Changing Face of Finance

CHANGING FACE OF FINANCE  |  The $8.2 billion deal for the New York Stock Exchange showed how the power base in finance has shifted. Once seen as the cradle of American capitalism, the stock exchange has suffered from declining trading volumes and razor-thin margins. Meanwhile, its acquirer, the Atlanta-based IntercontinentalExchange, or ICE, has bolstered its position as “trading in commodities and derivatives has become much more lucrative than trading in the shares of companies,” DealBook's Ben Protess and Nathaniel Popper write.

The Dodd-Frank financial regulatory overhaul may be a plus for the combined company. The law, which forces Wall Street banks to push derivatives trades into clearinghouses and regulated exchange s, “is ultimately expected to cement ICE's business model into the regulatory code,” Mr. Protess and Mr. Popper write. Jeffrey C. Sprecher, chief executive of ICE, said: “Financial reform is imposing that vision on many markets through a rule-making process.”

Duncan L. Niederauer, the chief executive of the stock exchange's parent NYSE Euronext, acknowledged that the deal was “not a merger of equals.” When Mr. Niederauer was approached by Mr. Sprecher of ICE, reaching a deal took only three months, Michael J. de la Merced reports. “The two companies found themselves in alignment on several issues. Mr. Sprecher indicated that he was willing to maintain two headquarters, ICE's home in Atlanta and the Big Board's center in New York City.”

But even that arrangement shows how the N.Y.S.E.'s clout has declined over the years. What was once “the temple of commerce” is now “not much more than a television studio,” The New York Times columnist Floyd Norris writes. “The transformation of the New York Stock Exchange from its position at the apex of the world financial system to an asset to be bought and sold like any other - and one that is not deemed to be worth as much as it would be if it traded more modern derivative securities rather than old-fashioned stocks - has been going on for decades, but has accelerated in recent years.”

PETER MADOFF SENTENCED TO 10 YEARS  |  Bernard L. Madoff's brother and former chief compliance officer is headed to prison for his role in aiding the Ponzi scheme. Peter B. Madoff, the second figure in the scandal to be sentenced, received 10 years on Thur sday. Peter Lattman and Diana B. Henriques write in DealBook: “Mr. Madoff, in a slate blue suit and striped blue tie, entered the crowded courtroom accompanied only by his lawyers, although many members of his family and friends had written letters of support for him. The 63 character references stood in stark contrast to his brother's sentencing, when the judge in that case noted that he had not received a single supportive letter.” For his part, Peter Madoff said he was “deeply ashamed” of his conduct and had “tried to atone by pleading guilty.”

F.B.I. DIGS INTO OLYMPUS SCANDAL  |  The Federal Bureau of Investigation arrested a former bank executive in Los Angeles in connection with the the accounting scandal at Olympus, Peter Eavis reports in The New York Times. “Prosecutors in New York said that the executive, Chan Ming Fon, received more than $10 million from Olympus for assisting in its accounting fraud.” Mr. Chan, who authorities said was a citizen of Taiwan living in Singapore, was charged with conspiracy to commit wire fraud, with a maximum potential penalty of 20 years in prison. In February, Japanese authorities arrested seven people in connected with the scandal, including the company's former chairman.

ON THE AGENDA  |  Please note that the morning newsletter is off for the holidays, to resume on Jan. 2. Walgreen, which recently bought a stake in Alliance Boots, reports earnings today before the market opens. Personal income and sp ending data for November are out at 8:30 a.m., and the Thomson Reuters/University of Michigan consumer sentiment index for December is released at 9:55 a.m. Thorsten Heins, the chief executive of Research in Motion, is on CNBC at 7:30 a.m. Austan Goolsbee, the former adviser to President Obama and current University of Chicago economist, is on CNBC at 8 a.m.

DOWN TO THE WIRE IN FISCAL TALKS  |  It looks like we'll be heading into Christmas without a deal to avoid the so-called fiscal cliff. The New York Times reports: “Speaker John A. Boehner's effort to pass fallback legislation to avert a fiscal crisis in less than two weeks collapsed Thursday night in an embarrassing defeat after conservative Republicans refused to support legislation that would al low taxes to rise on the most affluent households in the country.” The White House press secretary, Jay Carney, said the defeat should push Mr. Boehner back into talks with the president. “We are hopeful that we will be able to find a bipartisan solution quickly,” Mr. Carney said.

WALL STREET'S LOW-KEY HOLIDAY SEASON  |  Wall Street firms have little to celebrate this holiday season. And with new restrictions on parties since the financial crisis, holiday gatherings have been decidedly understated. Michael Kaplan writes in DealBook: “Witness the scene at the 40/40 Club in New York's Flatiron district on a recent December evening. There was no lavish, companywide affair; instead, a group of 40 Morgan Stanley employees gathered in a private room off to the side of the club. The generous platt ers of sliders and lobster crab cakes were present. But instead of Grey Goose vodka, there was Smirnoff and Stolichnaya.”

Mergers & Acquisitions '

A Top Deal Maker at Sony Is Headed to Warner Music  |  The Media Decoder blog reports: “Robert S. Wiesenthal, a top deal maker at Sony for the last decade, is leaving the company to become chief operating officer of the Warner Music Group, the company announced on Thursday. The move could help Warner expand through acquisitions and compete more handily against the music world's two corporate giants, Universal and Sony.”
NEW YORK TIMES MEDIA DECODER

Forrest Shumway, the Deal World's White Knight, Dies at 85  |  The New York Times writes: “Forrest N. Shumway, a California businessman who built Signal Oil and Gas from a regional energy company into one of the nation's largest conglomerates, a role in which he embraced his reputation as a high-stakes takeover artist but shunned the hostile deals that long defined corporate culture, died on Dec. 4 at his home in the La Jolla neighborhood of San Diego.”
NEW YORK TIMES

Aviva to Sell U.S. Life Insurance Business for $1.8 Billion  |  The British insurer is selling the unit to Athene Holding.
BLOOMBERG NEWS

BlackBerry Maker Reports 48% Drop in Revenue  |  The New York Times reports: “Research in Motion said on Thursday that it lost a million BlackBerry owners worldwide during the company's last financial quarter, the first such decline in the device's history.”
NEW YORK TIMES

Flight Attendants Invited to Join Airline Merger Talks  |  The union representing flight attendants at American Airlines said it had been invited to join confidential talks over a pote ntial merger with US Airways, Reuters reports.
REUTERS

Panasonic to Sell Digital Camera Unit  |  Panasonic said on Friday it would sell its Sanyo business to Advantage Partners, a Japanese private equity fund, for an undisclosed amount, Reuters reports.
REUTERS

Adobe to Acquire Behance, Social Media Platform  | 
WALL STREET JOURNAL

Mohawk Industries to Buy Marazzi Group of Italy for $1.5 Billion  | 
REUTERS

Compuware Said to Hire Advisers to Review Takeover Offer  | 
BLOOMBERG NEWS

INVESTMENT BAN KING '

A Year of Slumping Investment Bank Fees  |  Reuters writes: “Fees for advising on mergers, share listings and bond issues have fallen again in 2012, forcing investment banks to cut jobs and start overhauling business models they had stuck by in times of crisis over the past decade.”
REUTERS

Mortgages Yield Profit, But Giant Lenders Hold Back  |  Bank of America and Citigroup “are missing out on the biggest mortgage profits on record after catastrophic losses during the housing crash made them wary of offering new loans,” Bloomberg News reports.
BLOOMBERG NEWS

Managers at Citigroup's Hedge Fund Said to Get Stake for Free  |  “While Citigroup is keeping a 25 percent stake, managers at the Citi Capital Advisors unit will pay nothing for the remaining 75 percent of that business as it becomes a new firm managing as much as $2.5 billion of the bank's money, according to people with knowledge of the plan,” Bloomberg News reports.
BLOOMBERG NEWS

UBS Names Barclays Banker to Lead Financial M.&A. in Americas  | 
REUTERS

UBS Appoints Global Head of Equity Capital Markets  | 
BLOOMBERG NEWS

PRIVATE EQUITY '

Private Equity Stokes Demand for Credit Securities  |  The Financial Times reports: “It has been a vintage year for private equity firms seeking to take money out of their portfolio companies, and a gathering boom in an often overlooked part of the credit markets means 2013 is shaping up to be potentiall y even more lucrative.”
FINANCIAL TIMES

Apax Partners Warns Investors It May Not Reach Target for Fund  | 
REUTERS

HEDGE FUNDS '

Ackman Outlines Bet Against Herbalife  |  At an event held by the Sohn Conference Foundation in Manhattan, William Ackman of Pershing Square kicked off a three-hour presentation arguing that Herbalife's retail sales were far less than it claimed.
DealBook '

Investors Move to Withdraw More Money From Hedge Funds  |  Reuters reports: “Client demands to pull money out of hedge funds rose to their highest level in more than three years in December, at the end of a year that has left many investors disappointed with performance.”
REUTERS

Hedge Fund Managers Offer Predictions for 2013  | 
FINALTERNATIVES

I.P.O./OFFERINGS '

Twitter Quietly Reshuffles Top Ranks  |  The moves seemed to signal the company's preparations for an eventual I.P.O., AllThingsD writes.
ALLTHINGSD

China Relaxes Rules on Overseas Listings  | 
BLOOMBERG NEWS

VENTURE CAPITAL '

Instagram Reverses Course on Privacy Policy  |  The Bits blog writes: “In the aftermath of the uproar over changes to Instagram's privacy policy and terms of service earlier this week, the company did an about-face late Thursday.”
NEW YORK TIMES BITS

Instagram's Rivals Benefit From User Uproar  |  The anger over changes to Instagram's privacy policy “has helped a number of photo-sharing applications garner unprecedented amounts of traffic and new users,” the Bits blog writes.
NEW YORK TIMES BITS

Chinese Venture Capital Firm T ests Appetite for Yuan  |  Innovation Works, which is based in Beijing, “closed a small pool worth less than $100 million dollars in Chinese currency this February,” The Wall Street Journal writes. It also raised a fund denominated in dollars.
WALL STREET JOURNAL

LEGAL/REGULATORY '

S.E.C.'s Khuzami Said to Be Leaving Next Month  |  Robert Khuzami, the enforcement director at the Securities and Exchange Commission, who had been considered a long shot contender for the agency's top job, “plans to step down as early as next month, three people with knowledge of the ma tter said,” according to Bloomberg News.
BLOOMBERG NEWS

Making It Easier to Estimate Libor Losses  |  A government watchdog's report estimating Fannie Mae and Freddie Mac's Libor losses lays out an easy-to-follow road map for others.
DealBook '

Questions Remain About New Plan on ‘Too Big to Fail'  |  The Federal Deposit Insurance Corporation and the Bank of England recently put out a new paper on how they might work together to aid a major financial institution who gets into trouble, Stephen J. Lubben wr ites in his column, In Debt.
DealBook '

UBS Settlement Minimizes Impact of Guilty Plea  |  To settle a rate-rigging case, the Japanese securities subsidiary of UBS pleaded guilty to a charge of felony wire fraud as part of a settlement that was structured to keep the potential fallout from the plea to a minimum, Peter J. Henning writes in the White Collar Watch column.
DealBook '

Japan's Move for Higher Inflation  |  The New York Times columnist Floyd Norris writes: “Japan appears to be ready to do whatever it takes to end its long run of falling prices. The Bank of Japan took limited action on Thursday, and more is expected in the new year.”
NEW YORK TIMES