April 2005

Cover story

Naked shorting: The curious incident of the shares that didn't exist

Shareholders and executives in some of the US's smallest listed companies believe their share prices have been forced down by illegal naked shorting. This has led to a number of lawsuits, claiming unscrupulous behaviour by brokers and market-makers exploiting loopholes in the central clearing system. Those implicated dismiss the allegations as rubbish. What's going on?

SEC seeks to curb naked ambition

The SEC has amended legislation in a belated effort to clamp down on naked short selling. But it remains under pressure from a lobby group that ranges from senators to lawyers, and management to shareholders, who believe the new rules are having little effect.

Naked shorting: Stung by the German connection

Thousands of US stocks are being traded on a little-known Berlin exchange, without the knowledge of many of the companies involved. Have the naked short sellers exported their practice overseas?

Strategic failures

Academic research into delivery failures in the US cash equity and options market support the idea that prior to Reg SHO, market makers deliberately failed to deliver securities in a strategic way.

Foreign Exchange

EBS primed for change in online FX

Bank FX traders are up in arms about the plans of EBS, the interdealer FX broker, to allow hedge funds onto the platform. EBS says the pilot phase, which ended last month, was a success. Bank traders say it will create unstable trading conditions, and are beginning to talk about taking their liquidity elsewhere

Credit research poll

Credit research poll 2005: Banks consider new order for analysts

Modular rather than maintenance seems to be the new buzzword as the key to success in a rapidly changing environment for credit research. But every investment bank seems to have a different view about the implications for analysts. To publish or not to publish? Cross asset or sectoral? Client facing or in house? Whatever the decision, only the best analysts will survive.

Debt markets

Constructive conservatism

Germany's Pfandbrief issuers are getting ready for the new law that comes into effect in July. Now they, potential new issuers and an increasingly diverse investor base are focusing on the opportunities that the revised regulatory regime may provide. Will the new legislation help to hasten the internationalisation of the asset class?

Asia Pacific

Awake Australia fair

With some of the largest and most liquid capital markets in Asia Pacific and yield-hungry local asset managers, Australia would seem a natural port of call for Asian companies. Yet until structural reforms are made and local perceptions about Asian risk change, the expectations gap will not be bridged. Australia will end up the loser.

Medco shows the way ahead for Indonesia

The successful restructuring of energy company Medco shows what can be achieved in the byzantine and often murky world of Indonesian restructurings. With creditors all paid out and the family back in control, plans are afoot for a rapid expansion and an overseas listing.

Private banking

Nordic banks aim for cross-border growth

In global terms, the Nordic region does not register highly in private banking. In fact, industry consultants estimate the size of the whole Nordic private banking market is still smaller than that of Spain. This has discouraged international banks from establishing businesses there, and has left the Nordic banks and their private banking arms to fight it out for the small customer base. But it's a growth market. The number of affluent Nordic individuals is estimated to be set to increase by some 5% by 2007. Banks are trying to develop a pan-Nordic presence to attract as many of these clients as possible. In addition, the Nordic private banks are realizing the importance of pushing out to the rest of Europe and Asia to serve ex-pats and even compete for non-Nordic clients. Euromoney asks the heads of the private banking businesses of SEB and Nordea how they are managing for growth.

Western Europe

Spain's companies face accounting test

Until the advent of the European IAS39 accounting standard at the beginning of the year Spanish reporting requirements for derivatives were relatively relaxed. Now, though, companies will have to lift the lid on derivative transactions, causing pain for some of them.

Emerging Europe

Ukraine: promise and possibility

Ukraine is enjoying a huge re-evaluation in the eyes of outsiders, thanks to its Orange Revolution. President Viktor Yushchenko has set out an ambitious and investor-friendly reform programme but it is not clear that the government is capable of implementing it.

The bankers' dilemma

With the Russian state rolling back the liberalization of the economy – notably in its dealings with oil company Yukos – investment banks are faced with a dilemma. They must sometimes decide between defending the rights of private investors and forging and maintaining relations with the Kremlin in the hope of attracting current and future business. It's a tough choice.

Neither one thing nor the other

The tussle between liberals and dirigiste conservatives in Russia's ruling circles shows no signs of subsiding. Analysts are uncertain of the meaning of it all. The dismemberment of Yukos was a clear manifestation of the conservative line but there are indications that liberal intransigence is winning back ground

Foreign banks target Serbia

Foreign banks are racing to enter the Serbian banking market, one of the few in eastern Europe that still has large assets up for sale and strong potential for growth. Austria's Raiffeisen has stolen a march on its rivals but Italian and Greek banks are eager to build up business.

Muddling through deficit troubles

Hungary's economy is growing well, with relatively low unemployment and high foreign direct investment. But the government budget deficit is running far above EU criteria and there are divided counsels on how to control it.

Mol moves upstream in quest for supply

MOL, Hungary's expansive oil major, has become a leading downstream force in neighbouring markets. Now it is seeking new production sources to feed these regional markets.

Romania looks to EU membership

The lure of EU membership is encouraging Romania's recently elected government to tackle corruption and rationalize the currency and taxation regimes. If foreign investment is any indication, the reforms are working.

Romania's banks fight for the middle ground

With lending to small and medium-size enterprises and the provision of retail products the fastest-growing and most lucrative parts of Romania's financial services sector, banks are slogging it out for market share.

Kazakh banks hit the capital buffers

Kazakhstan's banking system is a success story whose rapid growth brings a need for capital injections, hence growing foreign interest. But while the banks are operationally transparent, ownership is opaque. What's more, a small population might limit foreign participation beyond investment banking.

CEE rankings 2005: Banks fly high in emerging Europe

Euromoney's first poll of central and eastern European companies draws on equity analysts' perceptions of a range of characteristics that are crucial to investors in the region. Banks figure highly in most categories and come out top in seven of the 12 rankings by country. Paul Pedzinksi reports.

An escape route for Turkey's Yapi Kredi

Now enjoying the third year of a recovery that is clearing away the debris of the 2001 crisis, Turkey's bankers are hoping soon to complete the final important clean-up operation: resolving the on-again, off-again fate of the fourth-largest private bank, Yapi Kredi.

Middle East

Saudis buy into an equity culture

Growing liquidity derived from high oil prices, less restrictive regulation, a drive to privatization and a reduction in investment abroad have driven the Saudi Arabian stock market to new heights



Front End


Market Monitor

Emerging markets

Deal Insider

Premiere's must-see IPO

Having recorded a loss of €1.5 billion in 2001 and been bought out by Permira in 2003, pay-TV operator Premiere has now completed the most successful IPO of a Germany company since 2000


Against the tide

The dollar's all at sea on a wave of change

Americans are poor exporters. A falling dollar can't change that. What with globalization, low-cost rivals and the downplaying of the greenback, a collapse rather than an adjustment looks likely.