While you were sleeping: Nasdaq, Bats drop flash trades, FTC eyes oil market

Friday 7th August 2009

Nasdaq OMX Group and Bats Global Markets bowed to pressure and agreed to stop brokers using so-called flash trades that may give them a split-second advantage over other investors.

The move comes after Senator Charles Schumer challenged the fairness of the practice and regulators hinted they may ban such activities. Nasdaq will stop the system on September 1.

Flash trades allow exchanges to show clients the flow of buy and sell orders for a split second before they are routed to rival platforms.

The US Federal Trade Commission said it will impose daily fines of US$1 million on traders who manipulated energy markets with bogus pricing, which had the potential to damage the US economy.

The FTC will target the cash energy markets and regulated futures exchanges in rules that come into effect on November 4.

"This new rule will allow us to crack down on fraud and manipulation that can drive up prices at the pump," said FTC Chairman Jon Leibowitz, according to Reuters.

The body will crack down on practices such as making false statements about pricing and production and so-called wash sales, where trades appear to have been made when no change of ownership occurs.

US cash products traders often try to influence price indexes, like the Platts oil benchmark, by using multiple low-volume trades in order to get favorable terms on larger supply deals benchmarked to those indexes, Reuters reported.

Maurice Greenberg, the 84-year-old who led insurer American International Group until being forced out in 2005 will pay US$15 million to settle US claims he manipulated earnings.

Greenberg and former chief financial officer Howard Smith “directed several different accounting transactions to materially affect AIG’s reported financial results,” the Securities and Exchange Commission said in the lawsuit.

The number of Americans filing new claims for unemployment benefits fell last week, stoking optimism the labour market may be stabilising.

Initial claims for state unemployment insurance fell 38,000 to 550,000, seasonally adjusted, last week, according to the Labor Department.

The figures come before the release of July non-farm payrolls data on Friday in the US, which is expected to show 320,000 workers lost their jobs last month and the unemployment rate edged up to 9.6%, the highest since 1983, from 9.5% in June.

The US Dollar Index, a six-currency gauge of the greenback’s value, rose 0.7% to 78.03 after the jobless claims data.

The Dow Jones Industrial Average fell 0.3% to 9256.26 and the Standard & Poor’s 500 Index declined 0.6% to 997.08. The Nasdaq Composite fell 1% to 1973.16.

Procter & Gamble fell 4.5% to US$51.46, leading the Dow lower. Alcoa declined 3.6% to US$12.80 and Verizon Communications fell 1% to US$30.96.

The euro fell 0.4% to $1.4353 and edged up 0.1% to 136.9 yen. The greenback climbed 0.5% to 95.39 yen.

Private equity firm Blackstone Group reported its preferred measure of earnings – before income taxes, noncash charges for vesting equity-based compensation, and amortization of intangible assets – rose US$173 million in the second quarter from $100 million a year earlier.

Chief operating officer Tony James said the firm has some US$ $29 billion available to invest, the largest amount in its history. He said Blackstone is "looking hard" at several bank deals.

The European Central Bank kept its benchmark interest rate unchanged at a record low said the region’s economy could return to growth sooner than previously thought.

ECB President Jean-Claude Trichet said the benchmark rate at 1% was appropriate and the ECB won’t scale back plans to buy 60 billion euros in covered bonds.

The ECB has cut interest rates by 325 basis points since October.

The Bank of England left its benchmark rate unchanged at 0.5% and expanded its bond purchasing programme by 50 billion pounds to 175 billion pounds in an effort to stimulate lending.

Shares in Europe gained after better than expected earnings, with the Dow Jones Stoxx 600 climbing 0.5% to 227.89.

Lloyds Banking Group jumped 12% and Royal Bank of Scotland rose 9.8% after the BOE boosted its quantitative easing programme.

Germany’s Commerzbank fell 0.6% after posting a second-quarter loss and failing to give any signal that its results had bottomed.

Unilever, the world’s third-biggest food and consumer goods group, 5.4% after posting a better-than-expected 4.1% gain in second-quarter sales. Nestle rose 1.3%.

Portugal Telecom fell 2.9% after reporting second-quarter sales that met expectations.

The UK's FTSE 100 rose 0.9% to 4690.53 and Germany’s DAX 30 gained 0.3% to 5369.98. France’s CAC 40 rose 0.6% to 3477.83.

Crude oil for September delivery fell 5 cents to US$71.92 a barrel on the New York Mercantile Exchange. Gold futures for December delivery fell 0.4% to US$962.90 an ounce in New York.

Businesswire.co.nz

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