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Proprietary Trading ban it curb it restrict it

Ban proprietary trading, curb proprietary trading in order to tame proprietary trading and its proprietary traders!

Proprietary trading or prop trading as it is usually called was at the helm of the last financial crisis in 2008. Once again it is this very form of trading activity and that has engulfed the US trading firm MF Global in the month of October 2011. 

So what exactly is this proprietary trading? In simple terms it is the form of trading activity that financial institutions carry out in the world financial markets with their own money. The proprietary traders or the prop traders as they are so called speculate the movements of bonds, currencies, stocks and derivatives items. They do so by means of taking some amount of leverage activity. In no time does this speculation turns intoxicating and the prop traders go on over speculating with their firms' money. This over speculation goes hand in hand with a higher leverage activity on the side of the firm, giving it an over exposure to the systemic risk that looms at large on the world markets. When Lehman Brothers collapsed in 2008, it had a leverage of somewhere around 34. When MF Global Holdings collapsed in the month of October 2011, it was leveraged somewhere close to 40 times its actual worth. So when such firms collapse, they not just collapse themselves, but in turn they bring down the entire system with them to rubble and ashes.

I would be expressing my strong views and opinions on this topic in the coming blogs and would try to keep you updated with the news and happenings across the globe, related to this prop bomb that causes widespread systemic financial crashes and explosions !!!

7th Annual FIA Asia Derivatives Conference 2011

• What? The 7th Annual FIA Asia Derivatives Conference 2011
• When? 29 November - 1 December, 2011
• Where? St. Regis Singapore

FIA - Futures Industry Association

The 7th Annual FIA Asia Derivatives Conference 2011 is a one of its kind conference that involves programs, exhibitors and delegates of high class and quality. More than 150 firms worldwide send around 450 delegates to attend this annual event. The FIA Asia conference is the place where you get to network with executive level and other senior managers in the Asia Pacific region since they comprise nearly 76% of the delegate list.

Asia is considered as the fastest growing region in the world and this conference highlights, shares and discusses the trends and opportunities that are present here. Watch some of the leading players in regional markets debate the challenges in Asia of OTC clearing, the changing nature of the markets in a high-speed world, and the commodity markets next door to the biggest, fastest-growing consumers of commodities in history.

The Asset Management Conference 2011

• What? The Asset Management Conference 2011
• When? 30 November to 01 December 2011
• Where? IET London: Savoy Place

This conference is being organized by The IET (Institution of Engineering and Technology) and the IAM (Institute of Asset Management).

The IET and IAM annual Asset Management conference 2011 has for the first time made a call for papers for this event. The programme will feature presentations of accepted papers that have been submitted from various sector industries and academia.

The prime focus of this conference is to advance knowledge and share understanding and thinking on the management of physical assets and strengthen the link and bridge the gap between industry, academia and research. Workshops would be conducted to offer a truly international insight into best practice asset management.

Kindly refer to the event website for full details, pricing and how to register for the event.

The FAST Conference 2011 on November 21, 2011

• What? The FAST Ltd Conference 2011 
• When? November 21, 2011
• Where? Twickenham Rugby Stadium.  

The conference is for the Directors, CEO s and the IT professionals. The theme of the conference is to stress the need for better, efficient and increased cooperation between business and the IT department. Focus would also be laid on the security and cost management issues at large. Software Asset Management (SAM) and IT Compliance also form part of the discussion. 

Experienced industry speakers and analysts would even conduct two separate streams of presentations, namely,  ‘Finance and Business’ & ‘Technology and Soft Skills’ on the day. Registered users would be able to attend either of the above two presentations.

Keynote speakers:
Ross Wilson, Chairman IOD Berkshire
Ben Hunt-Davis, Olympic Games Gold Medal Winner

Finance & Business Stream:
Andy Cook of VRL  Financial News
Chris Rawson, MD, exvine
Kirstin Furber of BBC Worldwide
Mark Jackson, PR/Rugby Referee

Technology and Soft Skills Stream:
Doug Clark of IBM
Frank Joshi of Mvine
Peter Hubbard of Pink Elephant
Chris Hurst of BT

After the event delegates will be able to attend a complimentary tour of the stadium.

Delegate Rates

For FAST Ltd Customers  - £269 + VAT per delegate
For non FAST Ltd customers - £399 + VAT per delegate

Technology in the Capital Markets

Firms rely on technology for capabilities ranging from high-frequency trading to risk management to derivatives pricing. That dependence will grow only deeper in the years to come as companies and regulators seek technological answers to portfolio and systemic risk.

- Irfan Khan, Vice President and Chief Technology Officer, Sybase, Inc.

The 2 golden rules to invest and make money in the stock markets

It is said that there are only 2 rules to invest in the stock markets and they are as follows -

1. You should never lose your money in the stock market
2. You should never forget rule number 1 

SEC Bans Unfiltered Market Access

After a couple of incidents of mistaken orders generated by humans or algorithmic systems which highlighted risks that could disrupt markets, it was being speculated since long that the U.S. Securities and Exchange Commission or SEC would pass new risk management standards. Although it was a necessary step, particularly in the aftermath of the May 6 "Flash Crash," the need to adopt such standards gained more prominence. Later on, SEC unanimously voted 5-0 to abolish so-called naked access to stock markets and require broker-dealers to check trades before they are made.

The law requires brokers or dealers with market access to establish, document, and maintain a system of risk management controls and supervisory procedures reasonably designed to manage the financial, regulatory, and other risks of this business activity.

Thereby it becomes increasingly important for us to know about the changes this law will bring in for the stock market professionals especially the broker-dealers segment.

Financial System - An overview

Financial System – An overview

The world financial system is composed of 4 major entities –

• Financial institutions
• Financial markets
• Financial products
• Financial services
  

Before we get a bird’s eye view of these 4 major entities of the financial system, let’s discuss a few basic questions –

Why at all is the financial system required?
The financial system is needed to provide the below mentioned functions –

Savings and investment functions
Liquidity functions
Payment functions
Risk mitigation and contingency functions
Financial policy functions


Who all need the financial system?
The financial system is needed by one and all namely –

Financial institutions including the FIIs or the foreign institutional investors
Corporations and companies
Individuals
Government


How does the financial system work?
The financial system facilitates the flow of funds either directly or indirectly, from the area of surplus to the area of deficit.


Now let us see the subdivisions of the 4 broad entities of the financial system.

The financial institutions could be subdivided into –
Regulatory
Intermediary (banking and non banking)
Non intermediary
Others

The financial markets could be subdivided into –
Primary markets & Secondary markets
Both the primary and the secondary markets could be of organized or unorganized nature. The organized markets could be further classified as –
Capital markets
Money markets
Derived or derivative markets

The financial products are sub-categorized into –
Debt instruments
Equity instruments
Hybrid instruments
Derived instruments

The financial services are sub-categorized into –
Market supporting systems (Trading, Broking, Clearing, Settlement)
Custodial and Depository services
Credit rating
Factoring and Forfeiting
Risk management
Wealth management
Asset management
Mutual funds services
Hedge funds services
Insurance
Consultancy
Merchant banking
Investment banking
Leasing
Hire purchase
ET AL…


In our subsequent discussions at CAFE FINANCE, we would be covering in detail, these broader aspects of the world financial system.

Basics of Investment

Investment Basics

Investment is a word that has long been used by almost every individual. And this is all because investment forms a very vital part of every one’s lives.

The money that we earn from our hard work has got huge potential to secure our future. But to do that we have to rightly plan our investments. After spending a part of our earned money, we keep aside a part of it and save it for meeting future expenses. But at times this secure money sits idle with us and thus does not give us back more money, which it could otherwise, if it had been invested wisely. This secure money forms the very base of investment. Thus investments are done so that our idle sum of money could be made to work for us and in turn give us some sound return.

People make some specific goals in their lives and for this also they need to plan out their investments in advance. One should start investing in their lives as early as possible. This would help them garner good money on their investments in the future to achieve their targets or meet their goals.

Money should be invested on a regular basis. This money could be a big sum or a small sum, depending upon the savings of the individual. It has always been mentioned that investments should be made keeping a long term perspective in mind and never a short term. Long term investments are generally more secure than short term and also have the potential to generate good amount of money in future. In long term investments, the concept of compounding plays a very crucial role, wherein the principal sum of money and the interest earned on it are reinvested year after year.

There are some basic guidelines that should always be followed while making investments. Written documents should be obtained that clearly explain the type of investments being made. The investor should read and thoroughly understand such documents and also verify its legitimacy. The costs and benefits that are associated with such investments should be calculated beforehand. After ascertaining the appropriateness of the investments for the specific goals, the investor should assess its risk return profile. The safety aspects and liquidity functions of the investments should be known and all such details should be compared with the other available investment products or services. A very basic but still a very vital point is that the investor should make such investment planning with only authorized investment planners, after seeking all clarifications about the concerned intermediary and its services. And last but not the least; the investor should also look out for the various options that are available, in case some things were to go wrong.

The various types of investment options that are available are as follows –
Physical assets like gold, silver, commodities, jewellery, real estate properties, et al.
Financial products like bank fixed deposits, life insurance, pension funds, and mutual funds, shares, bonds, debentures et al.

Welcome

Finance is the life and blood for any individual or organization. Whether you are an employee or a manger or an entrepreneur, whether you have a home business or a multinational company or an online firm, you just can’t afford to undermine the importance of finance and financial news.

Finance can be defined as the branch that deals with resource allocation and resource management. Simply put, finance is all about money and related decisions. In order to make informed judgments and evaluations, you should be having a sound knowledge of finance topics as well as latest financial news and trends. We at "CAFE FINANCE" strive to bring to you the most exhaustive and detailed analysis of all finance related topics, explained in simple terms. Reading these articles will give you a fairly good idea about how markets and money work and help you in making wise financial decisions. Just click on the appropriate category and read on...

Welcome to CAFE FINANCE ... !!!