The troubled trading firm agrees to be bought by rival Getco after a trading glitch earlier this year left Knight in precarious financial shape.
See the original post here: Knight Capital to be bought for $1.4 billion
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The troubled trading firm agrees to be bought by rival Getco after a trading glitch earlier this year left Knight in precarious financial shape.
See the original post here: Knight Capital to be bought for $1.4 billion
Knight Capital stopped taking new trading orders Wednesday afternoon and requested its clients re-route all stock orders to other trading firms
Read more from the original source: Knight Capital sidelined by power issues
Such has been the fury over the company’s contribution to the UK exchequer that even its chief executive has promised to comply with an inquiry. Parliament should take him at his word
Exactly 20 years ago, Kris Engskov, the head of Starbucks in the UK, was one of Bill Clinton’s most trusted lieutenants on the campaign trail that took both men to the Oval Office – Clinton as president, and his fellow Arkansas native as his most loyal aide.
One of the key points for the Clinton campaign team then was the charge that President George Bush Sr was soft on taxing big business. Clinton bragged that, given the chance, he could collect an additional £45bn in tax from foreign multinationals in just four years.
This very week in 1992, his campaign started a blitz of 30-second TV adverts. Viewers were told: “This is the $825bn question. That’s how much foreign corporations operating in the US took in one year. But 72% of them didn’t pay a dime in taxes. Not one dime …”
While he never quite clawed back £45bn, many felt Clinton put his finger on an important issue. Yet two decades on, US senator Carl Levin could still claim recently that multinationals “engage in shams and gimmicks to avoid paying the taxes they owe”. And that was the charge levelled at Starbucks UK last week, which became the latest target of fury, following Amazon and Google, for paying derisory levels of tax in the UK.
A Reuters investigation uncovered apparent discrepancies between what Starbucks was telling US investors on the one hand and what it was declaring to HM Revenue & Customs on the other.
By a curious coincidence Starbucks and Britain’s home-grown competitor, Costa Coffee, achieved similar sales last year – £398m and £377m respectively. The cost of achieving these sales, however, was £319m at Starbucks, more than three times the cost recorded by Costa. As a consequence, Costa’s accounts show a tax charge of £15m, while no tax is charged against Starbucks’ loss-making UK division.
That gap is in part explained by the US firm sourcing roasted coffee from a sister company in the Netherlands, and a consequent requirement to allocate some profits from the UK back to Amsterdam. Costa, meanwhile, operates a roastery in south London.
More unsettling, however, is the payment of almost £26m in “royalties and licence fees” by Starbucks UK in 2011 to other parts of the group. Engskov has defended this by pointing out that royalties are levied at the same percentage of revenues everywhere Starbucks operates in the world. Significantly, however, he does not say whether these payments are made back to Seattle or to a low-tax haven.
Royalties are not unusual:
Downing Street says regulator’s plan to make firms inform customers of cheaper deals is welcome but not sufficient
Downing Street has insisted it will press ahead with controversial legislation to require electricity companies to put some customers on cheaper tariffs, saying plans from the gas regulator, Ofgem, outlined on Friday did not go far enough.
No 10 said that while it had been aware Ofgem was going to set out proposals this week, this had not prompted David Cameron’s initiative on Wednesday, when he appeared to commit the government to forcing energy companies to put all customers on the lowest rate. It added that it had not been briefed on the detail of the Ofgem plans when Cameron made his remarks and said that while Ofgem’s commitment to greater transparency and its plans to require companies to inform customers of cheaper deals were welcome, they were not sufficient.
A spokeswoman for the prime minister claimed Ofgem’s plans, which would simplify bills and prevent suppliers offering more than four primary tariffs for each fuel type, would sit alongside Cameron’s stated plans for legislation that could force suppliers to give customers the cheapest deals.
On Wednesday the prime minister said he would oblige energy companies to provide customers with the lowest tariff. The next day, he was forced to admit he had only raised an option for inclusion in the energy bill. He said he was considering requiring energy companies to put some direct debit customers on low tariffs with a customer’s right to opt out.
His announcement was criticised by consumer groups and Labour as unworkable.
Downing Street said the legislation would complement Ofgem’s changes. “It is really the same agenda. We have been working with them for some time on this and will continue to work with them. As the prime minister said, we will use forthcoming legislation to ensure that people get the lowest tariffs.”
Asked whether the legislation would override Ofgem’s proposals, she replied that they would be “taken into account”.
The Ofgem plans to force suppliers to inform householders about their cheapest deals and greatly simplify the number of pricing plans are part of what it is calling the biggest shakeup of the market for domestic energy for more than a decade.
Ofgem’s proposals will, according to its chief executive, Alistair Buchanan, bring a “simpler, clearer, fairer and more competitive energy market for all consumers”.
Companies would be forced to put consumers on the lowest tariffs only in very special circumstances.
Audrey Gallacher, director of energy at Consumer Focus, said: “This is a positive package of measures which should help to make the energy market clearer and simpler. Particularly welcome are proposals which could cut the number of available tariffs by half. Ofgem needed to act to make the energy maze less impenetrable and these are important and overdue measures.
“Events of recent days have created more heat than light. Government and regulators need to plot a clear and consistent path on energy market reforms which puts the interests of consumers at the heart of the process. Regulation, legislation and effective competition all play a role in delivering an energy market that works for, not against consumers.”
The chairman of the energy select committee, Tim Yeo, wrote to the energy secretary on Friday night expressing his surprise at Cameron’s proposals. He warned: “The later the bill reaches the statute book, the later investment in urgently needed new electricity-generating capacity, and in particular low-carbon generation, will come forward.”
Angela Knight must relish a challenge. The woman who defended the industry during one of the worst periods in its history now takes the flak for energy suppliers. As chief executive of trade association Energy UK, she has to stand up for firms pilloried for driving up prices and trumpeting record profits. Knight became chairman of the British Bankers’ Association on April 1, 2007 just months before the queues formed outside branches of Northern Rock in the first run on a British bank since the 19th century. It was the start of an unprecedented crisis in the industry.
The former Tory MP rose from the backbenches to economic secretary to the Treasury within three years, only to be swept away by the wave of Labour MPs that brought Tony Blair to power in 1997. Keen to get away from traditional female-only professions, she studied chemistry at Bristol university, leading to an early career in heavy industry, when she set up and ran Cook & Knight Metallurgical Processors with her then husband David.
According to a report out today from property consultants Knight Frank, last year was a record one for sales of homes worth £10m or more.
Knight Vinke turns down improved offer for mining company Xstrata from commodities broker Glencore
Activist investor Knight Vinke has publicly rejected an improved offer for mining company Xstrata from commodities trader Glencore, which is expected to release further details of its now-hostile £56bn takeover proposal at 7am on Mondaymorning, with a full offer document to follow at a later date.
It will be the latest twist in a long-running mega-deal that began as a friendly merger of equals, turned sour over accusations of excessive rewards for management, and has prompted interventions from both the Qatar state and former prime minister Tony Blair.
In an announcement to the London Stock Exchange, where both companies are listed, Glencore will flesh out the new terms that its chief executive Ivan Glasenberg put to both his and Xstrata’s shareholders in an 11th-hour intervention on Friday.
It is understood this will not constitute a firm takeover offer or start the clock ticking on a new deadline in the process. Takeovers must be approved within 60 days of an offer being made, according to UK Takeover Panel rules.
The new terms offered by Glencore included an increase in the offer price from 2.8 shares in the new company for each existing Xstrata share to 3.05 shares, and controversially the removal of a promise to make Xstrata boss Mick Davis chief executive of the merged group.
In a statement released on Sunday night, Knight Vinke rejected Glencore’s improved price, saying “the value of Xstrata is substantially more than Glencore is proposing today”. The mining company is due to generate a threefold increase in earnings over the next two years, the only one of its peer group to have such a growth profile, argued David Trenchard, vice chairman of Knight Vinke, which is a top 20 Xstrata shareholder with just under 0.7% of the stock.
Trenchard also called for a “substantial increase” to the price, offered and an “appropriate premium” given Glencore’s offer has changed from a merger to a takeover, with a corresponding management overhaul, and now represents a change of control at Xstrata. Another Xstrata shareholder, Richard Buxton of fund management group Schroders, has already rejected the terms, saying “the price is absolutely still too low”.
Glencore’s new offer came on the day the boards of both companies had gathered in the Swiss town of Zug to vote on the deal, and at the very moment Xstrata’s directors were due to take their seats.
Xstrata and its key 12% shareholder, the Qatar sovereign wealth fund, are understood to have been surprised by Glencore’s stipulation that Davis would no longer lead the merged company as originally proposed. The Qataris are understood to be supportive of the mining group’s successful management team.
Blair was asked to intervene after it became clear Qatar would lead other Xstrata shareholders in blocking the merger on the grounds that Glencore’s offer was too low. In a meeting at Claridge’s hotel on Thursday night, Blair is understood to have mediated discussions well into the night between Glasenberg, the Qatari prime minister Sheikh Hamad bin Jassim al-Thani, and their advisers.
The Qataris had in June demanded an offer of at least 3.25 merged company shares for each Xstrata share, but Glencore improved its offer and their stance softened.
The new offer of 3.05 shares in the new companyrepresents a 17.6% premium to the miner’s share price on 1 February before the merger plans were announced.
However, in a statement released from Zug on Friday, Xstrata said the terms also required the replacement of Davis as leader of the merged group and an amendment to £200m of ‘management incentive arrangements’ that were due to be paid to more than 70 of the miner’s executives in exchange for staying with the new company.
In a proposal that irked shareholders at both companies, Davis had been due to receive as much as £75m in retention money, with a further £144m set aside for his top team.
Knight Capital, once one of the fiercest critics of Nasdaq’s Facebook compensation plan, has done a 180-degree turn.
Continued here: Knight Capital ‘likes’ Nasdaq’s Facebook plan
European crisis plus rising grain prices combine to make land attractive to Greek and Italian investors as well as City bankers
It is known as “gold with a coupon”. English farmland has trebled in value over the past decade and now averages more than £6,000 an acre. While farmers still make up at least half of all buyers, estate agents have seen an influx of City bankers as well as buyers from overseas – crisis-stricken Greece and Italy, along with India and China. In the next five years it is expected to rise in value by more than two-thirds.
The appeal of farmland is that it is a safe-haven asset, like gold, but also gives annual returns of 2-3%. On top of that there are tax advantages; most importantly, agricultural land is exempt from inheritance tax as long as it is managed as a farm. And as Mark Twain said: “Buy land. They’re not making it any more.”
“Every time there is a wobble in Europe you see more buyers,” says Christopher Miles, head of rural agency for Savills’ eastern region. “Greeks, Italians and French are buying in central London and some of those are also buying farmland. It’s just a movement of capital between different countries.”
He has also seen growing interest from Indians, split fairly evenly between investors and lifestyle buyers. He recalled that from 2005 the market was flooded by Danish and Irish investors snapping up cheap land, fuelling a 150% increase in values in the east of England. Burdened with debt, they have since cashed in and returned home.
A rival agent, Knight Frank, is starting to see bids from private Chinese investors. James Prewett, the firm’s head of regional farm sales in central and western England, said: “They want to buy social status and a piece of England. Post the London home, the next obvious thing they want to buy is a smallholding – 50-60 acres.”
But Africa is the main playground for Chinese institutional investors keen to buy large plots of land. In the UK, only 100,000 acres of land change hands every year.
Savills is predicting that UK farmland prices will climb by 36% by 2017, an average rise of about 6% a year. Last year the proportion of farmers selling land was at its lowest since 1993, while the number of farmers buying land to expand their businesses continues to rise.
Knight Frank sold 357 acres at Vine Farm in Langford, Bedfordshire, well above the £2.6m guide price, while a three-bed farmhouse with 40 acres at Rockwell near Leighton Buzzard in Buckinghamshire went for around £750,000. Apart from new nationalities, there have been other changes in the makeup of buyers. Whereas before the financial crisis more than 30% of buyers were acquiring a farm to live there, these lifestyle buyers have melted away and a similar proportion is now made up of City bankers and family offices buying up blocks of arable land in the east of England. They will then get a local farmer to manage the land. But it doesn’t look like the pension funds which were acquiring farmland in the 1970s and early 80s will be coming back, because the market is too small.
Andrew Shirley, the head of rural research at Knight Frank, said: “Prior to the credit crunch we were seeing a lot of people setting up farmland funds. They all disappeared. Now we’re seeing a lot of them coming back.”
Sharp rises in prices of commodities such as corn and wheat due to poor harvests in the US and Russia have made farmland more attractive as an investment.
Mark Hill, the head of food and agriculture at Deloitte, pointed out that land values have gone up around the world, with growing concerns about the security of food supply. Rising land values will ultimately feed through into food prices, which are already increasing, he warned.
Knight’s problems started early on Wednesday when a software glitch flooded the New York Stock Exchange with unintended orders for dozens of stocks
Knight Capital Group Inc looks set to enter into a $400m (£256m) financing deal with a group of investors, allowing the trading firm to open its doors on Monday after a crippling $440m loss, although it will come at a steep cost to shareholders, sources familiar with the situation said.
Such a deal would help Knight continue to operate and avoid further disruption and uncertainty for its brokerage clients, which include firms such as TD Ameritrade, Vanguard and Fidelity Investments.
An announcement on the deal is expected by early on Monday, one source said.
Knight’s shareholders have had to pay a steep price to keep the firm afloat following 45 minutes of software-induced mayhem last Wednesday that led to the loss and a massive decline in customer confidence. Shares worth $10.33 last Tuesday night may now be worth just $1.50, an 85% drop.
The capital lifeline is coming from investors that include the private equity firm Blackstone Group, the Chicago market-maker Getco – in which the private equity firm General Atlantic is a shareholder – as well as the financial services firms TD Ameritrade, Stifel Nicolas, Jefferies Group Inc and Stephens Inc, according to the sources.
The investment is expected to be made through convertible preferred stock, which will have a conversion price of $1.50 a share and carry a coupon of 2%, the sources said. The consortium will own 70% to 75% of Knight following the conversion, one source said.
Officials at Knight, Blackstone, TD Ameritrade, Jefferies, Stifel and General Atlantic declined to comment. Officials at Getco and Stephens were not immediately available for comment. CNBC earlier reported the news of the deal.
Knight’s problems started early on Wednesday when a software glitch flooded the New York Stock Exchange with unintended orders for dozens of stocks, boosting some shares by more than 100% and leaving the company with the trading loss.
As the nation’s largest provider of retail market-making in New York Stock Exchange (NYSE) and Nasdaq-listed stocks, Knight buys and sells shares for clients. It also provides liquidity to the equity market by stepping in to buy and sell using its own capital to ensure orderly, smooth activity.
Knight’s computers had been loaded with new software on Tuesday that was designed to accommodate a change on the NYSE, according to people familiar with the matter. When trading began at 9.30am, however, the computers poured a huge number of orders into the market.
For about 10 minutes it was unclear where the orders were originating, according to people familiar with the matter. After NYSE officials identified Knight as the source, it took another 10 minutes for the company to figure out the source of the problem. By that time, the erratic orders in a number of affected stocks had triggered exchange “circuit breakers” that temporarily halt trading in volatile stocks.
At Knight’s headquarters in New Jersey, senior officials streamed down to the trading floor and sought to halt the trading, according to people familiar with the situation.
The firm’s chief executive was not among them. The long-time Wall Street veteran Thomas Joyce, known in the business as TJ, had undergone knee surgery the day before.
In his absence that morning things spun out of control and it took until 10am, 30 minutes after trading on the exchange opened, for Knight and the NYSE to stop the order flow.
Joyce hobbled to the trading floor on crutches at around noon and stayed for about 15 minutes, assuring people that everything would be fine.
By that time, the damage had been done. A number of major trading partners were shifting their orders to other firms, drastically reducing the volume at Knight.
For example, through Tuesday, Knight accounted for 20% of the market-making activity in shares of Apple, one of the most actively traded stocks on a daily basis. By midday on Friday, Knight was the market maker for just 2% of the share volume, according to data from Thomson Reuters Autex, though market makers may not be reporting all trade data.
While Knight’s closure would not disrupt trading since big clients have routed orders to other firms, its demise could further shake investor confidence in the market.
Knight’s troubles also highlight how vulnerable market makers are to the complex web of computers and software that constitute the modern marketplace. For investors already suspicious that the system might be fundamentally broken after the “flash crash” of 2010 and the botched Facebook IPO in May, the troubles at Knight have only added to concerns.
TD Ameritrade, the No 1 US brokerage by trading volume, has exclusive clearing deals with Knight and it would be in its best interests to keep the embattled equities trader afloat.
Two months ago, Knight bought the futures business of Penson Worldwide for $5m. TD Ameritrade exclusively clears its clients’ futures and forex trades through that platform. The Omaha-based brokerage’s entire bond platform is also with Knight.
“They really are handcuffed to Knight,” a source with knowledge of TD Ameritrade’s arrangements with Knight said.
Getco was founded in 1999 by two Chicago traders and is also an electronic trading firm that matches buyers and sellers in fractions of a second.
The chief executive, Daniel Coleman, is a proponent of high-speed trading technology, touting the belief that it allows investors access to liquid markets at a lower cost. In June, Coleman told a congressional panel that market makers such as Getco “reduce market volatility by buying when others want to sell and selling when others want to buy”.
Even if Knight receives the capital injection, it will have to persuade clients to resume trading with it and identify the reasons behind the software glitch.
Customers including TD Ameritrade and Scottrade said on Friday they would return business to Knight, the nation’s largest retail market-maker of US stocks. Others, including Vanguard, said they were not trading with the company yet.
Knight could also face litigation from shareholders who have seen the value of their holdings plummet.
The potential liability could increase if it were found that Knight violated any market rules. The top US securities regulator said on Friday that government lawyers were trying to determine if Knight violated a new rule designed to protect the markets from rogue algorithmic computer trading programs.
The Securities and Exchange Commission’s market access rule, which took effect last year, requires brokers to put in place risk control systems to prevent the execution of erroneous trades or orders that exceed preset credit or capital thresholds.
Such concerns kept some potential investors on the sidelines over the weekend.