Bershidsky on Europe: Dark Pools Deepen
Here's today's look at some of the top stories on markets and politics in Europe:
Dark pools gaining market share in Europe
A new study by Tabb Group put the share of dark pools, or alternative trading systems, at 11 percent of European share trading volume. Alternative venues such as Bats Chi-X Europe, Goldman Sachs Sigma X, UBS MTF, Turquoise and Instinet have increased market share from 3.2 percent to 5 percent in the last 12 months. The study will provide ammunition to European regulators who would like to cap dark pool trading at 8 percent of total volume and 4 percent for individual stocks, arguing that this would be enough for institutional investors making large off-exchange deals. The growth of the shadow pools, however, is part of a more general trend. Shadow banking is also growing. The financial sector is quietly protesting against the increasing pressure from governments. At some stage, trying to regulate the alternatives to traditional banks and markets becomes a race between ingenuity and brute force.
Alitalia to unveil turnaround plan
Alitalia chief executive Gabriele del Torchio is due on Nov. 13 to announce his plan for saving the company. For the first time since the airline's privatization five years ago, it will include 2,000 layoffs and salary cuts. The company's shareholders will then have one day to decide whether to participate in a $400 million capital call meant to avert bankruptcy and allow some time for restructuring. Air France-KLM, which has already written off the value of its 25 percent stake in Alitalia, is unlikely to take part unless the restructuring plan is coupled with a partial writeoff of its $1.1 billion debt. The French-Dutch alliance invested in Alitalia in 2009, after its previous debts were eliminated, and since Air France-KLM bears no responsibility for subsequent mismanagement, it makes sense that it wants no part of the newly-accumulated burden. The Italian government needs to search more actively for a new white knight for the flag carrier.
Maersk raises profit expectations
Maersk, the Danish company that run's the world's biggest container shipping business, raised its profit guidance for the year from $3.3 billion to $3.5 billion, saying that in the third quarter, the market grew 5 percent and Maersk's own shipping volumes rose 11 percent. Freight rates are lower now than last year, but the increased global trade activity compensates for it. The Danish company's vision of the market could serve as a good leading indicator of global economic growth, much like purchasing managers' indices. The Maersk indicator is clearly looking up.
Malta decides to sell passports
Malta's parliament approved a controversial proposal to grant automatic citizenship for 650,000 euros ($871,000). The only requirement will be that candidates pass a due diligence process to make sure they aren't criminals. Polls show that the scheme is unpopular, with 53 percent of Maltese citizens opposing it and only 26 percent voicing support, but the government of the small island state hopes to make $40 million selling passports, and that outweighs all other considerations. Malta's passport scheme compares favorably to other European programs of this kind, because it does not contain any residency or language requirements: It is a simple exchange of cash for passport, the only deal of this kind in the EU today. Individual EU nations' economic needs are one of the reasons Europe will not have a united policy on immigration in the near future.
In Madrid, austerity stinks
Madrid mayor Ana Botella said her city of 3.5 million could "no longer be held hostage" by a garbage collectors' and street cleaners' strike that started on Nov. 5. The city's efforts to provide a "basic service" by sending out garbage trucks with heavy police escorts are failing to produce results, and Madrid is drowning in refuse. Many locals, however, support the strike: It is over the most precious thing a Spaniard can now have: a job. Three of the city's four leading contractors proposed to eliminate 1,000 jobs out of a total of 6,000 and cut the remaining staff's pay. Austerity is necessary if Spain is ever to cut its budget deficit from the current 6.5 percent of gross domestic product, but it really can stink.
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Leonid Bershidsky at email@example.com