CME Works to Close Loophole
In a report on Wednesday, the Chicago Mercantile Exchange - the largest U.S.
futures exchange - said they will take steps to close a loophole in its trading
system that could be giving high-frequency traders an advantage. CME announced
plans to make additional upgrades to its operations by the end of 2013. Traders
are using powerful computers to trade through the Chicago Mercantile Exchange’s
computer systems before other investors in the market. High-speed traders have
the advantage of a fraction of a second before the rest of the market and are
trying to profit from that. The Chicago exchange operator said it is
“continually making improvements to our trading platform to increase
efficiencies” and its goal is to ”bring variability as close to zero as
On Wednesday, NYSE Euronext (NYX) CEO Duncan Niederauer urged regulators and
Securities and Exchange Commission to conduct a thorough review of the expansion
of dark pools. Dark pools are are trading systems that are not openly available
to the public where buyers and sellers submit orders anonymously. "Off exchange
dark trading is at record levels, deteriorating market quality for all issuing
companies," Niederauer told a SEC advisory panel on small businesses. "Less
liquid stocks such as small companies tend to have a higher percentage of volume
trading away from an exchange." Niederauer added that it was time to do a
"meaningful" two-year long pilot program with 300 to 500 companies involved that
widens the minimum one-penny spread increment that is used to trade securities.
"If we did it it should change the economics from the banks point of view and
improve liquidity," he said.
Ally Financial Inc. - 74% owned by the U.S. government - reported a $900 million
gain on the sale of its Canadian operations, while core pre-tax income for Q1
also climbed and profit of $1.1 billion versus a profit of $310 million in same
period for 2012. Ally 's core auto-lending business posted an operating profit
of $343 million in Q1, up 42% from a year ago period in 2012 but, down 7.5% from
Q4. Insurance unit reported an operating profit of $61 million, down 39% from a
2012 year ago period but, more than double the $27 million in operating profit
reported in Q4. Mortgage unit for Ally reported an operating loss of $6 million
versus income of $63 million in same period in 2012. Core pre-tax loss, which
reflects continuing operations before taxes and certain expenses, was $6 million
compared with income of $111 million a year ago. Excluding repositioning items
mainly related to the sales agreements for Ally Bank's mortgage servicing
rights, the company reported core pre-tax income of $207 million. Chief
Executive Michael A. Carpenter said the majority of Ally's international
businesses have been sold and the company received more than 70% of the total
expected proceeds. Ally, a government controlled auto lender - generally
finances vehicles from General Motors and Chrysler Group dealers and customers -
after receiving $17.2 billion in funds through the Treasury Department's
Troubled Asset Relief Program during the financial crisis. As of May 15, Ally
will have paid nearly $6.1 billion to the U.S. Treasury, an amount that includes
interest and dividends.
IntercontinentalExchange, Inc. (ICE) - global markets and clearing house
operator - reported Q1 net income fell to $135.4 million or $1.86 earnings per
share, from $147.8 million or $2.04 earnings per share in same period 2012.
Revenue reportedly dropped to $351.9 million from $365.2 million. Jeffrey C.
Sprecher ICE Chairman and CEO said, "As we continue with the regulatory approval
process for the acquisition of NYSE Euronext, we are advancing our integration
plans while focusing on opportunities to grow and serve customers across all of
our markets globally." ICE shares were higher by nearly 4% into early afternoon
trading session on Wednesday.
Ford Motor Co. (F) reported on Wednesday, a 17.9% increase in U.S. vehicle sales
for April to 212,584 units, from 180,350 vehicles in same period of 2012, for
the best monthly results since 2007. Ford said car sales rose 21.2% to 78,513
units; utility vehicle sales rose jumped 16.5% to 59,089 and truck sales
increased 15.6% to 74,982. The company's largest brand - Ford - saw sales rise
17.8% to 204,969. The best-selling Ford car was Fusion with 26,722 units sold
and Ford F-series truck rose 24.4% to 59,030.
General Motors Co. (GM) reported an 11% rise in April U.S. vehicle sales on
Wednesday. For the month of April, GM sold 237,646 trucks and cars, for a
seasonally adjusted annual rate of sales at 15 million. Cadillac sales were up
34% from 2012, leading the increase and GMC sales rose by 6.7%.
MasterCard Inc. (MA) reported Q1 profit increased 12.3% as spending on its
credit and debit cards rose 10.5%. Earnings came in at $766 million or $6.23 per
share, up from $682 million or $5.36 per share in 2012 period. Higher rebate and
incentive payments it makes to clients for agreement renewals and meeting volume
goals offset revenues. Driven by a 12% increase in processed transactions and
16% increase in cross-border volume, revenue increased 8.4% to $1.91 billion.
Purchase volume had grown 13% on a local-currency basis in Q4 with customers
making $690 billion in purchases, using MasterCard's, in Q1, up 10.5% on a
local-currency basis from 2012.
The following is the text of the
Federal Reserve’s interest-rate decision Wednesday:
Information received since the Federal Open Market Committee met in March
suggests that economic activity has been expanding at a moderate pace. Labor
market conditions have shown some improvement in recent months, on balance, but
the unemployment rate remains elevated. Household spending and business fixed
investment advanced, and the housing sector has strengthened further, but fiscal
policy is restraining economic growth. Inflation has been running somewhat below
the Committee’s longer-run objective, apart from temporary variations that
largely reflect fluctuations in energy prices. Longer-term inflation
expectations have remained stable.
Consistent with its statutory mandate, the Committee seeks to foster maximum
employment and price stability. The Committee expects that, with appropriate
policy accommodation, economic growth will proceed at a moderate pace and the
unemployment rate will gradually decline toward levels the Committee judges
consistent with its dual mandate. The Committee continues to see downside risks
to the economic outlook. The Committee also anticipates that inflation over the
medium term likely will run at or below its 2% objective.
To support a stronger economic recovery and to help ensure that inflation, over
time, is at the rate most consistent with its dual mandate, the Committee
decided to continue purchasing additional agency mortgage-backed securities at a
pace of $40 billion per month and longer-term Treasury securities at a pace of
$45 billion per month. The Committee is maintaining its existing policy of
reinvesting principal payments from its holdings of agency debt and agency
mortgage-backed securities in agency mortgage-backed securities and of rolling
over maturing Treasury securities at auction. Taken together, these actions
should maintain downward pressure on longer-term interest rates, support
mortgage markets, and help to make broader financial conditions more
The Committee will closely monitor incoming information on economic and
financial developments in coming months. The Committee will continue its
purchases of Treasury and agency mortgage-backed securities, and employ its
other policy tools as appropriate, until the outlook for the labor market has
improved substantially in a context of price stability. The Committee is
prepared to increase or reduce the pace of its purchases to maintain appropriate
policy accommodation as the outlook for the labor market or inflation changes.
In determining the size, pace, and composition of its asset purchases, the
Committee will continue to take appropriate account of the likely efficacy and
costs of such purchases as well as the extent of progress toward its economic
To support continued progress toward maximum employment and price stability, the
Committee expects that a highly accommodative stance of monetary policy will
remain appropriate for a considerable time after the asset purchase program ends
and the economic recovery strengthens. In particular, the Committee decided to
keep the target range for the federal funds rate at 0 to 1/4% and currently
anticipates that this exceptionally low range for the federal funds rate will be
appropriate at least as long as the unemployment rate remains above 6-1/2%,
inflation between one and two years ahead is projected to be no more than a half
percentage point above the Committee’s 2% longer-run goal, and longer-term
inflation expectations continue to be well anchored. In determining how long to
maintain a highly accommodative stance of monetary policy, the Committee will
also consider other information, including additional measures of labor market
conditions, indicators of inflation pressures and inflation expectations, and
readings on financial developments. When the Committee decides to begin to
remove policy accommodation, it will take a balanced approach consistent with
its longer-run goals of maximum employment and inflation of 2%.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman;
William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Charles L.
Evans; Jerome H. Powell; Sarah Bloom Raskin; Eric S. Rosengren; Jeremy C. Stein;
Daniel K. Tarullo; and Janet L. Yellen. Voting against the action was Esther L.
George, who was concerned that the continued high level of monetary
accommodation increased the risks of future economic and financial imbalances
and, over time, could cause an increase in long-term inflation expectations.
The Institute for Supply Management index released on Wednesday shows a drop to
50.7% from 51.3% in March. As the industry's rate of growth decelerated to the
lowest pace since December, U.S. manufacturers showed minimal expansion during
April. The ISM new-orders gauge rose to 52.3% from 51.4%; production index
climbed to 53.5% from 52.2% and employment gauge sank 4 percentage points to
50.2% for the lowest level since November 2012.
Automatic Data Processing Inc. on Wednesday morning reported that private-sector
employment growth slowed down in April, with the economy gaining only 119,000
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