Posts Tagged ‘Capital markets’

High-Frequency Trading: An Innovative Solution to Address Key Issues

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Wednesday September 17, 2014 at 9:02 am
  • Print
  • email
  • Twitter
Editor’s Note: The following post comes to us from Jon Lukomnik of the IRRC Institute and is based on the summary of a report commissioned by the IRRC Institute and authored by Professors Khaldoun Khashanah, Ionut Florescu, and Steve Yang of Stevens Institute of Technology; the full report is available here.

As controversial as is HFT, the large volume of the discussion sometimes makes it hard to understand the content. What elements of HFT positively impact the trading markets? Which are problematic? What are the proposed mitigations? Therefore, the Investor Responsibility Research Center Institute (IRRC Institute) asked Khashanah, Florescu, and Yang (KF&Y) to look at HFT from various perspectives. The result includes:

  • The effect of HFT on volume, price efficiency and liquidity.
  • The problems and risks seen by various stakeholders from their vantage points.

…continue reading: High-Frequency Trading: An Innovative Solution to Address Key Issues

SEC Chair White Sets Equity Market Structure Agenda

Editor’s Note: The following post comes to us from Byungkwon Lim, partner in the Corporate Department at Debevoise & Plimpton LLP and leader of the firm’s Hedge Funds and Derivatives & Structured Finance Groups. This post is based on a Debevoise & Plimpton Client Update by Mr. Lim, Lee A. Schneider, and Ryan M. Kusmin; the complete publication, including footnotes, is available here.

Mary Jo White, the Chair of the Securities and Exchange Commission (the “SEC”), recently delivered two speeches with important implications for the future structure of U.S. equity markets. The first (discussed on the Forum here), delivered on June 5, 2014, discussed various initiatives to improve equity market structure. The second (discussed on the Forum here), delivered on June 20, 2014, addressed the importance of intermediation in the securities markets and the roles that technology and competition play with respect to various types of market intermediaries such as exchanges, dark pools, brokers and dealers. In both speeches, Chair White expressed her belief that the equity markets are not rigged or fundamentally unfair, but nevertheless could—with updated or different regulations—function more efficiently and with even greater fairness than they currently do.

…continue reading: SEC Chair White Sets Equity Market Structure Agenda

Putting Technology and Competition to Work for Investors

Posted by Mary Jo White, Chair, U.S. Securities and Exchange Commission, on Tuesday June 24, 2014 at 8:59 am
  • Print
  • email
  • Twitter
Editor’s Note: Mary Jo White is Chair of the U.S. Securities and Exchange Commission. This post is based on Chair White’s remarks to the Economic Club of New York, available here. The views expressed in this post are those of Chair White and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

Today [June 20, 2014], I want to speak to you about the current state of our securities markets—an issue that I know is on your minds and one that is well-suited for the financial capital of the world.

The U.S. securities markets are the largest and most robust in the world, and they are fundamental to the global economy. They transform the savings of investors into capital for thousands of companies, add to nest eggs, send our children to college, turn American ingenuity into tomorrow’s innovation, finance critical public infrastructure, and help transfer unwanted financial risks.

The state and quality of our equity markets in particular have received a great deal of attention lately, with a discussion that has expanded well beyond those who regularly think and write about these markets to include every day investors concerned about the investments they make and the savings they depend on. I have been closely focused on these issues since I joined the SEC about a year ago, and I welcome this broader dialogue.

…continue reading: Putting Technology and Competition to Work for Investors

Enhancing Our Equity Market Structure

Posted by Mary Jo White, Chair, U.S. Securities and Exchange Commission, on Tuesday June 10, 2014 at 9:21 am
  • Print
  • email
  • Twitter
Editor’s Note: Mary Jo White is Chair of the U.S. Securities and Exchange Commission. This post is based on Chair White’s remarks to the Sandler O’Neill & Partners, L.P. Global Exchange and Brokerage Conference; the full text, including footnotes, is available here. The views expressed in this post are those of Chair White and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

It is great to be here with you in New York to speak about our equity market structure and how we can enhance it.

While I know your views on particular issues may differ, you all certainly appreciate that investors and public companies benefit greatly from robust and resilient equity markets.

During my first year as Chair, not surprisingly, I have heard a wide range of perspectives on equity market structure, reflecting its inherent complexity, the relationships among many core issues, as well as the different business models of market participants. To frame the SEC’s review of these issues, I set out last fall certain fundamentals for addressing market structure policy. One of those is the importance of data and empirically based decision-making. At that time, we launched an interactive public website devoted to market structure data and analysis drawn from a range of sources. The website has grown to include work by SEC staff on important market structure topics, including the nature of trading in dark venues, market fragmentation, and high-frequency trading.

…continue reading: Enhancing Our Equity Market Structure

Addressing Known Risks to Better Protect Investors

Posted by Luis A. Aguilar, Commissioner, U.S. Securities and Exchange Commission, on Friday February 28, 2014 at 9:00 am
  • Print
  • email
  • Twitter
Editor’s Note: Luis A. Aguilar is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on Commissioner Aguilar’s remarks at the 2014 “SEC Speaks” Conference; the full text, including footnotes, is available here. The views expressed in the post are those of Commissioner Aguilar and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

I am honored to be here today [February 21, 2014]. This is the sixth time that I have spoken at “SEC Speaks” as a Commissioner. Much has changed since my first “SEC Speaks” in February 2009. At that time, we were in the midst of the worst financial crisis since the Great Depression. Among other things, Lehman Brothers had recently filed for Chapter 11 bankruptcy, The Reserve Primary Money Market Fund had “broken the buck,” and the U.S. Government had just bailed out insurance giant AIG. In addition, the Bernard Madoff Ponzi scheme had come to light just a few months earlier, further shaking investor confidence in the capital markets.

These and other events made it clear that the SEC had much to do to become a more effective regulator and to enhance its protection of investors. It was also clear that the agency itself had to undergo significant change. As a result, in my 2009 remarks at “SEC Speaks,” I highlighted a number of steps that Congress and the SEC should take to close regulatory loopholes. These regulatory gaps included a lack of appropriate regulation in the areas of over-the-counter derivatives, hedge funds, and municipal securities—areas that Congress subsequently addressed in the Dodd-Frank Act.

…continue reading: Addressing Known Risks to Better Protect Investors

The Governance Structure of Shadow Banking

Posted by Steven L. Schwarcz, Duke University, on Thursday February 6, 2014 at 9:16 am
  • Print
  • email
  • Twitter
Editor’s Note: Steven L. Schwarcz is the Stanley A. Star Professor of Law & Business at Duke University School of Law.

In prior articles (see, e.g., Regulating Shadows: Financial Regulation and Responsibility Failure, 70 Wash. & Lee L. Rev. 1781 (2013)), I have argued that shadow banking is so radically transforming finance that regulatory scholars need to rethink certain of their basic assumptions. In a forthcoming new article, The Governance Structure of Shadow Banking: Rethinking Assumptions About Limited Liability, I argue that the governance structure of shadow banking should be redesigned to make certain investors financially responsible, by reason of their ownership interests, for their firm’s liabilities beyond the capital they have invested. This argument challenges the longstanding assumption of the optimality of limited liability.

…continue reading: The Governance Structure of Shadow Banking

Focusing on Fundamentals: The Path to Address Equity Market Structure

Posted by Mary Jo White, Chair, U.S. Securities and Exchange Commission, on Wednesday October 16, 2013 at 9:15 am
  • Print
  • email
  • Twitter
Editor’s Note: Mary Jo White is Chair of the U.S. Securities and Exchange Commission. This post is based on Chair White’s remarks to the Security Traders Association 80th Annual Market Structure Conference; the full text, including footnotes, is available here. The views expressed in this post are those of Chair White and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

As market professionals, you obviously live the U.S. equity markets first hand, day in and day out. As an association, you have used your voice to focus attention on the value of our equity markets—an all-important engine for capital formation, job creation, and economic growth.

Like you, I believe that we must constantly strive to ensure that the U.S. equity markets continue to serve the interests of all investors. That mutual challenge must come fully of age and address today’s, not yesterday’s, markets. And today, I will speak about the path forward.

…continue reading: Focusing on Fundamentals: The Path to Address Equity Market Structure

Blockholder Heterogeneity and Financial Reporting Quality

Posted by R. Christopher Small, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Thursday October 10, 2013 at 9:35 am
  • Print
  • email
  • Twitter
Editor’s Note: The following post comes to us from Yiwei Dou of the Department of Accounting, Taxation & Business Law at New York University; Ole-Kristian Hope, Professor of Accounting at the University of Toronto; Wayne Thomas, Professor of Accounting at the University of Oklahoma; and Youli Zou of the Accounting Area at the University of Toronto.

An issue of considerable interest to accounting researchers is the association between shareholders and firms’ financial reporting quality (FRQ). In our paper, Blockholder Heterogeneity and Financial Reporting Quality, which was recently made publicly available on SSRN, we examine a specific type of shareholder, blockholders, because (1) they offer a sample of shareholders that are expected to have a significant impact on firms’ financial reporting decisions and (2) we are able to track individual blockholders and their association with FRQ. As discussed in more detail below, these two sample design features allow us to provide a test of the extent to which (large) shareholders influence FRQ. Blockholders also provide an interesting and economically important sample because of their large presence in U.S. capital markets in recent years.

…continue reading: Blockholder Heterogeneity and Financial Reporting Quality

Short-Termism of Institutional Investors and the Double Agency Problem

Posted by June Rhee, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Thursday May 9, 2013 at 9:26 am
  • Print
  • email
  • Twitter
Editor’s Note: The following post comes to us from Paul Frentrop and Daniëlle Melis, a Professor and an Associate Professor, respectively, at Nyenrode Business Universiteit. The following post is based on an inaugural lecture by Professor Frentrop.

Complaints that investors only look for short-term gains are nothing new. As early as 1990 an Economist article proclaimed: “The old bugbear of businessmen — that fund managers are too obsessed with the short term, and unwilling to buy shares in companies with ambitious research projects — is back on the prowl.”

Recently, the turnover of shares in listed companies has grown to numbers far exceeding those of 1990. Does this change in investor behavior influence the behavior of managers in listed firms?

The institutional innovation of freely tradable shares, traceable to Holland in the 17th century, made it possible for companies such as the Dutch East India Company to have longer investment horizons than individual investors. Listing shares ensured that an investor could recoup his money from other investors and that, as a result, companies didn’t have to repay individual investors. Seen in this light, one might assume that investor short-termism would have little influence on board decisions at listed companies and much more influence on board decisions at privately held companies. General opinion, however, disagrees.

…continue reading: Short-Termism of Institutional Investors and the Double Agency Problem

Challenges Facing the Audit Profession and PCAOB Initiatives

Posted by James R. Doty, Chairman, Public Company Accounting Oversight Board, on Thursday May 2, 2013 at 9:40 am
  • Print
  • email
  • Twitter
Editor’s Note: James R. Doty is chairman of the Public Company Accounting Oversight Board. This post is based on Chairman Doty’s keynote address at the Rice University Director-to-Director Exchange; the full text, including footnotes, is available here. The views expressed in the post are those of Chairman Doty and should not be attributed to the PCAOB as a whole or any other members or staff.

As you know, over the past couple of years, together with the board members and staff of the Public Company Accounting Oversight Board, I have been working to enhance the reliability of the external audit function and its usefulness to U.S. capital markets.

I will start off with an overview of some of the more significant issues confronting the audit profession. And then I’d like to open a more interactive discussion.

I. Corporate Governance Has Evolved to Suit the Needs of Capital Markets.

I have known many of you for years. I have watched and admired how you have navigated the many changes we have seen in both the energy industry and corporate governance.

Many of us have gained significantly more experience than we expected in identifying, addressing and preventing future threats to corporate success, such as differences in cultural expectations and business practices around the world and at home. Enron had a profound effect on Houston.

As this morning’s discussion demonstrated, you recognize that your work is never done. There is no perfect governance regime for all time.

…continue reading: Challenges Facing the Audit Profession and PCAOB Initiatives

Next Page »
 
  •  » A "Web Winner" by The Philadelphia Inquirer
  •  » A "Top Blog" by LexisNexis
  •  » A "10 out of 10" by the American Association of Law Librarians Blog
  •  » A source for "insight into the latest developments" by Directorship Magazine