In his new book, “Flash Boys,†Michael Lewis describes how high-frequency trading works, highlighting a system on Wall Street that has allowed certain professional investors to pay hundreds of millions of dollars a year to locate their computer servers close to stock exchanges so they can make trades milliseconds ahead of everyone else. “There is only one problem with Mr. Lewis’s tale: He reserves blame for the wrong villains,†Andrew Ross Sorkin writes in the DealBook column.
Mr. Lewis points mostly to the hedge funds and investment banks engaged in high-frequency trading. But, Mr. Sorkin writes, he “seemingly glosses over the real black hats: the big stock exchanges, which are enabling â€" and profiting handsomely â€" from the extra-fast access they are providing to certain investors.†And as regulators go to the table to change the rules on high-speed trading, he adds, it is important that they “address the real culprits, not just the easy targets.â€
Concern over high-frequency trading is hardly new, Michael J. de la Merced and William Alden write in DealBook. As high-speed computers have increasingly taken over Wall Street in the last five years or so, experts have wondered whether technology was getting out of control and whether those with the sharpest computer algorithms would come to dominate American finance at others’ expense. Now, coming nearly four years after the “flash crash†in the stock market rattled markets, Mr. Lewis’s book “seemed to punctuate the moment,†Mr. de la Merced and Mr. Alden write.
Few on Wall Street on Monday wanted to miss out on the conversation. Critics argued that Mr. Lewis broke no new ground. And a number of executives at the firms mentioned in the book said that Mr. Lewis did not double-check the facts. Others found the book nothing less than a betrayal. And New York State’s attorney general, Eric T. Schneiderman, seized the moment to discuss his yearlong investigation into the practice. Read The New York Times review by Janet Maslin here.
THE FUTURE OF MONEY  | There have been few big changes in the infrastructure of the world’s payment networks in decades. But recent technologies are seeking to upend the way banks, regulators, merchants and consumers think about the traditional system. That is the idea behind DealBook’s spring special section on the future of money.
Disagreements abound about the importance and usefulness of the upstart virtual currency Bitcoin, which is but one example of several of these new developments that are elevating awareness of how money works, Nathaniel Popper writes in DealBook. Perhaps the biggest challenge that virtual currencies present to the existing financial system is the speed and ease with which they can move across boundaries of all sorts. The current financial plumbing is a particular concern for people in countries with less-developed financial institutions. It is also a concern for immigrants trying to send money over international borders, who are often subject to high fees to move money.
Frustration with fees of all sorts has helped drive the interest in virtual currencies. Because Bitcoin is run by a decentralized network of computers, rather than a central company, there is essentially no charge to move money from one wallet to another. But even with these advantages, virtual currencies have real obstacles to overcome before they become as commonplace as cash, including price volatility, security flaws and increased regulatory scrutiny.
Still, the need for physical money has not disappeared. In Austin, Tex., a blue machine in the lobby of a gun store is one of the first in the country to allow users to buy and sell Bitcoins for cold, hard cash, Nathaniel Popper writes in DealBook.
The machine, built by the Las Vegas company Robocoin, is a somewhat odd creation. Mr. Popper writes: “If Bitcoin is aimed at moving the world toward a cashless future, how long will a cash-dispensing machine for the virtual currency last, particularly when it is more awkward to use than a traditional bank A.T.M.?†The allure of providing easier ways to buy virtual currencies has attracted several companies hoping to build a machine that will make Bitcoin available to people on the street.
IS ‘LONDONGRAD’ BLUSTER?  | Many worry that London, a global financial center, might suffer collateral damage if there are more penalties imposed on Russia over its actions in Crimea. But while the contribution made by Russians to London’s prosperity and economic activity is significant, it is not crucial, Kimiko de Freytas-Tamura and Steven Erlanger write in DealBook. In reality, they write, Russian influence is said to be felt most in London’s financial markets.
They write: “Since the energy giant Gazprom became the first Russian company to list in London 18 years ago, 67 more companies have done so. But together they make up only about 5 percent of the total. They are roughly in line with the nationalities of other companies: 95 are from the United States, 62 from India and 59 from China.†Russian issuers have accounted for about $50 billion worth of listings on London exchanges over the last decade, but most of that activity took place before the global financial crisis. And British banks are not highly exposed to Russia either, according to an economist at Deutsche Bank.
Still, some businesspeople in London who cater to Russians are worried about the Western sanctions. Some schools, which enroll Russian children, are anxious as well. But with the exception of buying property, Russians do not generally invest in Britain unless there is a plum opportunity, said a tax adviser who serves Russian clients, adding that British tax levels provide no incentive for Russians to keep and manage their wealth in this country.
ON THE AGENDA  | The Purchasing Managers’ Manufacturing Index is out at 9:45 a.m. The ISM manufacturing composite index is out at 10 a.m. Construction spending for February is out at 10 a.m. The House Subcommittee on Oversight and Investigations holds a hearing at 2 p.m. on the General Motors ignition switch recall. The House Subcommittee on Financial Services and General Government holds a hearing entitled “Budget Hearing â€" Securities and Exchange Commission†at 3 p.m., with testimony from Mary Jo White, chairwoman of the S.E.C. Michael Lewis is on CNBC at 1 p.m. Brad Katsuyama, a former trader at the Royal Bank of Canada who now runs the trading platform IEX, is also on CNBC at 1 p.m.
ARES TO GO PUBLIC Â |Â The private equity firm Ares Management disclosed on Monday that it planned to go public, paving the way for the firm to join the handful of alternative asset managers that have gone public in recent years, Rachel Abrams writes in DealBook.
The I.P.O. comes as no surprise, since the firm, founded in 1997, was rumored last year to be exploring an I.P.O. Ares manages more than $70 billion in four different units â€" tradable credit, real estate, private equity and direct lending. In 2013, the firm, based in Los Angeles, generated $478 million in revenue, most of which came from management fees.
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Bouygues Extends Offer for SFR and Adds Breakup Fee  | The latest salvo by Bouygues, a French conglomerate, comes as the Financial Markets Authority in France has called for more transparency in the negotiations by Altice, Vivendi and Bouygues over SFR, Vivendi’s mobile phone unit. DealBook »
Singapore’s O.C.B.C. Reaches Deal for Hong Kong Bank  | The Oversea-Chinese Banking Corporation said it would pay nearly $5 billion for Wing Hang Bank, one of the last major family-owned banking groups in Hong Kong. DealBook »
AT&T’s Stock Buyback May Further Signal Waning Interest in Vodafone Deal  | If there were any doubts that AT&T’s appetite was waning for a takeover bid for Vodafone, the latest announcement by AT&T for a potential stock buyback worth around $11 billion might erase them. DealBook »
MetLife Reaches $60 Million Settlement With New York Authorities  | MetLife is paying a penalty for permitting two subsidiaries to operate without first obtaining the required license to sell insurance. DealBook »
Alibaba Ventures Offline With Stake in Chinese Retail Group  | The Alibaba Group, China’s biggest e-commerce company, has agreed to pay nearly $700 million for a minority stake in Intime Retail Group, which operates 36 department stores and shopping centers across China, to form an “online-to-offline†joint retail business, The New York Times writes. NEW YORK TIMES
Yahoo in Talks to Buy News Distribution Network  | Yahoo is in preliminary talks to acquire the online video service News Distribution Network for about $300 million, The Wall Street Journal writes, citing unidentified people familiar with the situation. WALL STREET JOURNAL
Diamond’s New Venture Plans to Acquire African Bank  | Atlas Mara Co-Nvest, backed by Robert E. Diamond Jr., a former Barclays chief executive, has agreed to buy a majority stake in ABC Holdings, which operates the African bank BancABC, and to acquire its controlling shareholder, the ADC African Development Corporation, for about $265 million in cash and shares. DealBook »
Libyan Fund Sues French Bank Over $1.5 Billion in Losses on Derivatives  | The Libyan Investment Authority is suing Société Générale and other parties, saying it should be reimbursed for losses from soured derivatives because the bank paid bribes to associates of a son of the former Libyan dictator, Col. Muammar el-Qaddafi. DealBook »
Morgan Stanley Executive to Join Litigation Finance Firm  | William H. Strong, who is retiring as co-chief executive of Morgan Stanley’s operations in the Asia-Pacific region, plans to join Longford Capital as its chairman. The firm specializes in the budding field of investing in legal disputes. DealBook »
JPMorgan Fails to End Lawsuit Over London Whale Losses  | A judge ruled that JPMorgan Chase must face a lawsuit from shareholders accusing the bank of securities fraud by misleading them about its ability to manage risk, which surfaced when it lost $6.2 billion in the “London Whale†scandal. REUTERS
Encana to Sell Wyoming Field Assets to TPG for $1.8 Billion  | Encana, a Canadian natural gas concern, said on Monday that it had agreed to sell its Jonah field natural gas properties in Wyoming to an affiliate of the private equity firm TPG Capital for about $1.8 billion, The Wall Street Journal writes. Jonah is one of North America’s largest natural gas fields. WALL STREET JOURNAL
Dave Camp, Proponent of Raising Private Equity Taxes, to Retire  | Representative Dave Camp, a Michigan Republican and the chairman of the House Ways and Means Committee, said on Monday that he would retire after his current term, The Washington Post writes. Mr. Camp put forth a broad tax overhaul in February that included a proposal to tax investment profits generated by private equity at a higher rate. WASHINGTON POST
K.K.R. Gets Into Locomotion  | The private equity firm Kohlberg Kravis Roberts is planning to take advantage of the liberalization and promotion of Europe’s continental rail industry, The Financial Times writes. The firm’s infrastructure fund will help finance European Locomotive Leasing’s purchase of up to 50 “state-of-the-art†Siemens trains, which will be delivered over the next two years. FINANCIAL TIMES
Drug Company Seeks to Be Repaid Legal Fees in SAC Capital Inquiry  | Elan Pharmaceuticals is seeking to recoup the more than $1.5 million in legal fees it paid to comply with document requests by the federal government. DealBook »
Ackman’s Pershing Square Bolsters Stake in Mortgage Giants  | The activist investor William A. Ackman’s firm, Pershing Square Capital Management, has increased its stake in the mortgage financing giants Fannie Mae and Freddie Mac to more than 11 percent in each, CNBC reports. CNBC
China’s WH Group Aims to Raise Up to $6 Billion in Hong Kong I.P.O.  | The Chinese pork producer WH Group is planning to raise up to $6 billion in its Hong Kong initial public offering with the goal of repaying the debt it took on last year to acquire Smithfield Foods of Virginia, The Wall Street Journal writes. WALL STREET JOURNAL
China’s Weibo to Go Public in the U.S.  | Weibo, the Chinese version of Twitter, said on Monday in an updated Securities and Exchange Commission filing that it planned to trade on the Nasdaq stock exchange, CNN Money reports. The company aims to raise $500 million in its initial public offering. CNN MONEY
Candy Crush Maker Undertakes Hiring Effort  | King Digital Entertainment, the maker of the popular game Candy Crush Saga, has posted 165 job openings, representing 25 percent of its existing workforce, The Wall Street Journal writes. The move comes amid King’s disappointing first week trading as a public company. WALL STREET JOURNAL
Supreme Court Seems Wary of a Software Patent Case  | Some justices appeared skeptical about a case involving a patent for a computerized escrow mechanism that helps ensure that both sides in a transaction do what they have promised to do, The New York Times writes. NEW YORK TIMES
Intel Invests $740 Million in Cloudera For 18% Stake  | Intel has invested $740 million in Cloudera, which produces the most popular version of the Hadoop software framework for big data analysis, Reuters reports. REUTERS
Cool Planet Raises $100 Million in Funding Round  | Cool Planet, a start-up based in Colorado that makes liquid fuel from plant matter, announced on Monday a $100 million round of financing that included investments by Google Ventures, BP, General Electric and ConocoPhillips, The Verge writes. THE VERGE
Hong Kong Banking Regulator Opens Inquiry Into Currency Manipulation  | The Hong Kong Monetary Authority said it was asking several banks to independently review their foreign exchange operations and submit the results to the regulator. DealBook »
China Sees First Domestic Junk Bond Default  | A construction materials firm was unable to meet interest payments on bonds in the latest sign that slowing economic growth in China is hurting companies and investors, The New York Times writes. NEW YORK TIMES
Detroit’s Revised Debt Plan May Cut Pensions Deeper  | The city of Detroit has proposed new details, including potentially larger cuts to pensions for some retirees, for its plan for paying off portions of its debts, The New York Times reports. NEW YORK TIMES
Yellen Says Fed Is Determined to Improve the Labor Market  | In a speech on Monday, Janet L. Yellen, the Federal Reserve chairwoman, offered a reminder of her concern about unemployment and a rebuttal to economists who fault the Fed’s ability to improve labor conditions, The New York Times writes. NEW YORK TIMES
Ordinary Decisions With Not So Ordinary Consequences  | The collapse of Dewey & LeBeouf can provide a good example of how a series of seemingly mundane accounting maneuvers led to guilty pleas and criminal charges, Peter J. Henning writes in the White Collar Watch column. White Collar Watch »
British Regulator to Increase Scrutiny of Controls on Benchmark Rates  | The Financial Conduct Authority says it plans to review how investment banks control the flow of internal information on benchmark rates, potential conflicts of interests within financial institutions and internal controls on traders in relation to global benchmarks. DealBook »
Report Says Caterpillar Used Swiss Unit to Pare Taxes  | A Senate investigation, ahead of a Tuesday hearing, says the company avoided $2.4 billion in United States taxes over 13 years, The New York Times writes. NEW YORK TIMES
