to decide payouts.
FDIC Says Insurance Fund’s Growth Unlikely to Alter Banks’ Rates
The Federal Deposit Insurance Corp. said it is unlikely to change the rates banks pay for insurance that guarantees customer deposits even as the fund continues to stay on track to meet deadlines for its health.
The federal backstop, funded by assessments on banks, was at $37.9 billion by June 30, up from a deficit of $20.9 billion at the end of 2009 as bank failures surged during credit crisis. The FDIC predicted it will spend $4 billion to cover bank shutdowns in the next five years, a projection that declined another $1 billion since April as the industry improves, according to a report issued yesterday updating the fund’s health.
FDIC Chairman Martin Gruenberg said the fund “has a long way to go.” He said rates charged the banks probably won’t rise as industry health improves and numbers of banks failing or at risk of doing so continues to decline.
The fund returned to a positive balance in 2011, and the FDIC anticipates that its income from assessments on banks will drop from about $12.4 billion in 2012 to about $10 billion this year as conditions improve and growth in the assessment base has been more sluggish than expected, according to the report.
The fund still has less than its required reserve ratio of 1.15 percent of the deposits it insures, and the FDIC expects to reach that goal by 2019 -- an extension of one year from earlier estimates because of a “more conservative projection of future assessment revenue.”
Assurant Cuts Florida Insurance Rates 10% in Deal With Regulator
Assurant Inc. (AIZ), under pressure from Florida regulators, agreed to cut rates 10 percent in the state for home insurance that borrowers must buy when they miss payments on their initial policies.
The new rates are expected to be effective in the first quarter of next year, the New York-based insurer said yesterday in a statement.
FDIC Urges Judge to Reject $500 Million Countrywide Accord
The Federal Deposit Insurance Corp. urged a U.S. judge to reject a proposed $500 million settlement of Bank of America Corp.’s liability for billions of dollars in securities backed by mortgages that were later downgraded to junk.
The FDIC claims the bank accord is too small and benefits too few investors. Its objection was made in a filing Oct. 7 in a Los Angeles court.
The settlement in April was to end a class action led by the Iowa Public Retirement System. The consolidated lawsuit filed in 2010 sought damages of more than $351 billion concerning downgraded Countrywide mortgage-backed securities after the 2007 subprime collapse. The settlement requires a judge’s approval.
The Los Angeles case is Maine State Retirement System v. Countrywide Financial Corp., 10-cv-00302, U.S. District Court, Central District of California (Los Angeles).
Algo Traders Main Flash Crash Victims, Market Maker RSJ Says
Lightning-fast market plunges like the 2010 “flash crash” don’t hurt long-term investors and taxing algorithmic trading will drive the business from Europe, said the founder of RSJ AS, which trades a notional volume of $106 trillion in financial derivatives a year.
Investors would be protected by rules against unethical techniques and an introduction of random electronic delays to slow microsecond transactions by high-frequency trading companies, said Karel Janecek, the biggest shareholder in Prague-based RSJ, the largest such trader on NYSE Euronext (NYX)’s Liffe derivatives platform.
He made the remarks in an interview at Bloomberg offices in Prague Oct. 7.
Regulators worldwide are seeking to improve their understanding of how markets behave and reduce price swings since the May 2010 plunge and recovery known as the flash crash that wiped out about $862 billion in U.S. equity value in minutes. They’re also working to determine whether methods used by sophisticated traders give them an unfair advantage and if they should crack down on high-frequency deals.
“If we take a manager of private money or long-term investors, they don’t care about flash crashes,” Janecek said.
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