$440 million LOSS from the software problem

Trading software ran amok with no 'off' switch at Knight Capital

Employees had no idea how to stop the blizzard of erratic trading on Wednesday

Jessica Silver-Greenberg, Nathaniel Popper & Michael J De La Merced / Aug 05, 2012, 00:45 IST When computerised stock trading runs amok, as it did this week on Wall Street, the firm responsible typically can jump in and hit a kill switch. But as a torrent of faulty trades spewed Wednesday morning from a Knight Capital Group trading program, no one at the firm managed to stop it for more than a half-hour. Some Knight employees and New York Stock Exchange officials noticed the blizzard of erratic orders in the minutes after trading started and sent alarmed messages to Knight managers, according to the exchange and Knight employees who declined to be identified discussing the matter. As Knight struggled to survive on Friday, employees at the company, market overseers and other electronic trading firms were asking the same basic question: Where was the off switch? Several market insiders said that they were bewildered, because in a market where trading losses can pile up in seconds, executives typically have a simple command that can immediately halt trading. “Even just a minute or two would have been surprising to me. On these time scales, that is an eternity,” said David Lauer, a trader at a high-speed firm until a year ago. “To have something going on for 30 minutes is shocking.” Regulators are planning to look into why there was such a lag between the discovery of the problem and when Knight's trading ceased, according to people with knowledge of the discussions. But so far the company has not provided any answers, even to its own staff, employees said. On Friday, Knight, which in the last decade grew into a leading broker for American stocks, climbed off the mat, securing emergency financing that allowed it to continue operating for the day. It also enticed some of its customers to resume sending client stock trades, two days after it disclosed a possibly fatal $440 million loss from the software problem. But it faced a desperate weekend of maneuvering to find a more permanent solution for its woes. Knight's short-term financing was meant to keep it alive until Monday, when its executives and advisers hope to have deals completed to remove any doubt about the firm's future. Advisers, including Sandler O'Neill & Partners, have been talking with Knight rivals and private equity shops about either buying divisions of the firm or investing in the business. Among the businesses that Knight is in discussions about selling is its futures brokerage unit, largely made up of operations the firm purchased only in May, according to people briefed on the matter. Potential buyers for the business include R J O'Brien, which is based in Chicago and is one of the oldest futures clearing firms in the country. Others that have expressed interest in potential investments or deals include rivals to Knight like the Citadel Investment Group, Virtu Financial and Peak6 Investments, as well as private equity firms like Kohlberg Kravis Roberts and TPG Capital, these people said. Knight is also working with Goldman Sachs to help unwind the trades behind its extensive loss, according to people briefed on the matter. Goldman has agreed to buy, at a discount, the shares that the trading firm had accumulated. Such a move would help Knight by taking the portfolio off its hands and freeing up capital. Coming after a number of previous market mishaps caused by faulty computerised trading, Knight's trading problems rekindled a broader discussion about the vulnerability of an increasingly complex and fragmented stock market. In a statement, the chairwoman of the Securities and Exchange Commission, Mary L Schapiro, called the Wednesday episode unacceptable and said her staff would “convene a round table in the coming weeks to discuss further steps that can be taken to address these critical issues.” Duncan Niederauer, chief executive of the New York Stock Exchange, said in a conference call with investors that the incident was a “call to action,” and that the exchange was prepared to lead the way on reforms. “We are all understanding—meaning we, market participants, and most importantly the regulators—are understanding that speed is not always better,” Niederauer said. Within the financial community, much of the attention was still focused on what happened Wednesday morning. While the New York Stock Exchange has said that there was “irregular trading” in only about 140 stocks listed on its exchange that day, Knight's trading in those stocks was so extreme that it was visible in the volume of trading in all stocks. A New York Times analysis of New York Stock Exchange volume on Wednesday morning showed that during the first minute of trading there was 12 percent more trading in all stocks than there had been on average during the previous seven days. By the third minute of trading there was 116 percent more trading than the previous week's average. The difference reached a peak at 9:58 a.m., when the volume was six times greater. After that, trading volume fell off sharply, nearing the recent average at 10:15 a.m. Mr. Niederauer said that the exchange had noticed the problem and contacted Knight “within minutes” of the 9:30 opening bell. Knight's failure to respond sooner was particularly mystifying to other traders because on Wednesday the firm had introduced new trading software. Industry experts said that this would normally be cause for programmers and other employees to be on high alert. Once the problems began, many traders said it would have made sense if the firm's employees had not caught the problems for the first minute or so, given the speed at which Knight's program was firing off orders. After that, though, the problems were visible for all to see. Howard Tai, an expert in high-speed trading at the Aite Group, said that at all the firms where he worked, there were several warning signals built into every computerized trading system. When all else failed, there was always the “automatic kill switch” that could immediately stop trading. Mr. Lauer said, “It's kind of mind-boggling that it got so out of control.” Azam Ahmed and Ben Protess contributed reporting.

Now wait for lawsuit!!!

Spectrum tab fixed. Now wait for lawsuits

Published: Saturday, Aug 4, 2012, 8:56 IST 
By Beryl Menezes | Place: Mumbai | Agency: DNA

Picture this:
India’s telecom companies owe Rs1.7 lakh crore to banks.
So they wanted an 80% cut in the reserve price for 2G spectrum. They got 23%.

The Cabinet on Friday confirmed a reserve price of Rs14,000 crore to buy 5 mega hertz of pan-India 2G spectrum in the 1800 Mhz band, while for CDMA technology operators, the 800 Mhz spectrum base price would be even more – Rs18,000 crore – or 1.3 times the 1800 Mhz price.

But a decision on price to be paid by incumbents holding spectrum beyond the 6.2 Mhz limit was deferred.

The frozen price is about 7.5 times the price paid in 2008 for spectrum.

While telcos have to pay only a third of the final bid price upfront, they still need to take fresh loans of over Rs3 lakh crore to roll out the cutting-edge business, industry folks estimate.

On their part, telcos will have to cobble big cash, too -- as much as 20-30% of the winning bid price – in bank guarantees.
Banks, which are already trembling after disbursing the aforementioned loans, are chary of taking fresh gargantuan positions to the sector, say sources.

Says HK Vesuna, manager, corporate credit, Central Bank of India: “We don’t wish to burn our fingers with the telecom sector again. We are certainly not inclined to lend to them.”
Ergo, dialling for an auction disaster and a slew of lawsuits by affected entities? Experts say very likely.

“The telecom industry is reeling under tremendous stress due to high debt, banks’ unwillingness to lend and falling revenue,” Hemant Joshi, a telecommunications analyst with Deloitte Haskins & Sells, told Bloomberg. “These can only be cured with a strategic government policy and not by some poorly thought out rebates.”

Says Rajan Matthews, director general of COAI, which represents the GSM lobby: “While we are disappointed, both new and incumbent operators will participate in the auctions, albeit only in select circles. This will mean that the final auction discovered price will not move much beyond the reserve price, as there will also be fewer bidders.”

In a landmark judgement on February 2 this year, the Supreme Court quashed 122 telecom licences for their alleged participation in the 2G spectrum scam.

The court also said that a new auction, to be completed by August 31, would allow tainted operators a chance to win back their spectrum in order to continue their operations in the country. Failing this, they would be forced to wind up operations by September 7.

However, the problem arose with the Telecom Regulatory Authority of India preferring to err on the side of caution and setting a base price at Rs18,000 crore, or roughly twice the 3G auction bidding price.

Later, fearing auction failure, an EGoM headed by now finance minister P Chidambaram, suggested a 25% reduction in original base price to Rs14,000-16,000 crore to the Cabinet.

However, in addition, telecom operators would need to pay spectrum usage charges of 3-6% of their annual revenues.
Telecom operators had also deemed this price too high, especially for new telcos, who would end up paying much more, having not yet completed their roll-out obligations, and asked for a reduction to Rs10,000 crore.

Telenor and Sistema Shyam Telecom, the two international players who were aggressive about winning back their lost spectrum and continuing operations in the country, even threatened to leave the telecom sector, if the base price was not lowered.

However, in a statement today, Telenor said, “From media reports, it appears that the government is taking some positive steps towards these issues. However, until we see these and the full auction rules in the information memorandum, we are unable to come to any new position with regards to the auctions. Meanwhile, we urge the government to do everything it can to conduct the auctions within the August 31 deadline.”

According to the telecom minister today, a meeting is likely to be held on Monday to decide on the auction schedule, while the spectrum auctioneer will decide on the time-frame for the auction.

Other decisions taken today by the Cabinet, included approval of the existing slab-wise system of spectrum usage charges, according to which operators will have to pay only for the amount of spectrum that they actually use.

STOCK MANIPULATION....

Stock crash: Probe to be completed soon

AGENCIES

Posted: Saturday, Aug 04, 2012 at 1814 hrs IST

New Delhi: Sebi Chairman U K Sinha today said detailed investigations into the recent crash of mid-cap stocks would be completed fast and action would be taken against those found guilty of stock manipulation.

A day after Sebi barred 19 entities in an interim order in this matter, Sinha said: "On preliminary investigation, we found that things were not right. We have taken some action. Detailed investigation has been started. We are going through that".

"We hope to complete the investigations fast and as soon as it is completed, we will be taking action," Sinha told reporters here on the sidelines of a conference organised by PHD Chamber.

After initial probe into share plunge of 20-26 per cent in four mid-cap stocks -- Parsvnath, Tulip Telecom, Glodyne Technoserve and Pipavav Defence -- on July 26, Sebi last night barred 19 entities, including three individuals, from the securities market till further orders.

The 19 entities, many of whom are found to be related to each other with common addresses and phone numbers in Kolkata, include 4a Financials Securities, A To Z Steels, Ajit Kumar Jain, Cheminare TradeComm, G N Credits and Gajria Jayna Precision Industries.

Sebi had said a sharp downward movement was noticed in these stocks between 0915 and 0949 hours on that day. These stocks witnessed sharp intra-day price volume movement on both BSE and NSE on July 26, although no major corporateannouncements or price sensitive information was disclosed to the exchanges by these companies during previous 15 days.

The others among the barred entities include Neelanchal Mercantile Pvt Ltd, North Eastern Publishing & Advertising Co, Passions System Solution, Premium Hospitality Services, Ramkripa Securities, Umang Nemani, Venus Infosoft, White Horse Trading Co and Yashika Holding Pvt Ltd.

These persons and entities can file their objections, if any, within 21 days from the date of this order, Sebi had said in the order dated August 3.

Sebi bars 39 entities for price rigging

Sebi bars 39 entities for price rigging

TNN Feb 3, 2011, 05.33am IST

MUMBAI: Among the investing community on Dalal Street, it's believed that a large number of speculators indulge in circular trading- trying to push up a stock, lure gullible investors to buy those scrips and then quietly exit, leaving investors with dud stocks. Late on Wednesday, market regulator Sebi banned 39 such entities from the market for indulging in circular trading in Spectacle Infotek, Goldstone Technologies, Gemstone Investments, LGS Global and Well Pack Papers & Containers. The order followed a detailed investigation in these stocks and their price movement between 2008 and 2010, the market regulator said.

The investigation report pointed out that several of these entities are linked to each other, through directorships in the same company, introduction during the mandatory "know your client (KYC)" verifications, have common telephone numbers, and some have even furnished the same email id in KYC form. The Sebi investigation found there were 196 members within the Walmiki-Shah group and 43 in the Pabari-Parikh group, and identified 39 entities which were the core members.

Sebi barred 39 entities from accessing the stock market, and also prohibited them from buying, selling or dealing in shares. The regulator also asked the stock exchanges to square off any existing futures & options position these entities have.

In all these counters, Sebi order showed these entities bought large quantities of the stock, created artificial volumes by trading among themselve, and once unsuspecting investors also bought these stocks, these entities dumped these scrips to make substantial profit. For example, a group of entities named by Sebi as Walmiki-Shah group, manipulated the share price of Well Pack Papers, in which another group, named here as Pabari-Parikh group, played a supporting role. "Their roles were reversed in the trading observed in the share (price) of Gemstone," the order pointed out.

Interestingly, in the 64-page order, Sebi has pointed out previous violations of market rules by several of the entities banned, thus showing some of these entities are regular market offenders. For example, Anand Marathe was found to have indulged in suspicious banking transactions and had a role in the Pyramid Saimira Theatre case. Marathe is already banned from the market by Sebi in the Pyramid Saimira case. None of the entities banned by Sebi are much known or big entities in the market, a dealer with a local brokerage pointed out.

http://articles.timesofindia.indiatimes.com/2011-02-03/india-business/28368127_1_entities-circular-trading-market-regulator

Sebi bans 7 GDR issuers for price manipulation

Sebi bans 7 GDR issuers for price manipulation

BS Reporter / Mumbai Sep 22, 2011, 00:50 ISTThe Securities and Exchange Board of India (Sebi) has banned seven companies from raising fresh capital, after investigations revealed they manipulated share prices after issuing global depository receipts (GDRs). The regulator has also barred 10 entities, including a foreign institutional investor (FII) and sub-accounts, from dealing in securities market. The firms barred from issuing equity shares or any other instrument convertible into equities are Asahi Infrastructure & Projects, IKF Technologies, Avon Corporation, K Sera Sera, CAT Technologies, Maars Software International and Cals Refineries. All of them made at least one GDR issue during 2007-09.  According to a 44-page order issued by whole-time member Prashant Saran, a similar method was used by all these entities. The companies made a GDR issue that was subscribed even if the pricing was at a premium. Thereafter, within a short period of time, a set of common investors converted their GDRs into normal shares, again sold to a constant group of clients. The order says: “The various aspects of GDR issues, like the large size of the issue vis-à-vis existing size of the issuing company, unimpressive financials of the company, common initial investors, high proportion of cancellation of GDRs repeatedly by a set of FII/sub-accounts, sale in Indian exchanges, most of which are with a constant group of clients, and further off-loading by them, point towards an elaborate scheme to manipulate markets.” The findings reveal evidence of a pre-arrangement between parties to transactions at various stages of this complex scheme, it adds. The financial instruments regulator has asked the Enforcement Directorate to further look into the matter. Both the depositories — NSDL and CDSL — have been directed to freeze the beneficial owner accounts of all persons/entities named in the order. Some of the entities that form part of the common pool of investors indulging in this practice are European American Investment Bank Ag (FII), India Focus Cardinal Fund (sub-account), MAVI Investment (sub-account), KII Limited (sub-account) and Sophia Growth-A share Class of Somerset India Fund (sub-account). Other entities that have been barred are Basmati Securities Pvt Ltd, Oudh Finance & Investment Private Ltd, Alka India Ltd, SV Enterprises and JMP Securities Pvt Ltd (in capacity of a client to other intermediary or in proprietary account). According to the regulator, the beneficiaries of this manipulation are the GDR issuing companies that end up with a surge in net worth along with the lead manager who earns commissions for providing services and the sub-accounts that purchase GDRs at discounts in an illiquid foreign market and exit in the domestic market with the active connivance of related counterparties that generate volume and depth to attract domestic investors. The regulator has also barred (with immediate effect) Pan Asia Advisors Ltd and Arun Panchariya (Investment Manager of India Focus Cardinal Fund) from rendering services in connection with instruments that are defined as securities in the Indian market or in any way dealing with them.

SEBI bars 7 cos for listing-day price rigging!!!

SEBI BARS 7 COS FOR LISTING-DAY PRICE RIGGING

MUMBAI, DEC. 28: 

The Securities and Exchange Board of India on Wednesday issued a series of ad interim ex-parte orders against seven companies, their directors and their merchant bankers and lead managers to the issue in the matter of price manipulation on the listing day of the companies' initial public offerings.

The IPOs of Taksheel Solutions, RDB Rasyans, Onelife Capital Advisors, Brooks Laboratories, PG Electroplast, Tijaria Polypipes Ltd and Bharatiya Global Infomedia Ltd were investigated by the SEBI for price manipulation on listing day. The share prices of Taksheel Solutions, RDB Rasyans and Brooks Laboratories plunged by 62, 66 and 40 per cent respectively on listing days. Those of Brooks Laboratories and PG Electroplast surged 33 and 96 per cent.

SEBI found most of these companies had been involved in using inter-corporate deposits (ICDs) which were diverted to other entities who further funded the buying of shares on listing day. SEBI has barred the seven companies from raising capital from the securities market until further directions. The market regulator has also barred these companies and their directors from transacting in the securities market. The ICDs have been ordered to be called back, while the unspent IPO proceeds will have to be deposited in an interest-bearing escrow account with a scheduled commercial bank. The merchant bankers and lead managers have been prohibited from taking on new assignments till further orders.

Keywords: price manipulation, initial public offerings, listing-day price rigging, Taksheel Solutions, RDB Rasyans, Onelife Capital Advisors, Brooks Laboratories, PG Electroplast, Tijaria Polypipes Ltd, Bharatiya Global Infomedia Ltd, http://www.thehindubusinessline.com/markets/stock-markets/article2755381.ece?ref=wl_markets

US and CHINA BAD NEWS CROPPING....

Drought may cost billions in U.S. food exports

By Steve Hargreaves @CNNMoney August 2, 2012: 11:48 AM ET

NEW YORK (CNNMoney) -- The drought baking Midwest corn and soybean crops will likely cost the U.S. food export industry billions in lost revenue.

But unlike droughts in previous years, it should not cause a major disruption in worldwide food supplies.

Crops from other nations can mostly cover the loss, although some people who have recently grown accustomed to eating more meat, especially in developing nations, may have to cut back on it.

The United States accounts for over half the global export market for corn and nearly half of the soybean market. Some corn ends up in products like cereal and soda, but the biggest chunk is used as feedstock for pork, chicken and beef.

All told, U.S. agricultural products account for roughly 10% of the country's $1.5 trillion export market, according to the Census Bureau.

Exports of corn, soybean and meat products -- the items most at risk from the drought -- totaled $53 billion in 2011.

The drought this year "will definitely hurt the quantity of exports," said David Hightower, president of the agricultural futures newsletter The Hightower Report.

http://money.cnn.com/2012/08/02/news/economy/drought-food-exports/index.htm?iid=HP_River

COLOURS OF - FACEBOOK- A FACT TO DIGEST!!!!

Dalton Caldwell told Facebook he's not interested in being 'acqui-hired' -- a process the company uses to buy startups for their staff and kill off their products.

NEW YORK (CNNMoney) -- Editor's note: An earlier version of this story only featured the opinions of Dalton Caldwell. This story has resonated with many in the tech community, but only including Caldwell's commentary does not meet our editorial standards. We've refocused our reporting on the stir that Caldwell's blog post has caused in Silicon Valley and have included the fact that Facebook declines comment.

'Dear Mark Zuckerberg' letter stirs up tech world

By Stacy Cowley @CNNMoneyTech August 2, 2012: 5:50 PM ET(Dalton Caldwell told Facebook he's not interested in being 'acqui-hired' -- a process the company uses to buy startups for their staff and kill off their products).

A developer who says Facebook tried to buy his startup kicked off a Silicon Valley firestorm this week with a blog post describing the coercive tactics he says Facebook used to pressure a would-be rival.

"Dear Mark Zuckerberg," began the letter App.net founder Dalton Caldwell posted late Wednesday in his blog. "On June 13, 2012, at 4:30 p.m., I attended a meeting at Facebook HQ in Menlo Park, California."

Caldwell went into that meeting expecting to demo a new app he was building on Facebook's platform, which encourages outside developers to tap into Facebook's infrastructure. That's not how things went down, he says.

"The meeting took an odd turn when the individuals in the room explained that the product I was building was competitive with your recently-announced Facebook App Center product," Caldwell wrote in his blog. "Your executives explained to me that they would hate to have to compete with the 'interesting product' I had built, and that since I am a 'nice guy with a good reputation' that they wanted to acquire my company to help build App Center."

Facebook (FB) has a tradition of buying promising startups for their staff -- then killing off the actual products. Its recent portfolio of "acqui-hires," as the practice is called, includes check-in service Gowalla, publishing company Push Pop Press, mobile bookmarking service Spool and mobile app maker Acrylic Software.

Caldwell's complaint is that he thinks Facebook is using its power to push startups into selling with an implicit threat: Sell to us or we'll crush you.

"The execs in the room made clear that the success of my product would be an impediment to your ad revenue financial goals, and thus even offering me the chance to be acquired was a noble and kind move on their part," he wrote in his blog.

Contacted by CNNMoney for a response, Facebook declined to comment on Caldwell's allegations.

Caldwell is a serial entrepreneur who knows something about having your startup acquired and killed off. His first venture, social music sharing service imeem, was acquired by MySpace in late 2009. MySpace shut the service down almost immediately after.

Caldwell's blog post -- part open letter, part manifesto -- quickly went viral in the tech community, sparking dozens of news stories and long discussion threads on sites like Hacker News.

Vic Gundotra, Google's senior vice president of engineering, posted a link to it on his Google+ profile page and offered his own response. He wrote that Caldwell's letter spotlighted some of the reasons Google (GOOG, Fortune 500) hasn't opened its own social platform yet to outside developers.

"I'm not interested in screwing over developers," Gundotra wrote.

One Silicon Valley power player even got caught in the middle. A spokesperson for venture capitalist Marc Andreessen, whose company is an investor in both Facebook and Caldwell's Mixed Media Labs (the firm behind App.net), confirmed that he is resigning his board seat on Caldwell's company to avoid a conflict of interest.

The spokesperson added that Andreessen is keeping his spot on Facebook's board. But another executive at his venture firm, Scott Weiss, will take over his board seat at Caldwell's company..

Caldwell says he knew he'd be kicking the hornet's nest by publicly going after Facebook, but says he has no regrets.

"I picked this battle very carefully," he wrote on Twitter. 

--------

Facebook has no friends: Stock slides below $20

By Hibah Yousuf August 2, 2012: 2:52 PM ET

Facebook is not very popular among investors these days. Shares of the social media giant hit a new low of just $19.82 Thursday, nearly 50% below their initial offering price.

The stock has been under pressure since last week, when Facebook (FB) reported its firstearnings as a public company, and failed to relieve investor worries about slowing sales growth and its plan for mobile advertising.

As Facebook's stock continues to bleed, institutional investors are beginning to unload their stakes. Fidelity Investments, which owns both public and private shares of Facebook, sold more than 1.9 million public shares in June across 21 different mutual funds, according to Morningstar data.

Of those 21 funds, 16 dumped more than 25% of their Facebook stakes, including the Fidelity Puritan fund (FPURX), which still owns 1.9 million shares. The Fidelity Disciplined Equity fund (FDEQX) sold almost 50% of its Facebook stock.

Of course, more than a dozen Fidelity funds also added shares of Facebook in June -- about 2.2 million shares combined -- including the Fidelity Contradfund (FCNTX), which boosted its stake by 264,000 shares, or almost 2%.

While Fidelity declined to comment on Facebook specifically, the firm's spokesman Stephen Austin said "portfolio managers make investment decisions every day for what they believe is in the best long-term interests of their funds' shareholders."

Meanwhile, a number of JPMorgan (JPM) mutual funds and a handful of funds managed by Turner Investment Partners sold significant parts of their stake in Facebook in June, according to Morningstar.

Facebook's stint as a public company has been rocky since day one, when a trading glitch at the Nasdaq (NDAQ) turned its public debut into a public fiasco.

Related: UBS lost $356 million on Facebook, suing Nasdaq

Even prior to that botched first impression, investors and analysts alike have been questioning how the company will bring in more revenue from its 955 million users, particularly through its mobile platform which is becoming increasingly popular but lacks a strong advertising strategy.

CELEBRATIONS NOT YET!!!

FE Editorial : The spillover

THE FINANCIAL EXPRESS

Posted: Saturday, Aug 04, 2012 at 2155 hrs IST: Never mind the US jobs data looking better than expected, or Spanish bond yields falling 18 bps to 6.98%, the global crisis is getting worse. US GDP numbers are lower for two quarters running and Spanish 10-year yields were 7.75% last week. The saving grace for India, however, has been the impact hasn’t been as bad as was feared. In the past, the IMF estimated the financial sector impact, especially in times of crisis, is several times the real sector impact—a 1% fall in US GDP, for instance, would lower India’s GDP by 0.05% through normal trade and finance channels for India, but this could rise to 0.8% because of the dramatically increased financial sector impact today. The consequence of the euro crisis, similarly, is best seen in terms of the possible deleveraging of European banks. From $159.1 bn in June 2011, direct claims of European bank on India fell to $146.1 bn in December 2011 as banks started liquidating Indian assets, but these claims then rose to $150.6 in March 2012—while the exposure on non-UK and non-Swiss banks in Europe fell from $ 61.4 bn in June 2011 to $54.3 bn in March 2012, this was more than made up by a rise in Swiss and UK bank exposure.

The problem, however, the just-released IMF 2012 Spillover Report forecasts, is the Euro Area could well see a 5 percentage point fall in GDP over the next two years if Europe’s politicians don’t act in time—contrast this with the IMF’s baseline WEO forecasting, just two weeks ago, that Europe would bounce back from a 0.3% contraction in 2012 to a 0.7% growth in 2013. And in the US, after the Article IV consultations a few weeks ago, the IMF said not tackling the fiscal cliff could take 2013 growth to even a possible 1%. Indeed, given that over 40% of US growth since Q1 2009 has come from exports, this puts another barrier to a faster US recovery, regardless of whether there is a QE3 or not. Also, the larger danger is that the US may have shifted down to a natural rate of growth that’s 0.25-0.5% below what it was in the pre-crisis period—that has large consequences for the future of global growth especially since China is also slowing at the same time.

In this context, the IMF’s Spillover Report asks if the Euro shock has played itself out. Partly yes, but mostly no, is the answer. And the reason why the full impact hasn’t been felt, it argues, is the feeling that Europe’s political bosses will still save the day. If that doesn’t happen, IMF says, and the deleveraging increases, European banks are likely to start selling assets held outside of Europe as well—right now, most of the deleveraging is taking place inside Europe. That India should be in the middle of a fight between the government and the central bank on cutting interest rates when the world’s future is looking so bleak is quite unfortunate.

GOOD NEWS SPREADS ....STEEP RISE IN STOCKS!!!

European Stocks Advance For Ninth Week On U.S. Economy

By Adria Cimino - Aug 4, 2012 4:30 AM GMT+0530

European stocks rose for a ninth week as U.S. economic data surpassed estimates, outweighing comments by the Federal Reserve and the European Central Bank that disappointed investors looking for more definitive steps to support growth.

Bankia SA (BKIA) posted the biggest gain in the Stoxx Europe 600 (SXXP) Index. Vestas (VWS)Wind Systems A/S rallied 11 percent after saying it has renegotiated its credit lines. Air France-KLM (AF) Group, Europe’s biggest airline, jumped 11 percent after reporting a narrower second-quarter loss.

The Stoxx 600 rallied 2.2 percent to 265.58 this week, its longest stretch of gains since January 2006. The benchmark gauge has climbed 13 percent over the nine-week period as policy makers eased repayment terms for Spanish banks and optimism grew that central banks will announce stimulus measures.http://www.bloomberg.com/news/2012-08-03/european-stocks-gain-for-ninth-week-on-u-s-jobs-draghi.html

Jobs Gains Topping Forecasts Ease U.S. Slowdown Concerns

By Shobhana Chandra - Aug 4, 2012 1:48 AM GMT+0530The U.S. economy generated more jobs than forecast in July as automakers and health-care providers boosted employment, easing concern the three-year expansion is faltering, even as the unemployment rate unexpectedly rose.

The payrolls increase of 163,000 followed a revised 64,000 gain in June, Labor Department figures showed today inWashington. The median estimate of 89 economists surveyed by Bloomberg called for a gain of 100,000. The jobless rate, based on a separate survey of households, climbed to a five-month high of 8.3 percent.

Stocks rallied, sending the Standard & Poor’s 500 Index to the highest level since May, as the jobs data countered recent reports showing a contraction in manufacturing and slower consumer demand. Faster job growth is needed to push down an unemployment rate that has been stuck above 8 percent since February 2009, one reason why the Federal Reserve this week said it is prepared to take new steps if needed to boost the economy.http://www.bloomberg.com/news/2012-08-03/u-s-july-payrolls-rise-more-than-forecast-unemployment-8-3-.html

World’s Richest Gain $19 Billion As Stocks Surge On Jobs

By David de Jong - Aug 4, 2012 3:30 AM GMT+0530The 40 richest people on the planet added $19.4 billion to their collective net worth yesterday after an increase in U.S. jobs and positive earnings reports erased losses sustained earlier in the week.

The day’s biggest gainer was Spanish retail tycoon Amancio Ortega, who added $2.8 billion to his fortune as shares of Inditex SA (ITX), the world’s largest clothing retailer, jumped 5.4 percent. The 76-year-old, Europe’s richest man, is worth $45.1 billion, according to the Bloomberg Billionaires Index.

“Investor sentiment has turned a little bit more positive,” said Kristen Scarpa, a New York-based investment strategist at Barclays Wealth Management, in a telephone interview yesterday. “Job growth is the key to igniting additional consumption, which will drive the U.S economy forward.”

Global stocks slumped earlier in the week after European Central Bank President Mario Draghifailed to articulate the details of a bond-buying plan to ease the euro area crisis. The Federal Reserve Bank’s pledge to provide additional support for the economy further disappointed investors who were anticipating a more definitive sign of additional monetary easing.http://www.blogger.com/blogger.g?blogID=3740406258246223636#editor/target=post;postID=761605679672940307

PRICE MANIPULATION- CIRCULAR TRADING- HAPPENS....

I REITERATE AGAIN, MANY A TIMES MENTIONED, MANIPULATION BY FRAUDULENT OPERATORS FOR MONEY MAKING IN THE STOCK MARKET IS A WAY OF LIFE .... THEY ESCAPE UNSCATHED........BUT MARKET SURVIVES BECAUSE OF IT'S SIZE.....

Sebi slaps Rs 4L fine on 2 brokerages

AGENCIES

Posted: Thursday, Aug 02, 2012 at 1329 hrs IST

Mumbai: Market watchdog Sebi has imposed penalties of Rs 2 lakh each on two brokerage firms for circular trading between them in shares of Videocon Industries Ltd way back in 2004.

The two entities, Mansukh Securities & Finance Ltd (MSFL) and Intec Shares and Stock Brokers Ltd (ISSL) have been found to have violated norms related to synchronised or circular trading, while dealing in shares of Videocon Industries on behalf of their clients.

Circular trading refers to a fraudulent practice where the seller and buyer may have an understanding between them on trading of specific shares.

In separate orders, issued on July 30, Sebi said the penalties of Rs 2 lakh each is commensurate with violations committed by MSFL and ISSL and would also deter prospective violators in the future.

The orders have been passed after Sebi's investigation into trading in Videocon shares in 2004 from January 14 to February 26. During this period, the scrip plunged by over 20 per cent to Rs 28.90 from Rs 36.15 per piece.

As per the Sebi probe, MSFL and ISSL accounted for 71.68 per cent of the gross traded shares of Videocon Industries during that period.

The market regulator said there were 28 trades, over a period of nine days, wherein there was very close matching of order time, price, quantity and "hence these trades prima facie were structured/ synchronised trades".

Further, it was found that in all these structured trades, MSFL and ISSL were their brokers on the seller or buyer sides.

Sebi noted that execution of such trades amounts to fraudulent and unfair trade practice.

These trades created false and misleading appearance of trading in the scrip of Videocon Industries. They were not intended to effect transfer of beneficial ownership but were intended to operate only as a device to cause fluctuations in the price and create artificial volume, it added.

Sebi also pointed out that the scrip of Videocon Industries was illiquid at that time and there was not much trading volume except on days when the two brokers executed their trades.

OnMobile Arvind - Story -Irregularities

On November 23, 2010, Arvind Rao, the 53-year-old co-founder and CEO of OnMobile, bought approximately 6 lakh shares of his company from the open market, representing a little over 1 percent of the company’s total shares. Rao already owned over 10 percent of the company’s shares.

At Rs 277 a share, he had to pony up nearly Rs 16.5 crore to acquire them.
He still did it because he felt OnMobile, his baby, was severely undervalued. Since its blockbuster IPO in early 2008, OnMobile shares had climbed to over Rs 700 before falling.

Rao felt it was just an aberration—the market hadn’t realised the value of his baby. The world was at the cusp of the mobile revolution; billions of people around the world had yet to experience phone services beyond voice; and OnMobile was just getting started on its international journey.

Incubated within Infosys in 2000, OnMobile had arguably the best pedigree in the Indian business world. In the parochial world of Indian mobile telephony, its customer list covered almost every operator, attesting to the value of its services. With over 100 million subscribers for its services, including for the once wildly popular ringback tune, it had grown rapidly from just over Rs 2 crore in income in 2002 to over Rs 500 crore by 2010. At 20-plus percent, its profit margins were a source of envy and puzzlement to many, given the razor thin margins prevalent in the mobile value-added services (VAS) industry. Under Rao, OnMobile had gone international, generating nearly a third of its revenue from over 50 other countries.

So he went ahead and borrowed money to buy the shares, thinking nothing of the interest it entailed or the fact that he’d need to put up nearly half his existing shareholding as collateral.

That would turn out to be the worst decision he ever made.
OnMobile’s shares continued to fall from those levels, while Rao’s interest payments ballooned.
Consumed by the downward spiral of his baby and his worsening personal debt situation, his characteristic energy and enthusiasm waned, visible to most of his senior colleagues.
In an attempt to provide a floor to OnMobile’s share price, Rao managed to push through a controversial share buyback plan totalling Rs 25 crore last year, despite serious reservations from other board members.
Motivated by OnMobile’s growth all these years, he had never paid much attention to his salary, most of which went towards the monthly rental on his sea-facing apartment in Mumbai and his BMW 7-Series, both paid directly by the company.
He requested the board for a significant salary increase, arguing (rightly) that his Rs 1 crore salary was substantially below what the market would pay the CEO of a Rs 600-plus crore international company. But they would have none of it.

After that, he requested a personal loan, which too they denied.
Finally, left with no option—at least the way he saw it—Rao took the ‘shortcut’. Just that once.
THE DOMINOES
In November 2011 OnMobile’s finance department received a set of bills from a vendor they hadn’t dealt with before. The bills amounted to nearly Rs 12 crore—a large enough sum to set alarm bells ringing. They had been forwarded directly by Arvind Rao.

Rajesh Moorti, the CFO who had joined the company in 2006 and played a critical role in its successful 2008 IPO, had resigned a few weeks earlier. The company’s board hadn’t made any serious efforts to ascertain why.
Now finance departments are adept at spotting irregularities, so the bills duly got flagged.
According to sources who were directly privy to what followed but chose to remain anonymous due to the nature of the incidents, the matter escalated to the attention of Mouli Raman, the CTO and co-founder.
On December 8, Rao was inexplicably divested of his role as chairman of the board. He continued to remain CEO and MD even as HH Haight, the 78-year-old head of Argo Global Capital, a venture capital fund that was OnMobile’s largest shareholder, became the new chairman.

The bills would remain stuck for another two weeks till Moorti left; they then got cleared.
But the dominoes had already started falling.
Two long-time independent board members—Sridhar Iyengar and JR Varma—resigned on January 24 and 25, respectively, a few days short of a scheduled board meeting on January 28. Iyengar, a former CEO of audit firm KPMG India, headed the compensation committee while Varma, a highly regarded professor of finance at IIM Ahmedabad and a former full-time member of SEBI, headed the audit committee.

No reasons were given for their sudden and near-synchronised resignations.

Read more: http://forbesindia.com/article/boardroom/why-arvind-rao-and-onmobile-went-down-a-dark-road/33420/1#ixzz22ImjZNJH

SUBROTO BAGCHI

WEB EXCLUSIVE/MAGAZINE EXTRA | Jul 30, 2012 | 2161 views                    What Overachievers Can Do to Save Themselves by Subroto Bagchi            What can save over achievers from self-destruction? 1. Pace yourself: For a great professional, it is a marathon. Your work will spread over at least 40 years. Don’t burn at both ends of the candle. Be authentic; know that life has a larger purpose to achieve through you.  Life wants to make an impact using your abilities. Therefore, don’t be under any pressure to prove your one-upmanship to someone. Your talents are not meant to be gunpowder in the barrel of your ego. 2. I always think of myself as a municipal water pipe. My job is to deliver the water, not quench my own thirst. My position and my authority are not meant for my gratification. Yes, they feel good. But I must know that they are not for personal consumption. 3. I must own failures but deflect the success. This is the best way to create greater success. When I own failure, I learn valuable lessons; this process pre-supposes reflective space and that slows me down deep within; it is a very important part of regeneration. When I deflect success I no longer carry its burden. Success is heavy, we have just two shoulders. 4. I must not trivialise my screw ups. I should relive them in my mind and seek forgiveness. Great people say sorry. 5. Every overachiever very well knows the difference between the right and the convenient. In 98 percent of cases, a CEO does not need a lawyer to tell him what the right thing to do is. Yet, sometimes, even the best among us fall prey to temptation: A fling, a bribe, waving a due diligence, a seemingly harmless favour from a supplier…anything that would later tell us all that it was a matter of common sense. Let us begin by admitting that we are all human. So, it is all right to be tempted but not all right to fall to the subsequent indiscretion. The trick is to pick up the phone when temptation begins and speak to someone with no vested interest in the matter and ideally someone with a higher reputation capital than you. Ask for advice. When you do, make sure you give all the facts, not the biases. Ask for the advice before the act. 6. When people who have loved you a lot for a long time bring forth a cautionary note, beg you not to do something you are about to, please pay attention to it. It is life showing you the yellow card through an Angel who you have always trusted. Pause.  7. What is common between politician ND Tiwari, self-styled God-man Nityananda, Strauss-Kahn, Bill Clinton and Tiger Woods? High testosterone. This is a very common phenomenon among alpha-males and history is replete with examples of countless powerful people fall because of it, starting with the demon Mahishasura who, even the Gods feared! Sexual proclivity beyond the ordinary can be a disorder that can be treated with medicine and counselling.  8. Overachievers have the power to convince people like no one else can. But note the first three alphabets in the word ‘convince’. Beware, you can con others and often simply con yourself. Once you do, no one can argue with you; you have the gift of the gab. You think brilliantly, but know that you may often come to a conclusion first, and then retrofit the justification. Then you psych yourself. Reasoning does not work anymore. The argument and your chosen path of action look perfect in every which way. Then you just step into obscurity.  9. A lot of overachievers get carried away with public awards and recognitions. Trophy hunting overshadows real work. Beware, much of the award business in the world is shallow, many are a business unto themselves, and some are a downright racket. Do the work; the recognition will follow. The greatest recognition in life is unlikely to be an award; it may be a grandchild in your arms or a butterfly in spring that you can notice in the winter of your life!  10. My dad always told me one thing: You are known by the company you keep. If you hang out with the wrong guys—seemingly harmless—and just for a few times for fun, it wouldn’t quite work. The wrong guy will return.  11. Do not live on your professional fame alone. Keep a backup. One day you will need it. This is particularly important for people who are to hang their boots in the next five, six, ten years.  12. Do leave with grace. Do not cling on to your name, fame, role, and office, whatever. Leave gently, leave a little before you are asked to go. If things get difficult, go with grace. Do not immolate yourself in the town-square and ask people to come to watch. It makes for news only for that day. 13. Respect the system. Either you are an overachiever because the system has brought you here or the system presented itself as the matching colliding force for you to battle. Either way, have respect for it.  14. Last but not the least, pray. It keeps you subordinate to a larger power and that helps in a crisis. If you believe in God, use the toll-free number; know that it gets disconnected if not used periodically.  Read more: http://forbesindia.com/article/maga-zine-extra/what-overachievers-can-do-to-save-themselves/33428/1#ixzz22GIXyBDK