News Archive

Goldman settles SEC charges over 2013 trading incident

Goldman Sachs Group Inc (GS.N) will pay $7 million to resolve U.S. Securities and Exchange Commission charges stemming from a programming error that caused the stock options market to be flooded with erroneous orders, roiling traders and prices.

Tuesday’s settlement, in which Goldman did not admit wrongdoing, arose from an Aug. 20, 2013 incident that was among a series of high-profile mishaps, including the 2010 “flash crash,” linked to computers.

The SEC said Goldman mistakenly sent about 16,000 mispriced options orders to various exchanges.

It said this caused about 1.5 million options contracts, representing 150 million shares, to be executed within minutes after markets opened, though Goldman tried to cancel the orders.

The SEC said the problem was compounded when an employee in Goldman’s “Mission Control” unit, which monitored the bank’s trading systems, manually lifted circuit breakers designed to block errant orders, believing he had authority and because no one objected.

Goldman was charged with violating the SEC’s “market access” rule, which requires brokerages that provide customers with direct market access to have reasonable risk and supervisory controls designed to prevent disruptions.

“Firms that have market access need to have proper controls in place to prevent technological errors from impacting trading,” SEC enforcement chief Andrew Ceresney said. “Goldman’s control environment was deficient in several ways, significantly disrupted the markets, and failed to meet the standard required of broker-dealers.”

In a statement, Goldman said it was pleased to settle, and has strengthened its controls and procedures.

The market access rule was adopted after the May 6, 2010 “flash crash” in which computer activity caused the Dow Jones Industrial Average to briefly plunge more than 1,000 points, wiping out nearly $1 trillion of market value.

A London-based high-frequency trader, Navinder Singh Sarao, was in April criminally charged over his alleged role in that case.

The SEC said the Goldman orders in question were placed for options on stocks and exchange-traded funds with ticker symbols beginning with the letters I through K.

It said Goldman lost $38 million from the incident, and could have lost $500 million had many trades not later been canceled or received price adjustments under options exchanges’ rules governing “clearly erroneous” trades.

Last November, Wedbush Securities agreed to pay $2.44 million and admit wrongdoing to settle SEC charges it violated the market access rule by improperly allowing thousands of “essentially anonymous” overseas traders to access U.S. markets.

(Reporting by Jonathan Stempel in New York; Additional reporting by Sarah N. Lynch in Washington, D.C.; Editing by Chizu Nomiyama and Tom Brown)

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Disney names treasurer Christine McCarthy as CFO

Walt Disney Co (DIS.N) said it named Christine McCarthy as its chief financial officer.

McCarthy had previously served as Disney’s treasurer over the past 15 years.

Disney said in June that James Rasulo, a 29-year veteran of the media company, would step down as CFO at the end of the month.

(Reporting by Anya George Tharakan in Bengaluru; Editing by Joyjeet Das)

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New Volkswagen brand boss faces challenge of taming Wolfsburg’s high costs

BERLIN/FRANKFURT When Herbert Diess takes over on Wednesday as head of Volkswagen’s (VOWG_p.DE) namesake car brand, he will inherit one of the group’s biggest problems: how to slash costs at the sprawling Wolfsburg complex.

Diess summarized his views on Wolfsburg in a scathing internal report, telling superiors the plant’s workforce of 50,000 is bloated with staff whose services are no longer needed but who haven’t been fired, a BMW source said.

The report was used by former VW Chairman Ferdinand Piech in his attack on the company’s Chief Executive Martin Winterkorn this spring, the source added.

Now Piech, who recruited Diess from rival BMW (BMWG.DE), is gone. Diess’s future depends on whether he can deliver on Winterkorn’s plan to slash 5 billion euros ($5.6 billion) a year in costs from VW brand operations by 2017, overcoming a long history of resistance by its German unions and political leaders to significant job cuts.

“There is a certain tenseness among staff and managers ahead of Diess’ arrival,” a VW manager said. “Things are bound to get difficult.”   

VW and Diess both declined comment.

The carmaker has called the 56-year-old Bavarian “the ideal candidate” to revive the VW brand, which lags rivals Toyota (7203.T), General Motors (GM.N) and Ford (F.N) on profitability.

But Diess, whose austerity measures helped BMW keep to 2012 profit targets even as the debt crisis sapped luxury car demand, will be closely watched by labor.

Europe’s largest carmaker has long faced calls to trim fixed costs and raise production efficiency in high-wage Germany, where nearly half its 593,000 employees work. Toyota builds slightly more cars with only 340,000 workers.

The VW namesake brand, control of which Diess inherits from Winterkorn, last year generated half the group’s 202 billion euros of sales but added only a fifth to earnings, reflecting high labor outlays and costly in-house production of engines, transmissions and other components.


Instead of issuing blanket cost-cut calls which enrage VW’s unions, Diess, who has a doctorate in production technology, may work with suppliers to change their methods, a BMW executive said. “If Diess told a supplier to cut prices by 10 percent, he could also explain to the supplier how to make it 10 percent cheaper in production.”

VW’s unions have foiled cost cutting plans in the past.

Former VW brand chief Wolfgang Bernhard, now at Daimler (DAIGn.DE), and former VW CEO Bernd Pischetsrieder were both effectively ousted after clashing with labor bosses over cost plans. And union influence has grown since Winterkorn relied on labor to fend off Piech’s challenge.

“One will try to bias him (Diess) toward our case,” a labor source said.

Diess, who spent eight years on BMW’s executive board, joins VW with high ambitions. A source said last December he only accepted VW’s offer after being passed over for the job of BMW CEO.

Yet any hopes of becoming VW CEO will depend on whether he can secure backing from executives and unions who occupy half the 20 supervisory board seats.

“That’s a balancing act,” said Stefan Bratzel, head of the Center of Automotive Management think-tank near Cologne. “If Diess manages to revive the core brand he will be a candidate for CEO.”

Some of the problems at the VW brand hark back to its centralized leadership culture, with Piech and Winterkorn seeking control over almost any project such as design and quality issues.

But Piech’s departure has triggered a process to devolve power and streamline the executive board to tackle underperformance in the United States and other foreign markets.

For Diess, the shakeout at VW will be visible on Wednesday when he moves into a makeshift office opposite the 13-storey building that normally houses VW executives but is being redeveloped.

Any manager may find it more difficult having to work his way into a new employer if it is undergoing structural change.

“Diess is keeping his house in Munich,” the BMW executive said. “It’s pretty obvious why this is a smart move.”

(Additional reporting by Jan Schwartz; Editing by David Holmes)

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New oil bull market in sight as Brazil, Iraq cut output targets

LONDON Massive downward revisions to oil output in Brazil and Iraq have increased the risks for oil markets of going from the current feast to famine within just a few years, leading to a price spike that would give a new boost to the U.S. shale industry.

Brazil and Iraq had been expected to add over 2 million barrels per day to global supply by 2020 and another 2.5 million by 2025, becoming the two biggest contributors to help meet rising global demand, according to the long-term forecast of the International Energy Agency.

With Brazil’s Petrobras cutting this week its five-year production outlook by 1.4 million bpd in response to low oil prices and the ongoing corruption probe and Iraq renegotiating deals with oil majors to reflect “more realistic” output targets, the current glut in the oil markets is poised to end sooner than expected.

“All these project cancellations and deferral and cut backs are setting the world up for tighter oil markets in the medium term (2017-19) unless the record Middle East oil rig count successfully translates into significantly higher production,” said Seth Kleinman from Citi.

“Demand will have its say but from a supply perspective it is hard not to believe the seeds of the next price spike are being sown today,” Deutsche Bank said in a note on Tuesday.

To put the Petrobras revision in prospective – the 1.4 million bpd figure almost equates to the current global oversupply, which arose due to a U.S. shale oil boom and a decision by OPEC to keep its taps fully open to battle for market share with rival producers.

With 2015 global oil demand surprising on the upside and likely to exceed its average growth of around 1 million bpd a year over the past decade, the glut is expected to clear by the middle or the end of 2016.

Beyond 2016, the balanced market may not last long.

Only a year ago, the IEA saw Brazil pumping 3.7 million bpd by 2020 and Iraq some 4.6 million. On Monday, Petrobras, responsible for most of the country’s output, said it will pump only 2.8 million by 2020.

Sources at oil majors working in Iraq, which has been producing an average of 3.5 million bpd this year, say they will struggle to raise output steeply after agreeing large spending cuts with Baghdad, which still aspires to see production at 5.5-6.0 million within five years.


Several oil industry heavyweights, including former BP boss Tony Hayward, have predicted a new bull market could arrive sooner than expected given the scale of capital and workforce withdrawal from the U.S. oil industry.

U.S. oil output growth has indeed stalled in recent months as companies drastically cut the number of drilling rigs following a steep fall in oil prices after OPEC decided against cutting output last November.

The irony for OPEC, though, could be that it might ultimately win the market share battle against most competitors but not the United States, where output from shale formations run by hundreds of independent firms can be switched on and off much quicker than in giant offshore projects such as in Brazil.

“I call this the shale wagging the dog scenario – as shale can work in a prices below $70 per barrel but much of the rest of the industry does not… It is a bullish scenario for 2017/18 time period,” said Citi’s Kleinman.

Downward revisions of output figures for Brazil and Iraq follow repeated warnings from the IEA that the breathing space provided by the rise in non-OPEC output was in many respect illusory, given the long-lead time of new projects.

On Tuesday, the IEA, which made a downward revision of its production outlook for Brazil back in February, said it was still assessing the latest announcements.

But the developments will likely further strengthen the agency’s belief that OPEC would need to produce much more crude to balance the markets.

The IEA’s long-term outlook sees the need for OPEC crude to rise by 6 million bpd in the 2020s and by the same amount again by 2030 – effectively meaning the world needs to add another Saudi Arabia to its supply.

In the shorter run, demand growth is simply poised to outstrip supply without prices rising above $60 per barrel to encourage higher-cost supplies, such as oil sands and deepwater, to balance the market, according to U.S.-based consultancy PIRA.

(Additional reporting by Ron Bousso, Simon Falush and Christopher Johnson, editing by David Evans)

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EU makes last-ditch bid to save Greek bailout

ATHENS EU authorities made a last-minute offer to salvage a bailout deal that could keep Greece in the euro as the clock ticked down on Tuesday, with Germany warning that time had run out to extend vital credit lines to Athens.

With billions of euros in locked-up bailout funds due to expire at midnight, the European Commission urged Greece to accept the proposed deal, while holding out hopes that some tweaks could still be possible.

If no agreement is reached, Greece will default on a loan to the IMF, setting it on a path out of the euro with unforeseeable consequences for the European Union’s grand currency project and the global economy.

Greek officials, who insist that a referendum on the bailout package on Sunday is part of the negotiating process, said they wanted a deal though there was no firm offer or move towards accepting European Commission President Jean-Claude Juncker’s proposals.

“We want a viable solution. If we get a credible proposal that leaves even a sniff of a viable solution, we’ll be the first to take it,” a senior finance official told reporters.

However prospects of a breakthrough were dampened by a cool response from German Chancellor Angela Merkel.

“This evening at exactly midnight central European time the programme expires. And I am not aware of any real indications of anything else,” Merkel said at a news conference with Kosovo’s prime minister.

“All I know is that the last offer from the Commission that I’m aware of is from Friday of last week.”

EU and Greek government sources said Juncker, who spoke to Prime Minister Alexis Tsipras late on Monday, had offered to convene an emergency meeting of euro zone finance ministers on Tuesday to approve an aid payment to prevent Athens defaulting, if Tsipras sent a written acceptance of the terms.

He also dangled the prospect of a negotiation on debt rescheduling later this year if Athens said “yes”.

By early afternoon on Tuesday no firm response had been received from Greece, Commission spokesman Margaritis Schinas told reporters.

“As we speak, this move has not yet been received, registered, and time is now narrowing,” Schinas said.

The growing possibility that Athens could be forced out of the single currency brought into sharp focus the chaos that could be unleashed in Greece and the risks to the stability of the euro.

“What would happen if Greece came out of the euro? There would be a negative message that euro membership is reversible,” said Spanish Prime Minister Mariano Rajoy, who a week ago declared that he did not fear contagion from Greece.

“People may think that if one country can leave the euro, others could do so in the future. I think that is the most serious problem that could arise.”


The last-ditch bid from Brussels came as uncertainty built ahead of Sunday’s referendum, with a string of European leaders warning that it would effectively be a choice between remaining in the euro or reverting to the drachma.

Opinion polls show Greeks in favour of holding on to the euro but a rally of tens of thousands of anti-austerity protestors in Athens on Monday highlighted the defiance many in Greece feel about being pushed into a corner by the lenders.

Further rallies are expected in coming days, with a demonstration in favour of staying in the euro planned in central Athens on Tuesday.

Tsipras broke off negotiations with the Commission, the IMF and the European Central Bank and announced the referendum on the bailout terms early on Saturday, giving voters just one week to debate the fundamental issues at stake.

Under Juncker’s offer, Tsipras had to send a written acceptance by Tuesday of the terms published by the EU executive on Sunday and agree to campaign in favour of the bailout in the planned July 5 referendum.

European Union leaders hammered home the message that the real choice facing Greeks is whether to stay in the euro zone or return to the drachma, even though the EU has no legal way of forcing a member state to leave the single currency. [ID:nL5N0ZF4ZF]

Italian Prime Minister Matteo Renzi warned against turning the referendum into a personality contest between Tsipras and Juncker or Merkel.

“This is not a referendum on European leaders. This is a run-off vote: euro or drachma,” Renzi told the Italian business daily Il Sole 24 Ore.

“The Greeks do not have to say whether they love their prime minister or the head of the European Commission more. They have to say whether they want to stay in the single currency.”    


Greece, which has received nearly 240 billion euros in two bailouts from the European Union and International Monetary Fund since 2010, is set to miss a 1.6 billion euro debt repayment to the IMF which falls due on Tuesday.

If that happens, IMF Managing Director Christine Lagarde will immediately report to the global lender’s board at close of business, Washington time, that Greece is “in arrears” – the official euphemism for default.

It will be the first time in the history of the IMF that an advanced economy has defaulted on a loan from the world’s financial backstop, putting Athens, which has seen its economy contract by more than 25 percent since 2009, in the same bracket as Zimbabwe, Sudan and Cuba.

Already the imposition of capital controls to prevent the crippled banking system from collapsing have given Greeks a bitter foretaste of the economic plunge that could follow exit from the euro.

Withdrawal limits of 60 euros a day have been fixed for cash machines and there have been long queues at petrol stations and in supermarkets as worried shoppers have stocked up on essentials like pasta and rice.

There were no immediate signs of serious shortages but if the banks remain closed, cash flow problems which have already been reported by some firms, could worsen.

“So far there are no problems with suppliers, but if the banks are still closed next week there will be a bit of a problem if they demand purely cash payments,” said Charisis Golas, owner of a small meat and dairy shop in Athens.

(Additional reporting by Silvia Aloisi in Milan, Mark John in Paris and George Georgiopoulos and Lefteris Karagiannipoulos in Athens; Writing by Paul Taylor and James Mackenzie; editing by Anna Willard)

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Markets on edge as Greece heads for default

LONDON Euro zone stocks and low-rated bonds recovered the worst of their losses on Tuesday but remained on edge as Greece looked set to default on a debt repayment to the IMF and plunge deeper into financial crisis.

The breakdown of talks between Athens and international creditors over the weekend has led Greece to close its banks and impose capital controls. It has provoked market jitters worldwide, with Greeks due to vote in a referendum on Sunday that EU partners say will amount to a choice between staying in the euro or leaving.

There have been few signs of market panic even as the uncharted territory of a Greek exit from the euro zone becomes more likely, with investors citing Europe’s improved ability to fight financial contagion since the height of the euro debt crisis in 2011.

Top euro zone stocks .STOXX50E were up 0.2 percent at 1148 GMT after Greece’s finance minister said Athens would not repay the International Monetary Fund debts due on Tuesday but added he hoped for a deal with international creditors. German Chancellor Angela Merkel said the door was open for talks.

U.S. equity futures SPc1 pointed to a higher open, though the euro was down against the U.S. dollar as hedge funds stepped up sales.

“We are relatively bullish,” said Antonin Jullier, head of equity trading strategy at Citi. He said a Greek ‘Yes’ vote would be a positive outcome but a ‘No’ was likely to see the European Central Bank step in with tools to fight contagion.

“This is a complex situation and there is a lot of volatility; given the binary outcome we expect many investors will wait it out, but we already see value at current levels.”

Bank stocks were in positive territory and peripheral euro bonds recovering from losses after reports of last-minute contacts between Athens and Brussels, just hours before Greece’s international bailout package was due to expire, though a German government official said it was “too late” for an extension.

While Greek ripples were also a drag on investor sentiment in Asia, Chinese stocks broke a punishing three-day losing streak as regulators and the government stepped up efforts to prevent the past few weeks’ plunge from inflicting further damage on an already slowing Chinese economy.

“Even after these market swings, a Greek exit is still not fully discounted as a positive outcome is still possible,” BNP Paribas Investment Partners said in a note to clients.

“With a majority of Greeks in favour of staying in the eurozone, there is a decent probability of a referendum outcome in favour of the creditors’ proposals. But until the results are known, we are likely to see continued market volatility.”

The MSCI All-Country World equity index .MIWD00000PUS was flat. MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 1.1 percent but remained near a five-month low hit on Monday. Japan’s stock index .N225 rose 0.6 percent while South Korea .KS11 gained 0.7 percent.

In commodities, oil futures hovered below three-week lows and gold failed to attract strong safe-haven bids, even with ongoing Greek uncertainty. London nickel slid 8 percent to six-year lows and Shanghai nickel also tumbled after the Shanghai exchange broadened delivery options. [MET/L]

A risk gauge, the CBOE Volatility index .VIX, spiked overnight to its highest levels since February.

“There is still too much uncertainty in the markets and investors would be watching developments in Greece and China very carefully before jumping in,” said Karine Hirn, Hong Kong-based partner of Swedish group East Capital, a $3.5 billion fund management firm.

(Reporting by Lionel Laurent; Editing by Mark Trevelyan)

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Wall Street set to open higher on hopes of Greece deal

Wall Street was set to open higher on Tuesday, a day after the Dow and the SP 500 registered their worst session since October, as investors hoped Greece would strike a last-minute deal to avoid an exit from the euro zone.

Greece is hours away from defaulting on a 1.6 billion euro repayment to the International Monetary Fund.

The European Commission made its final push to try to persuade Greek Prime Minister Alexis Tsipras to accept a bailout deal he has rejected before.

“We are looking at some sort of a bounce from yesterday’s sharp decline,” said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.

“This last-minute talk of a deal is basically causing some short covering.”

U.S. corporations have limited exposure to Greece, but investors are concerned about the fallout across Europe if the country exits the euro zone.

In Asia, Chinese stocks .SSEC reversed course to end up 5.5 percent after the government and regulators stepped up efforts to reverse a 20 percent slump in the past few weeks.

U.S. investors await June consumer confidence data at 10 a.m. ET (1400 GMT). The index is expected to rise to 97.3.

SP 500 e-minis ESc1 were up 13 points, or 0.63 percent, with 339,891 contracts traded. Nasdaq 100 e-minis NQc1 were up 21 points, or 0.48 percent, on volume of 47,389 contracts. Dow e-minis 1YMc1 were up 83 points, or 0.47 percent, with 42,444 contracts changing hands.

ConAgra Foods Inc (CAG.N) rose 3.2 percent in premarket trading to $44.80 after the packaged foods maker said it would exit its struggling private label foods business.

General Electric (GE.N) rose 0.6 percent after it said it would sell its European private equity financing unit to Japan’s Sumitomo Mitsui Banking for more than $2 billion.

For-profit education provider Apollo Education (APOL.O) fell 11.5 percent to $13.75 after the company reported lower-than-expected sales on Monday.

Juno Therapeutics (JUNO.O) jumped 39 percent after Celgene (CELG.O) signed a 10-year partnership with the company. Celgene was down 1.2 percent.

Pentair Plc (PNR.N) rose 5.5 pct to $68 after the Wall Street Journal reported that Nelson Peltz’s Trian Fund Management LP disclosed a 7.24 pct stake in the valve maker.

(Additional reporting by Siddharth Cavale in Bengaluru; Editing by Saumyadeb Chakrabarty)

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GE to sell European private equity financing unit to SMBC

TOKYO General Electric Co (GE.N) said it would sell its European private equity financing business to a unit of Japan’s Sumitomo Mitsui Banking Corp (SMBC) for about $2.2 billion as the U.S. conglomerate sheds financial assets amid a restructuring.

The portfolio represents about $2.2 billion of total invested capital, GE said on Tuesday.

The portfolio carries a wider spread margin than most corporate loans, a source familiar with the matter said.

This makes the deal attractive to the core banking unit of Japan’s third largest bank, Sumitomo Mitsui Financial Group (SMFG) (8316.T), which is trying to diversify away from the fiercely competitive corporate lending sector.

Major Japanese banks such as SMFG have been aggressively buying businesses and extending loans overseas to make up for a weak domestic market.

In 2012, SMFG acquired an aircraft leasing company from Royal Bank of Scotland Group (RBS.L) for $7.3 billion and this year, Mizuho Financial Group Inc (8411.T) agreed to buy the U.S. and Canadian loan portfolio of RBS for $3 billion. (

In April, GE announced plans to exit $200 billion worth of finance assets which made it subject to government regulation as a financial institution.

The U.S. industrial conglomerate has since signed agreements to sell about $23 billion worth of assets, including the latest deal.

GE Capital’s Japanese commercial finance operations are part of this wider sale process, with one person familiar with the matter valuing them at around $5 billion.

GE is also shedding other assets.

The company said on Monday that it was selling its fleet management arm in the United States, Mexico, Australia and New Zealand for $6.9 billion.

GE is also selling its European fleet segment for an undisclosed sum that a source close to the matter said would be around $3.3 billion.

Bank of America Merrill Lynch and Citigroup Global Markets were GE’s financial advisers and Clifford Chance was its legal adviser.

GE shares closed at $26.64 on the New York Stock Exchange on Monday. Up to Monday’s close, the stock had risen about 5 percent this year.

(Additional reporting by Sagarika Jaisinghani and Rama Venkat Raman in Bengaluru; Writing by Ritsuko Ando; Editing by Edwina Gibbs, Miral Fahmy and Kirti Pandey)

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German watchdog says Deutsche Bank has catching up to do

FRANKFURT Deutsche Bank (DBKGn.DE) has some “catching up” to do under its new leadership to ensure its systems and processes are up to the requirements of international financial rules, the head of Germany’s financial watchdog Bafin said.

“It’s not enough to have a good strategy,” Bafin president Felix Hufeld told the Frankfurt business journalists’ club.

Deutsche Bank under its new chief executive John Cryan needs to ensure that reliable processes and controls are in place that fit the international regulatory environment, including the training of thousands of employees and investing billions in IT.

“Its a mass of measures that some banks master better than others,” Hufeld said late on Monday, in remarks set for release on Tuesday. “Deutsche Bank has some catching up to do.”

Cryan takes the helm of Germany’s largest lender on Wednesday, following the early departure of co-chief executive Anshu Jain.

Bafin in a report had been critical of organisational failings and insufficient controls at the lender as well as its slowness in clearing up problems, a person familiar with the report’s conclusions told Reuters earlier this month.

If Bafin is unhappy with a bank’s management, it usually communicates its view informally to the relevant supervisory bodies, Hufeld said. “Then we see what happens,” he said.

(Reporting by Jonathan Gould and Andreas Kroener; Editing by Thomas Atkins)

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