Morning Coffee: Derivatives Moving to Small Players

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Earlier this week, the chairman of the Commodities Futures Trading Commission remarked that more transparency in the derivatives market "can only be good for jobs," but he may not mean jobs of derivatives folks at big banks. Recruiters say the main beneficiaries will be small firms who will be able to participate in the market for the first time.

The CFTC has agreed on new rules, some of which have already gone into effect, that require reporting of derivative trades such as swaps. “Strict reporting standards would allow boutique institutional brokerages like this one to get involved in trading of [derivatives] products,” said one current trader. The rules will also likely benefit investors, who won’t be kept in the dark on what they’re actually buying.

But the revenue pool won’t change much, said Richard Lipstein, managing director at Gilbert Tweed Associates, an international executive search firm focused on upper level management positions. Large firms like Deutsche Bank will likely lose some of their competitive edge, ceding market share to smaller players, he said.

“More transparency and more technology mean lower profit margins and lower commissions,” Lipstein said. “You’ll see the same old people, just in new places.”

While big banks won’t abandon the market, they will see their volumes contract, according to a former C-level exec at a derivatives exchange who asked not to be named.

Buffet Salivating (WSJ)

Warren Buffet is “salivating” about the possibility of making another large acquisition, potentially an unnamed $6 billion company that he has kept his eye on.

SEC Probe (Fox Business)

The Securities and Exchange Commission is looking into whether Citigroup issued a false statement by announcing that former chief executive Vikram Pandit resigned from his role. All indications suggest he was ousted by Citi’s board.

No Backing Down (Bloomberg)

Nearly 70% of economists believe Fed Chairman Ben Bernanke will continue his aggressive bond buying strategy aimed at improving the labor market throughout his term ending Jan. 2014. Just half of economists believe the strategy will help add jobs.

Going Solo (Bloomberg)

Herb Wagner, co-portfolio manager at Boston-based Baupost Group, will leave the firm at the end of the year to launch his own investment firm. Co-manager Jim Mooney will become the sole head on Jan. 1.

Axe Officially Falling (Reuters)

UBS will lay off roughly 400 members of its investment banking division as soon as this week. Affected employees in Asia and the U.S. are likely to be notified on Thursday.

Eyeing Freedom (FIN Alternatives)

A three-judge panel will hear arguments from lawyers wishing to dismiss the conviction of Raj Rajaratnam, the Galleon Group founder who is serving an 11-year prison term for insider trading.

Buzz Around the Office

Are You Smarter than a 5th Grader? (MSN)

A University of North Carolina football player is being accused of plagiarism after allegedly copying a blog post from a group of 11-year-old elementary school students.

List of the Day: Interview Mistakes Over 50

Getting a new job after the age of 50 can be difficult in the current market. Here are a few interview mistakes.

  1. Demanding too high a salary.
  2. Being overconfident in your skills and experience.
  3. Admitting to an inflexible work schedule.

(Source: Yahoo)

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