Former bank president detained on fraud, money laundering charges

The ex-president of "troubled" Portuguese commercial bank BPN has been detained by authorities on charges including tax fraud and money laundering, it has been reported.

News agency Xinhua said local media statements indicate Jose Oliveira e Costa was arrested on Thursday (November 20th).

Mr Costa, who headed up BPN between 1997 and 2008, also faces charges of alleged forgery, abuse of credit and illegal gains, the site said.

On November 21st, he was sentenced to three months of "preventative detention" by the central criminal tribunal in Lisbon in order to prevent any flight risk or potential destruction of incriminating evidence, it added citing local daily Diario de Noticias.

Earlier this month, Xinhua said, the Portuguese government was forced to nationalize BPN in order to prevent its collapse after it was revealed that the bank had lost around €700 million ($885 million) because of "bad management and malpractice".

BPN was formed in 1993 by the merger of the banks Soserfin and Norcredito. At the end of 2007, it reported a consolidated net income of €56.7 million.

Watchdog demands action on 'worst-ever fraud case'

An investor protection group is calling on US state attorneys to take action against banks and financial institutions involved in the auction rate securities "debacle", describing it as the "worst single case of fraud" in the country's history.

The Wall Street Fraud Watchdog (WSFW) said ARS mis-selling still presents a "gigantic problem" as many of its victims' life savings remain at risk.

ARS were sold to thousands of individual and institutional investors as safe, liquid cash-equivalent products. However, when the $330 billion market collapsed, many found themselves with damaged assets they could not easily dispose of.

So far, a number of financial institutions involved in selling the products have agreed to buy back around $50 billion worth of ARS from investors. They include Morgan Stanley, UBS, Merrill Lynch and Goldman Sachs.

WSFW is now calling on prosecutors to pursue fraud actions against some of the banks involved in the "disaster", urging states like New York, Massachusetts and Missouri not to "look the other way".

The group has also advised investors to avoid cash equivalent products unless their sellers will provide written guarantees that the investments are "100 percent safe and liquid".

U.S. prepared to lend trillions to save financial system

Although Congress approved $700 billion to help the financial system, all told, the U.S. government pledged more than $7.4 trillion in taxpayer funds. As regulators commit more money without disclosing collateral received or who is getting the loans, some lawmakers are calling for the Federal Reserve to be reined in. "Whether it's lending or spending, it's tax dollars that are going out the window, and we end up holding collateral we don't know anything about," said Rep. Scott Garrett, R-N.J. "The time has come that we consider what sort of limitations we should be placing on the Fed so that authority returns to elected officials as opposed to appointed ones."

more at http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aDqw8_eMzrhU

Citi's dramatic slide caused by lack of oversight

Exposure to obscure mortgage instruments from Citigroup’s trading operations has taken a severe toll on the company, which provides financial services ranging from retail banking to advising companies on mergers.

more at http://www.nytimes.com/2008/11/23/business/23citi.html?_r=1&em

U.S. injects $20 billion into Citigroup

In a last-minute deal, the U.S. government agreed to inject $20 billion in capital into Citigroup as well as backstop as much as $306 billion in toxic assets. The agreement requires Citi to absorb the first losses it sustains from residential mortgages, leveraged loans, collateralized debt obligations and other assets, up to $29 billion. For the injection, the government will receive preferred shares in the bank. If needed, the arrangement will be extended to other financial institutions that pose a risk to the stability of the financial system.

more at http://www.ft.com/cms/s/0/447938ee-b9f0-11dd-8c07-0000779fd18c.html?nclick_check=1

Steve & Barry's to liquidate, close all stores

Steve & Barry stores and its parent company have abandoned plans to keep stores open during bankruptcy protection and will liquidate them over the next few months, according to a bankruptcy court filing. 

Trading in CBOE Volatility Options

Options on CBOE volatility indexes can be an invaluable tool for investors seeking to hedge against market risk or speculate on future volatility.

Important differences between volatility options and other index options:

• Quoting – Volatility-related index options quotes are based on the expected value at expiration, and are not the same as the "spot" price, which represents the current index value.
• Expiration and settlement – Volatility-related index options normally expire on a Wednesday, with settlement completed the following day. The last trade day is typically the Tuesday before expiration.

Volatility-Related Index	Underlying Index	Index Symbol	Settlement Symbol
CBOE Volatility Index®	S&P 500 (SPX)	VIX	VRO
CBOE NASDAQ-100 Volatility IndexSM	NASDAQ-100 (NDX)	VXN	VSX
CBOE Russell 2000 Volatility IndexSM	Russell 2000 (RUT)	RVX	RSL

Best Exchange Traded Fund (ETF) books

The follwing is a list of recommended ETF books on Amazon:

ING looks to pull shares from European exchanges

ING has announced its intentions to remove its shares from stock exchanges in Paris, Frankfurt and Switzerland.

The financial institution has made moves to delist from the bourses with the intention to concentrate its trading in New York, Amsterdam and Brussels.

In a press release, ING suggested that cutting costs is one of the main reasons behind the new strategy.

"Maintaining a listing brings costs with it," the company stated. "Concentrating trading on a limited number of exchanges aligns with ING's ongoing focus on cost efficiency."

ING had a low volume of shares trading on the Swiss, French and German exchanges, which also informed its position.

It claimed the amount had fallen in recent years and accounted for just 0.3 per cent of all ING trading during the 12 months up to November 1st.

Based in the Netherlands, ING has six specific business areas, according to its website - ING Direct, retail banking, wholesale banking, Insurance Americas, Insurance Europe and Insurance Asia/Pacific.

Jobless Claims Reach a 16-Year High

New claims for unemployment benefits jumped last week to a 16-year high, the Labor Department said Thursday, providing more evidence of a rapidly weakening job market expected to get even worse next year.

The government said new applications for jobless benefits rose to a seasonally adjusted 542,000 from a downwardly revised figure of 515,000 in the previous week. That was much higher than Wall Street economists’ expectations of 505,000, according to a survey by Thomson Reuters.

That is also the highest level of claims since July 1992, the department said, when the economy was coming out of a recession.

The four-week average of claims, which smoothes out fluctuations, was even worse: it rose to 506,500, the highest in more than 25 years.

In addition, the number of people continuing to claim unemployment insurance rose sharply for the third straight week to more than 4 million, the highest since December 1982, when the economy was in a painful recession.

SEC wins case against unregistered broker-dealer principal

The Securities and Exchange Commission has won a ruling against a man who it says made millions of dollars in commissions controlling a broker-dealer firm despite being unregistered as a company officer and violating the reporting provisions of US securities laws.

During a seven-day trial, the court heard that Michael Crow had controlled "virtually every significant aspect" of New York-based Duncan Capital, taking the "vast majority" of the company's profits.

However, the firm's regulatory filings did not identify Mr Crow as one of its officers, directors or control affiliates.

Duncan Capital's owner and "nominal president", Robert David Fuchs, was found guilty of making false regulatory reports and transferring part of the company's profits to entities controlled by Mr Crow.

The court ordered Mr Crow and Duncan Capital to pay $1.9 million illegally gained profits and prejudgment interest, Mr Fuchs to return £282,874.95 and Mr Crow, Mr Fuchs, Duncan Capital and the Duncan Capital Group to disgorge a total of $4.9 million in ill-gotten gains.

Furthermore, Mr Crow and Mr Fuchs must pay individual fines of $250,000 and $125,000 respectively. Duncan Capital and the Duncan Capital Group must each pay a $50,000 fine.

Citi's shares drop 23%, putting more pressure on CEO

Jittery investors pushed shares of Citigroup down 23% on Wednesday, the steepest percentage drop for the financial giant. The development puts increased pressure on CEO Vikram Pandit, who is trying to boost confidence in the bank. Investors appeared nervous about Citi's announcement that it will purchase the remaining $17.4 billion in assets from its structured-investment vehicles. The company will take a write-down of $1.1 billion to reflect the deteriorating value of the assets. 

NYSE Euronext expands real-time trade quotes service

Stock exchange group NYSE Euronext has expanded its deal with CNBC and Google Finance to provide real-time stock prices online by adding last-trade data from the NYSE Arca platform to the companies' websites.

The deal follows an agreement in June between the three parties which allows the media organisations to publicly display real-time, last-trade data for securities listed on the New York Stock Exchange, NYSE Alternext US and Nasdaq on their websites.

In a statement, NYSE Euronext said the latest addition would broaden the availability of stock prices beyond regulator trading hours for investors around the world.

NYSE Euronext executive vice-president of data solutions, Ronald Jordan, said: "With the addition of NYSE Arca last-trade data, CNBC and Google further demonstrate their commitment to investors by making available a comprehensive array of free online real-time stock prices during the full trading day."

In other news, the New York Stock Exchange's oversight NYSE Regulation has moved to suspend and delist shares in Woodbridge Holdings Corporation ahead of the start of trading on November 20th.

The regulator made the decision after the company's market capitalization fell below the NYSE's continued listing requirements.

China replaces Japan as biggest U.S. debt holder

After years of accelerating purchases of U.S. debt, China has taken over Japan's spot as the biggest foreign holder of Treasury bills, notes and bonds. China's investment in U.S. debt rose from $541.4 billion in August to $585 billion in September, while Japan's holdings declined from $586 billion to $573.2 billion. Meanwhile, U.S. investors sold a record $38 billion in foreign bonds.

more at http://www.ft.com/cms/s/0/eed11ddc-b5ab-11dd-ab71-0000779fd18c.html

Banks demand European exchanges to lower trading tariffs

Goldman Sachs, Morgan Stanley, Merrill Lynch, Citigroup and investment banks in Europe supported the establishment of new trading platforms and are using their clout to pressure exchanges to lower trading fees. "Banks have been angry for some time about fees," said Benn Steil, an expert on exchanges. "They've pointed out that volumes have grown and fees haven't come down. And in an environment like this, you can expect them to ratchet up pressure. They definitely have more leverage now with the likes of Turquoise and Chi-X." 

more at http://www.bloomberg.com/apps/news?pid=20601208&sid=aYIPCla.Ufg8&refer=finance

SEC charges Cuban with insider trading

Charges that Dallas Mavericks owner Mark Cuban engaged in insider trading, allegedly using confidential information on a stock sale to avoid more than $750,000 in losses, could strike him out of the running to buy the Chicago Cubs.
The Securities and Exchange Commission filed a civil lawsuit against Mr. Cuban on Monday in federal court in Dallas. The SEC says that in June 2004, Mr. Cuban was invited to participate in a stock offering by Mamma.com Inc., terms of which he agreed to keep private.

The SEC says Mr. Cuban knew the shares would be sold below their market price and a few hours after receiving the information told his broker to sell all shares in the search-engine company.

The accusation could hurt Mr. Cuban’s chances as bids for the Cubs approach a Nov. 26 deadline, some observers say. Mr. Cuban reportedly already faced an uphill battle for the approval he would need from two-thirds of the current Major League Baseball owners, in part because of his bombastic style.

The insider-trading complaint “could very well drive a stake into the heart of his attempts to acquire the franchise,” says Frank Murtha, a sports consultant who also teaches at Northwestern University. “It will probably give Major League Baseball owners pause, or an additional excuse or reason not to approve him in an ownership capacity.”

The complaint also could make it more difficult for Mr. Cuban to raise money from partners, who might be hesitant to back someone accused of fraud, Mr. Murtha says.

Still, at least one analyst said Mr. Cuban should not be counted out. Mr. Cuban is one of five bidders in the final round of Tribune Co.’s Cubs auction, and the media company may be loathe to eliminate him on the basis of the complaint, says Michael Rapkoch, president, of Dallas-based Sports Value Consulting.

“Just because you are accused or charged doesn’t mean you did something wrong,” Mr. Rapkoch says. “Let’s see how he responds to it. Let’s not jump on Mark too much.”

Online brokers see big jumps in trading volume

Charles Schwab, TD Ameritrade and E*Trade are handling more trades as investors pull out of mutual funds. Charles Schwab, the largest publicly traded U.S. online broker, is expected to report that trading was up 35% in October from a year ago. "What you see now is very savvy active traders, who use different strategies in a volatile market, and you also see investors with a long-term approach rather than chasing the latest fad," said Patrick O'Shaughnessy, an analyst with Raymond James Financial.

It’s official - the euro zone is in recession.

The eurozone's economy shrank 0.2% from July to September, creating the start of the region's first technical recession, according to the EU's statistics office. That is the second consecutive quarterly decline. France, the eurozone's second-largest economy, resisted the trend, pumping out 0.1% growth. But Nos. 1, 3 and 4 -- Germany, Italy and Spain, respectively -- all moved into decline, dragging the overall figure into negative territory. 

more at http://www.iht.com/articles/reuters/2008/11/14/business/OUKBS-UK-EUROPE-ECONOMY.php

Russia looks to hit Wall St bank with US racketeering act

Lawyers working for the Russian government have called for US racketeering laws to be applied in domestic court to make the Bank of New York Mellon liable for $22.5 billion in damages linked to a money laundering scandal dating back to the 1990s, reports say.

Public Policy News and Research said the case relates to the illegal transfer of $7.5 billion out of Russia through Bank of New York accounts to a shell company owned by one of its former employees.

In 2005, the bank admitted its oversight procedures had failed and it agreed a $14 million settlement with the United States.

Lawyers representing the Russian Customs Committee argue that this amounts to an admission of guilt and they want damages under the US Racketeering Influenced and Corrupt Organizations (Rico) act, which is normally used to recover money from organized crime gangs.

The Wall Street bank contests that the statutory window for new legal actions linked to the case has closed.

Bank of New York Mellon operates in 34 countries worldwide and has around $1.1 trillion worth of assets under its management.

Market Triple Bottom?

The S&P 500 is testing the bottom for a third time. It seems that the volume has been declining with each successive test. If we fail to hold these levels, then we could be in for another serious leg down. 

However, with a confirmed triple bottom in place, our overall swing trading strategy will need to be adjusted. In the bear market, the predominant strategy was short sell rally tops. Now the strategy would change to buy the bottom of corrections, or "buy on the dips."

Triple bottom - A reversal pattern consisting of three price troughs at roughly the same price level. The implication is that by failing to move through such levels after three attempts, the market is meeting significant support and could reverse.

This Day in Wall Street History, 1986: Boesky banned from Wall St.

Until 1986, Ivan Boesky was one of wealthiest and most successful figures on Wall Street. But, after November 14, 1986, his name was inextricably linked with the scandal and corruption that engulfed the industry during the 1980s. Indeed, on this day, Boesky consented to a stern settlement on charges that he had engaged in insider trading. Specifically, he and Wall Street veteran Dennis B. Levine had been involved in an improper trade relationship: Levine furnished tips and information that Boesky then used to make big-money trades. In return, Boesky paid Levine a percentage of the profits from these trades. The union proved to be quite lucrative, as Boesky reeled-in roughly $50 million from illegal trades. But, when the Securities and Exchange Commission started probing into Levine's affairs, he wilted under the heat and handed over his partner to the authorities. The ensuing settlement called for Boesky to return his illegally gained profits to the SEC, as well as pay a $50 million fine. Along with emptying his once-considerable coffers, the sentence also banned Boesky from the securities industry and called for him to serve a maximum of five years in prison. 

source: www.history.com 

G-20 leaders descend on Washington Friday to talk about what's needed to get the global economy back on track.

Leaders from the so-called Group of 20, which includes the United States, members of the European Union, China, Saudi Arabia and Brazil, agreed to the summit late last month at the height of the global financial crisis.

The summit represents the latest effort by countries around the globe to address what continues to be a painful and unrelenting economic crisis.

What began as a problem in the U.S. housing market more than a year ago has spread far and wide, infecting all corners of the global financial system.

Hoping to stem the crisis, countries around the globe have acted both in concert and individually in recent weeks.

Beyond the actual crisis, the leaders are expected to continue dealing with infighting, which has stalled other efforts to curb the crisis. They appear to be taking some credit before it was earned by dubbing the meeting Bretton Woods 2. By the end of the weekend, the world should know what kind of progress was made, but it will take much longer to know whether the leaders' work results in a fix for the financial system.

Group of 20 countries
Argentina
Australia
Brazil
Britain
Canada
China
European Union
France
Germany
Indonesia
Italy
Japan
Mexico
Russia
Spain
South Africa
Saudi Arabia
South Korea
Turkey
United States

Vienna Stock Exchange in takeover of Prague bourse

The Vienna Stock Exchange (VSX) has acquired a 92.4 per cent share in the Prague Stock Exchange, making it the bourse's new majority stakeholder, subject to regulatory approval of the deal.

In a statement, VSX said Prague's exchange is one of the biggest in central and eastern Europe, with 29 listed companies and total market capitalization of around €40 billion ($50.9 billion).

So far this year, the platform's average monthly trading volumes were €2.77 billion, it added.

The latest acquisition means VSX now owns a majority stake in three central and eastern European exchanges. Together with Oesterreichische Kontrollbank, it owns 68.8 per cent of Hungary's Budapest Stock Exchange and in June this year, it secured an 81.01 per cent stake in the Ljubljana Stock Exchange of Slovenia.

VSX chief executive officer Michael Buhl said he would be meeting with the management of the Prague exchange "over the coming weeks and months" to develop new strategies.

Founded in 1771, the VSX had a market capitalization of €59.8 billion at the end of October, with average monthly trading volumes of €13.2 billion.

This Day in Wall Street History 1789 : Ben Franklin complains about taxes

Complaining about taxes is nothing new for Americans. Indeed, in a letter he wrote on November 13, 1789, Benjamin Franklin lamented to a friend, "In this world nothing can be said to be certain, except death and taxes." 

source: www.history.com

Guidelines for banks will address lending, executive pay

The four federal agencies that have oversight of financial institutions are coming to an agreement on guidelines that strive to encourage those receiving federal aid as well as other financial firms to lend more and rein in executive compensation, sources said. While the federal guidance is not as strong as a law, banks that ignore the guidelines can face a variety of sanctions.

more at http://www.washingtonpost.com/wp-dyn/content/article/2008/11/10/AR2008111002918.html

CME's trading up 17% in 2008

Trading at CME's two Chicago exchanges has grown only 17% this year, the slowest pace since at least 2002, and some analysts forecast declines next year. Third-quarter profit rose 3%, to $278 million. Meanwhile, shares of CME swung widely last month as investors tried to gauge its chances of success in the swaps business; starting Oct. 13, the stock slumped 43%, hitting a three-year low of $233.19 a share on Oct. 27.

The challenge is unprecedented for CME, which has increased its profits and share price since its public offering in December 2002.

CFTC chief calls for regulatory overhaul, creation of 3 new agencies

The nation's top futures market regulator Tuesday called for the creation of three new agencies to replace the functions of the Securities and Exchange Commission and the Commodity Futures Exchange Commission and add oversight to the most active parts of the unregulated derivatives markets that were at the heart of the financial meltdown this past September.

"I believe the United States should scrap the current outdated regulatory framework in favor of an objectives-based regulatory system consisting of three primary authorities: a new Systemic Risk Regulator, a new Market Integrity Regulator and a new Investor Protection Regulator," Walter Lukken, CFTC's acting chairman, said in prepared remarks to a speech before the futures industry association meeting in Chicago.

more at http://www.chicagobusiness.com/cgi-bin/news.pl?id=31772

Questions linger over China's huge stimulus package

What China announced as a $586 billion stimulus package may not be quite that big and could take longer to implement than analysts expected. The amount includes money for several programs previously announced, and the spending is allocated through 2010, spreading the impact over nine quarters. Beyond that, as little as a quarter of the money will come from the central government, with the rest contributed by local governments and unspecified "social investment."

more at http://www.reuters.com/article/ousiv/idUSTRE4A91NW20081110

Citi bids farewell to No. 1 spot

One year ago this week, the board of a struggling Citigroup Inc. ousted Chief Executive Charles Prince in hopes of turning the bank around. Twelve months and $68 billion in mortgage-related losses later, Citi shares have lost 65% of their value, and the company has so many troubled assets that its days as a leader in U.S. finance appear to be over.

What was once the world's biggest bank has slipped to a position as America's fourth-largest by market value, ahead of Minneapolis-based U.S. Bancorp.

Today, Citi CEO Vikram Pandit is furiously trying to right his ship by cutting costs, jettisoning risky assets and selling nonessentials. Working against him is the sinking economy, which is exposing Citi to titanic losses on everything from credit cards to office-building loans. Adding to the company's pain, healthier rivals Bank of America and J.P. Morgan Chase are expanding aggressively, in part filling the void left by Citi's retreat.

“Citi no longer matters,” says Bill Smith, head of Smith Asset Management, a shareholder in and longtime critic of the bank. “It's a black hole.”

The numbers are grim: Citigroup has racked up $20 billion in net losses over the past year, while J.P. Morgan and BofA have generated net income of $8 billion and $6 billion, respectively.

Similarly, Citi sat binding its wounds as J.P. Morgan grabbed Bear Stearns and Washington Mutual at fire-sale prices and BofA captured Merrill Lynch. Citi's one attempt at vulture investing—a low-ball bid for the failing Wachovia—was blown out of the water by the healthier Wells Fargo.

Even after massive write-downs, the bank still has $138 billion of “problem assets,” according to brokerage firm Fox-Pitt Kelton, compared with J.P. Morgan's $32 billion. Credit losses and nonperforming assets continue to rise, which suggests a continuation of the past year's pattern of painful write-downs and costly capital injections.

China launches $586 billion economic-stimulus plan

Days before Chinese President Hu Jintao is set to meet with Group of 20 leaders in Washington, the country's State Council announced a spending plan that allocates $586 billion through 2010 to stimulate the economy. Hu is expected to be under greater pressure to play a bigger role in battling the global financial crisis. China plans to spend the stimulus package on projects including roads, airports, railways and the power grid. Initial reaction to the plan has been positive across global markets. 

http://www.iht.com/articles/2008/11/09/business/yuan.php

Nobel Laureate's Fund Halts Withdrawals; Value Drops 29% in First Half of October

Platinum Grove Asset Management, the hedge-fund firm co-founded by Nobel laureate Myron Scholes, temporarily stopped investor withdrawals from its biggest fund after it lost 29 percent in the first half of October.

The decline left Platinum Grove Contingent Master Fund with a 38 percent loss this year through Oct. 15, according to investors. Funds that use a similar approach of exploiting differences in the value of related securities fell 14 percent last month and 30 percent this year, according to data compiled by Chicago-based Hedge Fund Research.

"The suspension is necessary given current market conditions," Platinum Grove said in an e-mailed statement Friday.

The Eight Bubbles

written by DK Matai, Chairman, ATCA Open

There is a rising myth of the single bubble which suggests that The Great Unwind -- manifest as the global credit crunch -- is essentially about subprime mortgage default, a USD 1.5 trillion challenge. The truth is that there are as many as eight bubbles at play which are in the process of bursting, taking the form of deleverage on an unprecedented scale.

1. Subprime Mortgage linked Loans and other Assets (USD 1.5 trillion);
2. China, India, Eastern Europe and other Emerging Market Loans (USD 5 trillion);
3. Commodities (Commodity Derivatives at about USD 9 trillion);
4. Corporate bonds (USD 15 trillion);
5. Commercial (USD 25 trillion) and Residential property (USD 50 trillion);
6. Credit Cards Outstanding Debt (USD 2.5 trillion);
7. Currencies (Foreign Exchange Derivatives at about USD 56 trillion); and
8. Credit Default Swaps (USD 58 trillion) as a subset of all Derivatives (USD 1,144 Trillion).


The USD 1.144 Quadrillion derivatives market as quoted by the Bank for International Settlements in Basel, Switzerland:

1. Listed credit derivatives stood at USD 548 trillion;
2. The Over-The-Counter (OTC) derivatives stood in notional or face value at USD 596 trillion and included:
a. Interest Rate Derivatives at about USD 393+ trillion;
b. Credit Default Swaps at about USD 58+ trillion;
c. Foreign Exchange Derivatives at about USD 56+ trillion;
d. Commodity Derivatives at about USD 9 trillion;
e. Equity Linked Derivatives at about USD 8.5 trillion; and
f. Unallocated Derivatives at about USD 71+ trillion.

The relative scale of the world's financial engine is as follows:

1. The entire GDP of the US is about USD 14 trillion.
2. The entire US money supply is also about USD 15 trillion.
3. The GDP of the entire world is USD 50 trillion. USD 1,144 trillion is 22 times the GDP of the whole world.
4. The real estate of the entire world is valued at about USD 75 trillion.
5. The world stock and bond markets are valued at about USD 100 trillion.
6. The big banks alone own about USD 140 trillion in derivatives.
7. The population of the whole planet is about 6 billion people. So the derivatives market alone represents about USD 190,000 per person on the planet.

Withdrawal of hedge fund AML rules "inexplicable"

The Bush administration's decision to drop planned anti-money laundering (AML) regulations aimed at the $2 trillion hedge fund industry has been denounced as "inexplicable, ill-timed and unwise" by Democrat Senator Carl Levin.

In a statement, Sen Levin said there is a danger of the private investment pools being used as a conduit for money laundering and possible terrorist financing because they handle large amounts of offshore capital "without any legal obligation to check who is behind the funds or report suspicious activities", the Washington Post stated.

All financial institutions have an obligation under the 2001 Patriot Act to introduce AML measures.

However, the US Treasury announced earlier this week that it was withdrawing proposed AML laws for hedge funds because they were "dated".

Officials have argued that hedge funds represent a relatively low money laundering risk because of the large upfront investments required. They also said regulations would be difficult to implement because there is no central oversight body to enforce them.

Nevertheless, Sen Levin said the White House's move leaves a "regulatory gap" in the system that must be addressed.

This Day in Wall Street History 1851 : Charles Henry Dow was born

Charles Henry Dow, the journalist and economist who helped wed media to the stock markets, was born on this day in Connecticut in 1851. Dow moved to New York in 1880 to work as a stringer for a financial news wire. In 1882, he joined forces with Edward D. Jones to produce news reports for Wall Street brokerage firms. The newly formed Dow Jones & Company would churn out these bulletins, then known as "flimsies," or "slips," and send them over to Wall Street via messenger. Dow and his team would cap the day with a summary report of the market action that, by 1889, had evolved into the Wall Street Journal. Dow was the first editor of the Journal, using the paper as a vehicle to postulate his economic beliefs, including the aptly named "Dow theory." Along the way, Dow developed a statistical method for measuring the markets that has since become the Dow Jones average. 

source: www.history.com

CME Group Oct. volume up 13%

Exchange operator CME Group Inc. said Monday its October trading volume rose 13 percent.
An average of 12.5 million contracts were traded per day, compared with 11.1 million contracts per day during the same month last year. Last year's figures include combined CME Group and New York Mercantile Exchange trading volume.

Earlier this year, CME Group acquired the New York Mercantile Exchange.

Through the first 10 months of the year, CME Group has averaged 13.7 million contracts traded per day, a 10 percent increase from last year.

E-mini equity index volume rose 83 percent to 4.7 million contracts per day, compared with 2.6 million contracts per day during October 2007. E-minis are futures contracts that are benchmarked to popular broad-based stock indices, such as the Standard & Poor's 50 or the Russell 2000.

Interest rate contract volume fell 18 percent to 4.6 million contracts per day from 5.6 million contracts traded per day during the same month last year.

Lehman vets opening boutique investment bank

Three investment bankers are leaving the remnants of Lehman Bros. Holdings Inc. to open a Chicago office next month for Wall Street investment banking boutique Greenhill & Co.
Glenn Tilles, a 34-year Lehman veteran, says he and colleagues Doug Jackson and Chris Roehm will form an industrial-oriented practice for Greenhill and eventually hire additional bankers.

Greenhill, founded in 1996 by former Morgan Stanley Group Inc. President Robert Greenhill, had no immediate comment. Mr. Tilles says the firm is searching for space in the Loop’s financial district. At Lehman, Mr. Tilles, 60, advised Chicago Mercantile Exchange Holdings Inc. on several transactions, notably the 2007 merger with CBOT Holdings Inc. that produced CME Group Inc. Lehman’s Chicago office also advised Alcoa Inc.’s $2.8-billion divestiture of its packaging and consumer products business this year.

Greenhill’s work is primarily advisory, counseling corporate clients like Delta Air Lines in its just-completed merger with Northwest Airlines and the board of Wendy’s International Inc. during merger talks with Arby’s owner Triarc Cos. Greenhill eschews riskier capital-markets activities like lending, trading and underwriting.

“We don’t have to worry about being wiped out on the capital side of the business as, frankly, we were in the old Lehman Bros.,” Mr. Tilles says.

Greenhill nevertheless is hardly immune from market turmoil. It lost $11.7 million during the three months ended in September, causing a 57% decline in net income — to $36.4 million — for the first nine months of 2008. Greenhill blamed a drop in advisory fee revenue from fewer completed deals and a decline in the value of energy investments.

Last month it opened an office in Tokyo, its seventh.

Exchange-traded notes lose their appeal for investors

Investors have been withdrawing assets from exchange-traded notes as the credit crisis and falling commodity prices take their toll. In September, investors pulled roughly $460 million from 90 ETNs that are tracked by Morningstar. October figures are expected to be worse, although bankers are still optimistic about the sector. "We believe the outflows across commodity investment products, such as ETNs or ETFs, are only temporary," Barclays said. "The exchange-traded product market will continue to grow and there will continue to be new products offered to investors." 

Citadel Says Business is Sound, 30 Percent of Assets in Cash

Citadel Investment Group, one of the world's biggest hedge funds, said Friday it has more than $10 billion in available credit and sought to quell rumors it was liquidating some portfolios after its two main funds had lost 35 percent since January.

Reacting to persistent market talk it had asked the U.S. government for a cash injection and that financial regulators were coming to inspect its accounts, Chicago-based Citadel held an unusual and hastily arranged conference call.

Its founder Kenneth Griffin, one of the $1.7 trillion industry's most prominent players and someone who rarely speaks in public, and Gerald Beeson, its chief operating officer, blamed the dislocations in the bond and credit default swap markets for the bulk of the loss in Citadel's main funds. Panic also played a major role, they said.

The men told throngs of people who had jammed the phone lines at the start of the call that Citadel, which manages roughly $18 billion, has 30 percent of its assets in cash and U.S. Treasuries locked away in a box at the Bank of New York and was in no danger of collapsing.

Beeson said the firm could access $8 billion in one particular line of credit and the firm said it could access other lines as well, giving it more than $10 billion in available credit.

While the firm's main Kensington and Wellington funds have lost 35 percent this year, Beeson explained the bulk of losses occurred in the weeks after Lehman Brothers Holdings collapsed and filed for bankruptcy in mid-September. The men said Citadel's other businesses were strong.

Recently the fund firm, which has long been known as an aggressive trader, has branched out into other businesses like executing a large bulk of American option and stock trades.

It has hired a string of bankers from JP Morgan Chase & Co in a move that so angered the New York-based bank that it sued the head hunter who helped broker the hires.

But because Citadel has traditionally delivered out-sized returns, such as 20 percent annually from 1998 to 2007, word of the its swelling losses -- the funds suffered their worst month ever in September -- came as a huge shock even as thousands of other hedge funds are also nursing double digit losses.

The average hedge fund has now lost roughly 19 percent, according to data from Hedge Fund Research and industry analysts expect thousands of funds, including some multibillion dollar players, to collapse in coming months.

Credit default swaps on Citadel's debt have been quoted at distressed levels for the past week, indicating concerns over the fund's viability, though trading in the swaps has been very illiquid.

Griffin, 40, who started his investing career in his Harvard dorm room, firmly brushed off talk that the firm might fail. "We have made it through 18 years and we are confident we will make it through the next 6-to-8 weeks as we approach year end," Griffin said.

He also stressed that the "tremendous dislocations in the market" have also created "tremendous opportunities".

So far investors seem to be taking the firm at its word as the men said investors' requests to get their money out have been modest, totaling only a few percent of capital. Clients have until Nov. 15 to notify Citadel if they want to exit by year's end.

Beeson and Griffin repeatedly described recent events as unprecedented and Beeson called Lehman's bankruptcy "the greatest dislocation we've seen in money market history."

To calm frayed nerves, Citadel had issued a statement early on Friday saying that it is "business as usual around the globe."

But as the day wore on and the rumors kept coming, the company arranged the call with Griffin, who rarely gives interviews, but who has been asked to testify before Congress next month along with other industry icons and fund managers George Soros and John Paulson.

Earlier this week, Griffin told a group in Chicago that he sees a changed world for hedge funds as policymakers around the world have chosen the winners and losers. "The winners are the banking system," he said, adding that he also sees the need for a new fiscal stimulus package.