Bye Bye Bulletin Board

Hot off the Dow Jones Newswires: Steps on the NASDAQ’s road to becoming a full-fledged SRO and second node in the NASDAQ-NYSE would-be world duopoly.

The Securities and Exchange Commission issued two orders Monday to help the Nasdaq Stock Market (NDAQ) move toward becoming a full-blown stock exchange.

Nasdaq, long a national securities association, was cleared to become an exchange on Jan. 13 and the formal transition is expected to occur Tuesday. To avoid having thousands of Nasdaq-listed companies file new paperwork registering their securities for sale on the exchange, the SEC agreed to have Nasdaq file a single application for all its previously-registered companies, effective July 31.

In addition, the SEC issued a second order allowing Nasdaq members, brokers and dealers to execute trades until Aug. 1, 2009, in 13 Nasdaq-listed firms that were previously exempted from SEC registrations. Nasdaq sought the relief saying an immediate registration requirement could prompt the firms – four insurance companies and nine non-U.S. firms – to withdraw from Nasdaq trading altogether.

The SEC said a three-year exemption is appropriate and should give the firms adequate time to register their securities if they decide to continue trading on Nasdaq. The registration requirement could require the non-U.S. firms to reconcile previously issued financial results to comply with U.S. accounting rules.

Boston Commons

The bad news:

Despite efforts around the country, no universal wireless network is up and running in a major American city.

The good news for chowderheads: Hub sets citywide WiFi plan.

By Robert Weisman, Boston Globe, July 31, 2006

Boston will tap a nonprofit corporation to blanket the city with “open access” wireless Internet connections, under a plan to be unveiled today by Mayor Thomas M. Menino.

The task force report in Boston anticipates that it will take up to two years to blanket the city with radio transmitters, or routers, and wireless Internet access points.

The plan, which envisions raising $16 million to $20 million from local businesses and foundations, is a striking departure from the business models used by other cities, including Philadelphia and San Francisco, which have turned over responsibility for their wireless data networks to outside companies such as Earthlink Inc. and Google Inc.

Obrador Update

“Subcomandante Marcos, what have you to say to Obrador and the PRD”? “Talk to the finger ’cause the face don’t wanna hear it.”

WSJ passes on the wire service copy: the sore losers who says he won the Mexican elections but was defrauded takes the battle to the financial district — much as the Falun Gong does on Wall Street, or used to before the Street became a discreetly but heavily armed enclave and maximum surveillance zone.

Getting in the faces of the people whose wasted time is worth the most money is accepted as a solid bit of tactics, I guess. Makes sense.

MEXICO CITY (AP)–Hanging protest banners from sculptures and pitching tents in the middle of Mexico City’s historic Reforma boulevard, supporters of the country’s leftist presidential candidate paralyzed the city’s main financial district Monday and refused to leave until the top electoral court ruled on their demands for a recount in the disputed race.

Leftist Andres Manuel Lopez Obrador spent the night in a tent in the city’s main Zocalo plaza, where thousands of his supporters joined his fight. Others set up makeshift camps by the dozens along the tree-lined Reforma boulevard, braving chilly, intermittent rain throughout the night and blocking most east-west traffic on one of the main arteries in this megalopolis of 20 million people.

The protest camps snarled already chaotic rush hour traffic, bringing freeways to a crawl for a kilometers and forcing millions of commuters to circle the city’s center looking for a way to work. Many parked blocks away and hiked to their glass-and-steel office buildings.

A Brown Study in Financial Education

The History of Finance, or Why I Don’t Have a Ph.D. (Financial Engineering News): Guest essayist Aaron Brown, author of The Poker Face of Wall Street (shown above), explains how he weighed his pending Ph.D. in finance — and “all the rights and privileges appurtaining thereto” — in the balance against his life experience and common sense, and in the end found the former wanting in the value-add department.

Prehistoric humans lived in small self-sufficient groups with little calculated exchange (calculation and exchange are the two defining characteristics of finance). Barter, gift, gambling and involuntary exchange are far older than writing, and leave no tangible trace for archeologists. 8,500 years ago in Turkey lumps of copper were used as money. Herodotus credited the Lydians with inventing coins 2,700 years ago, but that happened elsewhere in Asia Minor somewhat earlier. China invented leather and later paper money. The Phoenicians, Athenians and other Mediterranean trading cultures developed forms of insurance, commodity markets and securities.

We jump to early Renaissance Italy for corporations, double-entry bookkeeping and banks. The Reformation in northern Europe spawned modern securities markets, accompanied by bubbles and crashes: Tulipomania in Holland, John Law’s Mississippi Scheme in France and the South Sea Bubble in England. When William and Mary of Orange meld Dutch economic ideas to the English industrial revolution, we get stability via the gold standard and the Bank of England. In 1792, 24 brokers signed an agreement under a buttonwood tree on Wall Street creating the New York Stock Exchange. These three institutions, and similar ones elsewhere in the world, were the basis for the modern global economy.
This was the conventional story in 1980 when I entered the University of Chicago finance Ph.D. program.

Quango Tango of the Week

Utilities Unite in Energy-Conservation Push (W$J):

In the wake of record electricity use in the U.S. this month, a broad coalition of utilities, government regulators and consumer advocates is set to announce today a plan that could result in the offering of more-robust conservation programs to customers in coming months.

Flexibilizing Infodensity

More Flexibility and Reality in Explaining Anonymity: The NY Times public editor breaks his silence to announce a policy shift, although once you get through the labored explanation, it seems more like they have simply moved the furniture aside to vacuum the rug, then put it back where it was.

READERS who have peppered the public editor for months with complaints about The New York Times’s “phony” and “tortured” explanations for granting anonymity to sources should be happy. The paper has shifted toward a more flexible — and more realistic — approach to how it explains to readers why it is using an anonymous source.

An ambitious push spelled out in a June 2005 staff memo from Bill Keller, the executive editor, required reporters to explain why they had granted anonymity to each unnamed source. The guidelines also called for descriptions of how unnamed sources knew what they knew and what motivated them to talk — helpful information that the paper continues to want in stories.

Counting Cuerpos

Tercera marcha masiva en México contra el resultado electoral que dio la victoria a Calderón (El Mundo/Reuters):

Más de 100.000 mexicanos marcharon por las calles de la capital en apoyo al candidato presidencial izquierdista, Andrés Manuel López Obrador, que dice fue derrotado en los comicios del 2 de julio por Felipe Calderón con fraude, ha impugnado los resultados e insiste en un nuevo recuento voto por voto.

Reuters Latin America reports a march of “more 100,000 people” in the Zocalo in Mexico City today; the ANSA news agency and others are reporting 1,100,000. The Times spot coverage, cribbed from the Reuters wire, mentions “at least 100,000,” while the Times’ own report is blurbed:

Andrés Manuel López Obrador escalated his campaign to undo official results in the presidential election.

I’m going to write the ombudsman about that one. There have been no official results, because no results are official until certified.

Judging from the AP wire photo, above, does 100,000 seem a little on the low side — unless most of those people are Japanese tourists and Sunday strollers?

Perhaps a typographical error? Hard for me to tell, though I was in a crowd of 200,000 in Sampa a couple years ago — in the middle of a thunderstorm and flash flood, too — and the great meadow in Ibirapuera didn’t seem as vast as the Zocalo.

Infomediaries Old and New

For Immediate Release: The Knight-Batten Awards for Innovations in Journalism have announced their 7 finalists. But how “innovative” are they? And how much do they have to do with “content” production, as opposed to content packaging and distribution?

The seven honorees seemed like interesting business cases to which to apply my latest reading, Blown to Bits: How the New Economic of Information Transform Strategy.

The chapters on “disintermediation” and “reintermediation” (Ch. 5-6) are as far as I have gotten, so I’ll try to test myself on those concepts with a scaled-back HBR case study approach.

COLLEGE PARK, Md. – Seven new ways to connect people with news – from showing every Congressional vote, to warning where hurricanes will strike, to blogging the world – are the winners of this years Knight-Batten Awards for Innovations in Journalism.

Wiener the Wunderkind

Woke up this morning and finally got to the end of a long-term bedside table reading project: Dark Hero Of The Information Age: In Search of Norbert Wiener, The Father of Cybernetics.

Slothrop Unbound

Lit fans have been buzzing about the synopsis of Thomas Pynchon’s forthcoming novel, Against the Day, on Amazon.com, which was written by the reclusive author himself.

Given that I bet some friends of mine that the next novel would be set in the Roaring 1890s — squarely in line with the steampunk Industrial Revolution fin du siecle meme — I should be getting personal satisfaction out of the announcement — were it not for the fact that said friends were roaringly stewed at the time and don’t recall assenting to the proposition.

With a worldwide disaster looming just a few years ahead, it is a time of unrestrained corporate greed, false religiosity, moronic fecklessness, and evil intent in high places. No reference to the present day is intended or should be inferred.

Taxpayers Played by USAID?

Audit Finds U.S. Hid Actual Cost of Iraq Projects (NY Times):

BAGHDAD, Iraq, July 29 — The State Department agency in charge of $1.4 billion in reconstruction money in Iraq used an accounting shell game to hide ballooning cost overruns on its projects in Iraq and knowingly withheld information on schedule delays from Congress, a federal audit released late Friday has found.

The agency hid construction overruns by listing them as overhead or administrative costs, according to the audit, written by the Special Inspector General for Iraq Reconstruction, an independent office that reports to Congress and the Pentagon.

Notes on Adult Supervision

I’ve been doing some background reading lately that bears on the problem of “authority” and “expertise” in an allegedly “heterarchical” project like Wikipedia — mocked by “smart mob” cultists for having evolved a de facto bureaucracy of editorial intermediaries and by skeptics for grossly exaggerated claims about the quality of research produced by its “smart mob” of anonymous contributors.

Among the readings are Lawrence Lessig’s 1995 monograph on the “marketplace of ideas,” a note by Geoffrey Sampson called “The Myth of the Diminishing Firm,” and especially two essays by Nikolai Foss: “‘Coase v. Hayek’: Economic Organization and the Knowledge Economy,” and “New Organizational Forms: Critical Perspectives.”

I will try to upload those. Ah, here we go, I can upload the shorter articles at any rate:

1. New Organizational Forms: A Critical Perspective
2. ‘Coase v. Hayek’
3. Lessig’s The Regulation of Social Meaning (1995)

It’s a line of reading that suggests a plain-English, common-sense answer to the question of why firms in a free market cannot be replaced by emergent, market-like catallaxies. It’s simply that efficient markets require that market participants be uniformly accountable.

For all that we may ponder the question qui parle? — who is this ‘I’ that speaks? — the limited value of that exercise may be seen when it comes time to pose the question cui bono? — in whose account, as it were, does this buck stop?

Foss:

Many writers argue that economic organization is undergoing major transformation in the emerging knowledge economy; authority relations are withering; legal and ownership-based definitions of the boundaries of firms are becoming irrelevant and there are increasingly few constraints on the set of feasible combinations of coordination mechanisms.

The present paper critically deals with these claims, beginning from the basic idea that they may be analysed as turning on the implications for the Coasian firm of the Hayekian notion that the distributed knowledge is a strong constraint on the use of planned coordination.

Wall St. v. the Beehive State

Wall Street group sues Utah over short-sales rule:

WASHINGTON, July 28 (Reuters) – The Securities Industry Association (SIA), which represents Wall Street interests, said on Friday it filed a lawsuit in federal court seeking to block a Utah law aimed at curbing naked short selling, a controversial investment strategy.

Newsflow for Robots

An Australian design for a “virtual institution” in which autonomous automated agents negotiate deals on behalf of their human users.

Making computers newsreaders (London Times): Reuters invests in “machine-readable” news so that trading algorithms can react to newsflow.

What, I wonder, will it be like to write “news” for an audience of machines?

PLANS by Reuters to ensure a healthy future in the next ten years include teaching computers how to read news stories in order to help them trade more efficiently.

The company is under pressure to capitalise on the growth in “algorithmic trading”, where computers buy and sell commodities according to pre-set rules. Algorithimic [sic] trading generates huge volumes, but does not add to the numbers of terminal subscriptions — traditionally the way that Reuters earned its money.

Furious Finn: Don’t Take License

Torvalds on lawyers. Click to zoom.

Torvalds critical of new GPL draft (CNet): Linux developer No. 1 scolds the Free Software Foundation for ignoring input from enterprise users — the ones that currently employ Torvalds, e.g. — and imposing overly restrictive anti-DRM provisions in the GPL v. 3 (download the GPLv3 redline version here)

Torvalds’ concern is with the clause in the GPLv3 second draft regarding digital rights management (DRM) technology, which puts controls on how computers can run software or supply content such as movies or music.

Whereas the GPL version 2 was a basic “quid pro quo” arrangement that required anyone modifying source code to make the changes public, the draft of GPLv3 extends much further, Torvalds argued. GPL is a widely used license that governs the use of open-source software.

ICAP in Shanghai Duopoly Duel

Source: Stefan Landsberger

Icap gains route into Chinese market (London Times)

ICAP, the world’s biggest inter-dealer broker, has been given permission by the Chinese authorities to go head-to-head with Tullett Prebon in the promising financial markets in China.

Anytime, Anywhere Risk Management

Fortis to provide insurance by SMS (press release): If you’re like me, your imagination immediately leaps to a young couple, say, about to enter a really rough-looking nightclub and dialing up for a quote on temporary supplemental medical coverage … STDs and blunt-force trauma …

The UK-based arm of European insurance provider Fortis has bought a majority stake in Text2Insure – a company that specializes in providing insurance via SMS messaging.

50,000 Branches Down

Source: BBC

Indian bank workers strike over outsourcing:

Around half a million workers at state-run banks in India have staged a walk out to protest against the planned outsourcing of payment clearing operations to private companies.

According to a press reports, nearly 500,000 bank workers joined the one-day strike, which affected more than 50,000 of the country’s 65,000 bank branches, although around 200,000 staff at state-run State Bank of India (SBI), which controls around a quarter of banking assets in India, did not participate in the strike.

Caught With Khat

Cathinone. Source: Wikipedia

Criminal enterprise of the week, according to a DoJ press release: A New York court indicts the Somali immigrant members of a Boston-area khat-smuggling ring, who allegedly used hawala transfers and Western Union to remit funds to the lawless land on the Horn of Africa.

ISMACIIL GEELLE and LIBAN ABDULLE, of Boston, were charged last week in separate criminal complaints with conspiracy to distribute cathinone, a Schedule I controlled substance; conspiracy to import cathinone to the United States from overseas; conspiracy to commit international money laundering; and international money laundering. Two other men, HASSAN SADIQ MOHAMED and ABDULAHI HUSSEIN, also of Boston, were arrested late last night on the same charges, arising from the Indictment out of the Southern District of New York. Two other Boston men, SAEED BAJUUN and YOUNAS HAJI, who are also charged in the New York Indictment, are still being sought.

Add 30% APR to Baltic Ave. Rents

Monopoly sustituye el dinero por tarjetas (El blog de Salmon): Monopoly cash gives way to the Monopoly credit card (above), notes an eminent Spanish market machinist:

La tendencia cada vez mayor a usar tarjetas en lugar de dinero (tanto en papel como en moneda) se empieza a trasladar a los juegos de mesa.

Polyglot BOT

CBOT Works to Increase Trading Opportunities Worldwide Via New Global Developing Markets Program (press release): As NYMEX opens itself up to hedge funds and commodities pools, the Chicago Board of Trade is also opening its doors to an influx of outsiders and punk rockers.

The launch date coincides with the opening of the CBOT’s “side by side” hybrid electronic-outcry model for ag commodities.

CHICAGO, July 20 /PRNewswire-FirstCall/ — The Chicago Board of Trade (CBOT(R)) (NYSE: BOT) today announced it will launch a Global Developing Markets Program (GDM), furthering its strategy to expand global access to the CBOT’s liquid and transparent markets. Through targeted fee waivers, the Exchange is increasing trading opportunities and encouraging volume growth among traders located in countries that have not historically been active in CBOT markets.

Proprietary trading groups and trading arcades will be eligible to qualify for the program, which will provide registered participants with transaction and clearing fee waivers for up to 250,000 sides for all electronically traded CBOT products during a two-year period.

The GDM Program is set to begin on Tuesday, August 1, 2006.

Failure to Deliver on Sacred Cows

India plans an RFID tag for every sacred cow within its borders.

‘Cow-fraud’ hits Indian banks: Borrowing cows you don’t own, and therefore can’t deliver, to inflate the loan collateral reported to banks. Sounds a lot like the malfeasance Sen. Hatch ascribes to Shorty in questionable securities-lending transactions.

The problem is biggest for India’s retail banks, which are charged with the responsibility of aiding the country’s still-developing agricultural industry by providing loans to farmers in order to allow them to expand their business.
 
But as collateral on that loan, many farmers are providing their herds of sacred cows – highly valued in Indian society, and frequently used as currency or collateral in a variety of business deals.

Green Market Machines

Sun’s SunFire series: Energy-efficiency is a top selling point.

Power algorithms needed… (The Park Paradigm) excerpts a story from Financial News ($$$) on the energy needs of trading venues:

For Cristóbal Conde, chief executive of financial services group SunGard, this poses big problems. He said: “Data centres were designed with a ratio of power consumption versus square foot. With the power requirements of the new hardware, these ratios are no longer valid.

India Drops Negroponte Laptop

India Says No Thanks To The $100 Laptop (Techdirt) — a project being touted heavily by the U.S. Dept. of State with the usual rhetoric of “revolution” and the “technological sublime” …

One of the most common retorts to the often-tried idea of creating ultracheap laptops for the world’s poor is that they have more pressing needs than the ability to surf the internet. The Indian government apparently believes this, as it has decided not to participate in Nicolas Negroponte’s One Laptop Per Child initiative, which wanted to sell $100 PCs to governments around the world for them to distrubute.

NYX Upbeat on Next Step?

NYSE (NYX) 2Q results are in (via Hybrid Talk), but does not sound, to my ear, as bullish on its proposed merger with Euronext as some observers are saying:

“We remain focused on growing and delivering on our core business priorities. The strength of our transaction and listing businesses, the announcement of our plans to merge with Euronext N.V., and our new transaction pricing model reflect our commitment to these goals.”

CBOE 2.0

DealBook:

As some the world’s major stock exchanges consider their merger options, the Chicago Board Options Exchange has announced plans to get into the business as well. The Chicago exchange, which is the largest venue for options trading in the United States, said Thursday it would start up a stock exchange through a partnership with four other companies. The partners are Interactive Brokers Group, LaBranche & Company, Susquehanna International Group and VDM Specialists. The Chicago firm hopes to launch the exchange in early 2007, provided the Securities and Exchange Commission approves.

Out With Eurex, In With USFE

Man Group to acquire 70% stake in Eurex US (Finextra)

British hedge fund manager Man Group is buying a 70% stake in Eurex US, the struggling electronic futures market launched in Chicago in 2004, for $23.2 million in cash.

Eurex, which is co-owned by Deutsche Börse and the SWX Swiss Stock Exchange, said in January that it was holding talks with a number of parties regarding a partnership for the loss-making business.

Bloomie’s Burg

Gotham Gazette’s The Wonkster measures political fallout from Mayor Bloomberg’s handling of the Astoria, Queens blackout — and especially his expressions of support for the ConEd CEO, despite subpar performance on maintenance and upgrades that allegedly contributed to duration of the fubar:

No surprise there, writes Times reader Joseph Hirsch in a letter to the editor, who says Bloomberg’s continued defense of Burke “reveals his insensitivity to working and middle-class people. When the transit workers went on strike last year, the mayor was not shy about expressing his opinion about their ‘illegal actions.’ But when corporate executives are derelict, Mr. Bloomberg not only does not remain neutral, but he also extols them.”

Empire Falls

NFA comes down hard on Empire Futures (Albourne / MarHedge):

… the National Futures Association ordered New York-based trading advisor and introducing broker Empire Futures LLC’s membership terminated within 45 days, and said it should never again apply for NFA membership. Empire’s principal Reuben Sushman’s associate NFA membership and his principal status with an NFA member also was ordered to be terminated within 45 days.

The NFA, which began an examination of Empire in January 2005, found that the firm’s disclosure document and promotional material featured performance data that had been realized in nondiscretionary accounts but were falsely presented as having been achieved by the firm’s managed account customers.

NYMEX Lets the Mongrels In

Nymex aims to hike membership (Dow Jones Newswires), in a move calculated to bid up the value of its memberships ahead of its IPO and shore up market share that’s been eroded by the advancing ICE.

Will it also give the exchange better insight into the activities of energy market rocket scientists? The board decision coincides with CFTC chair Ruben Jeffery’s first testimony to the Senate committee — which as it happens focused on supervision of hedge funds and commodities pools in energy markets.

JUL. 26 6:11 P.M. ET Pushing to attract more hedge fund business amid growing competition, the New York Mercantile Exchange is opening membership to the funds and other traders it has previously barred.Market participants say the move is in response to a dramatic increase in hedge fund activity in energy markets in recent years. Broadening the member base would also increase demand and, thus, prices for Nymex seats and shares ahead of a planned initial public offering this year.

Following a board meeting late Tuesday, Nymex said it will allow “non-traditional entities, including hedge funds and pools, and other collective investment vehicles” to become members.

NASD Back-Office Door Revolves

Mary Schapiro during her stint at the SEC

NASD Chairman Leaving for Harvard (W$J): The former Treasury undersecretary, Kennedy School professor, and Moody’s Corp. director re-enters the quango cycle. Is there anything the philosopher-kings of Harvard don’t run?

By RANDALL SMITH
July 26, 2006; Page C3

After 5½ tumultuous years at the helm of the National Association of Securities Dealers, its chairman and chief executive, Robert Glauber, plans to return to Harvard Law School as a visiting professor.

He is being succeeded by Mary Schapiro, 51 years old, currently the NASD’s president of regulatory policy and oversight, who is a former commissioner of the Securities and Exchange Commission and chairwoman of the Commodity Futures Trading Commission.

The Content Quality-Quantity Quandary

Britannica: Fiddling while MSFT is first to market with content that’s good enough for Joe Sixpack.

The Wikipedia-Britannica feud continues to simmer: This week, for example, The New Yorker’s Stacy Schiff asks,

Can Wikipedia conquer expertise?

It’s an excellent article. It’s interesting to read about the origins of Jimmy Wales’ Hayekian dogma, for example, on the nature of the “marketplace of ideas.”

But a better question might be whether Wikipedia can foster and create expertise?

Can it even recognize it when it sees it?

Singapore Ping

Singapore Exchange to go all-electronic in October (press release):

Singapore Exchange Ltd (SGX) today announced that it will consolidate all trading of the SGX Euroyen (TIBOR and LIBOR) futures and options on SGX QUEST from Monday, 2 October 2006.

Accordingly, the open outcry trading facility at SGX Centre will be closed on Friday, 29 September 2006 at the end of the business day.

Ant-Poison Pill for NYSENext Deal?

NYSE-Euronext merger deal may include ant [sic]-Sarbanes-Oxley break-up clause (Forbes):

Lawyers and regulators are working on adding a clause to the merger agreement between Euronext NV and NYSE Group Inc which would break up the deal if any attempt was made to apply the Sarbanes-Oxley US corporate reporting rules to companies listed on the combined group’s European exchanges, L’Agefi financial daily reported, citing an unidentified financier.

The Urge to Diverge

A Funny Thing Happened On The Way To Convergence (The Accounting Observer): When it rains, it pours. It seems like transoceanic economic cooperation is falling to pieces, brick by brick.

The International Accounting Standards Board released a bombshell yesterday that’s gone pretty much unnoticed in the US press. (Though the Financial Times picked it up.)

The IASB is declaring a moratorium on the effective date of any new International Financial Reporting Standards (IFRS) or major modifications of existing standards until after January 1, 2009.