A study conducted by Aite Group concluded the following:

• Broker/Dealers will spend about $262 million in 2008 on clearing workstations.
• Providers will have to integrate better with workstations especially Portfolio Balancing and Trading applications.

Bear Stearns had one of industry’s best clearing workstation, which was fully integrated and strong in Institutional Trading and Reporting.   The platform also supported futures and commodities.

JP Morgan will stand to benefit from this after the take over.

Some correspondent clearing firms are – Bear Stearns, Pershing, National Financial and Ridge Clearing.

Link

Trading on NYSE listed stocks has changed and investors need to be aware of the consequences.

If an average investor were asked, where is volatility greatest—the NYSE or the NASDAQ—most would probably respond that the NASDAQ has more volatility. Up until recently, they were probably correct. A study performed in April 2005 by the US Office of Economic Analysis found that, “On average, stocks experience a significant decline in intraday volatility upon moving from the NASDAQ to the NYSE”.

And why is that? “A major reason…is the role NYSE specialists play,” says the NYSE Euronext’s Web site. “The specialists have an affirmative obligation with regulatory accountability to cushion price movement and dampen volatility. They commit capital to dampen volatility and reduce the impact of institutional orders.”

Since the introduction of Regulation NMS and the NYSE Hybrid market, however, electronic trading has become the dominant method for trading NYSE stocks. Market share by the NYSE on NYSE listed stocks has dropped dramatically over the past year. In the second quarter of 2007, NYSE reported 63% of matched volume in NYSE Listed issues (down from 75% in the second quarter of 2006).

A recent example of this trend of increased electronic trading of NYSE stocks occurred on August 1, 2007. A rumor hit the market around 10:30 am that Beazer Homes (NYSE: BZH) may file for bankruptcy. The stock started to sell off immediately. Within 20 minutes, it plunged 37%, to $8.12 and the entire housing sector (including TOL, KBH and PHM) sold off quickly in sympathy. At 11:30 am, BZH issued a statement saying that the rumor was false. This led to a rally in BZH and the rest of the housing sector, which led to a recovery in the sell off to their pre-10:30 am levels.

If the electronic trading alternative was not available, the BZH specialist on the NYSE would have been more in control. Seeing the imbalance in sell orders, the specialist would have stepped in and committed capital to take the other side of the trade. Or they would have requested a trading halt. By performing either one of these actions, the specialist would have mitigated the initial and unwarranted plunge, and the subsequent spillover to the rest of the sector and the overall market would have been limited.

As a result of a large share of trading on NYSE listed stocks being done electronically, the specialist now has different motivations. The desire to commit capital has been diminished due to the lack of profits being derived from the specialist activities.

To sum up, NYSE stocks are essentially traded the same way as NASDAQ stocks now (except for the opening and closing trades). Investors need to be aware of this change and adjust their strategies accordingly.

The point of my piece is not to defend the specialist system or to assume that if it were just up to the specialists, like in “the good ol’ days,” they would have solved this problem. My point is that a new wave of electronic trading is changing the way that stocks are traded and priced, in this case on the NYSE, and that institutional investors need to take this into account. Because institutions buy large amounts of shares, even small changes in the price of a stock, caused by electronic trading, can greatly influence an institution’s opportunity cost.

References:

http://www.advancedtrading.com/blog/archives/2007/08/has_the_nyse_el.html

Ages: Aris 38, Maria 36
Occupations: Pricing manager and bank manager
Salary: $115,000 combined
401(k): $180,000
IRA: $23,000
529 plan: $14,000
Home equity: $81,000
Emergency Fund: $3,000

Money isn’t just a means for Aris Magtibay of San Antonio, Texas – it’s a full-time obsession.

Since getting his degree in finance in 1991 from Old Dominion University in Norfolk, Va., he’s putting abstract concepts from his education – like asset allocation and the importance of compounding money – to work in the real world.

Aris has documented all of his spending in Microsoft Money since graduation. If he buys a $3.99 value meal on his debit card at McDonald’s, it goes into the books. He says he takes no offense to the teasing he gets from coworkers and friends about his obsession.

“Although I must admit: if I spent as much time trying to make money as tracking the money I have, I’d be a rich man,” he jokes.

Aris’s big indulgence is the lottery – $7 in tickets each week. He calls it his investment that hasn’t paid off just yet.

He and his wife, Maria, were both born in the Philippines, although his family moved to Virginia when he was 3 years old. Maria spent most of her life in the island nation before the couple married in 1993. Aris met Maria while vacationing there, and she moved to the U.S. just three weeks before their marriage.

They have a son, Jared, who’s 13. The couple has built up $14,000 in a 529 college savings plan. They’re adding $100 a month, hoping to reach $20,000 by the time Jared is ready for school.

Aris and Maria earn a combined $115,000 a year before taxes. He works as a pricing manager for a telecom company, and she’s a manager at a bank. They each sock away 10 percent of their salaries in 401(k)s, putting in a total of $1,150 a month. Their employers match add an additional $500. They also put $50 per month into their Roth IRA.

The Magtibays bought a new home in San Antonio early this year for $315,000 with 20 percent down, spending some of their emergency savings to make the down payment. They pay $1,500 a month towards a 30-year fixed-rate mortgage at 6.25 percent, and expect to pay it off in 21 years.

“The goal is to pay the mortgage off before we begin dipping into our 401(k)s and IRAs,” said Aris.

After buying the house, their emergency savings are down to $3,000 in cash. They also have $1,200 in a bond exchange traded fund (ETF).

Aris handles his own investments wherever possible and says he prefers ETFs and individual stocks over mutual funds. Maria’s Roth IRA is also in the aggressive growth Janus Orion Fund.

Aris is trying learn more about investing and has recently started to trade options. They can take years to learn and can be risky.

The couple owns a 2006 Nissan Pathfinder and a 2006 Nissan Altima, both of which they lease for a total of $850 a month.

“I think that’s our Achilles heel,” said Aris. “We’re the type who wants to drive something brand new every five years.”

Each month, they spend $600 on food, $500 on utilities, and $700 on taxes. They’re also paying $700 a month on $11,000 in credit-card debt.

For security, they have two term life insurance policies for $500,000 each, plus homeowner’s insurance for 120 percent replacement value.

The couple’s goal is to have $1 million in assets, including home equity, by the time that Aris reaches age 50. After their retirement, they’d like to have $100,000 a year in income to live on.

Our Expert’s Take: The Magtibays are in pretty good shape, and on track to be millionaires by age 50 – but they could do better, said Greg Gardner, Certified Financial Planner with Gardner Group wealth management.

“They need to really beef up their savings account so they have six months worth of emergency liquid savings,” he said.

In addition, Gardner estimated that they are currently saving enough to withdraw only $93,000 annually in retirement – short of their $100,000 goal – assuming they live to 95.

In order to make up the budget gap in retirement, he listed three options. “They can buckle down and work one year beyond the typical retirement age of 65, or they could choose to save $850 more per month now, or adjust their spending down at retirement,” he said.

“But they’re definitely going to be able to save a lot more money once Jared leaves the house,” said Gardner.

For their emergency fund, they should have $20,000 to $30,000 – essentially six months worth of expenses – at the minimum. It should be completely liquid, in an interest-earning account like a money-market fund, says Gardner.

Finally, they should purchase larger life insurance packages, he said. “They’re a little bit underinsured at the moment,” said Gardner. “If one gets laid off, there’s not enough money in the emergency savings or the taxable investment accounts to draw on. If you were forced to liquidate money from the 401(k)s and IRAs, you’re talking taxes and penalties to get to those funds.”

References:

http://millionaires.blogs.cnnmoney.com/2007/07/25/aris-and-maria-magtibay/#comments

By MP DunleaveyEditor’s note: Columnist MP Dunleavey and eight other women have come together online to strip away the myths surrounding money, lay bare their assets and liberate themselves from debt. Follow the quest for financial fabulousness of these “Women in Red” every second Monday in Dunleavey’s column on MSN Money.

My stomach is churning, my heart is pounding and at night I toss and turn. What’s wrong, you ask? Is my job at risk? Is my husband having an affair?

Sob! No — I’m just trying to figure out how to invest my retirement funds.

I’ve got a $7,000 SEP-IRA that’s been sitting in an ice-cold, less-than-zero-interest money-market account for two years. From time to time an advisor from my bank calls and pleads with me to invest in something. Anything.

But there are 18 million investment options out there. (I count them when I can’t sleep.) What if I pick the wrong one?

Some simple solutions

I’m not alone in my paralysis: My fellow Woman in Red, Jill, has $26,000 in a rollover IRA from her previous job three years ago that’s also stuck in money-market limbo, earning 3%. Like me, she’s wanted nothing more than to invest it. But she feels overwhelmed by the dizzying number of investment choices and complex variables involved in making this key life decision.Well, come to find out: There are answers for folks like us. And they don’t involve joining a cult that scorns retirement because life on planet Zorbiton doesn’t require cash.

These basic, beginner, novice investment methods rely mainly on the use of index funds and exchange-traded funds (ETFs) — which are assortments of stocks (think: box of chocolates) that capture the overall performance of different market sectors.

(Can you believe I just wrote that? I’m learning so much I can practically open my own investment firm!)

Don’t think, invest

The clever idea behind the simplest of these so-called passive investment strategies is to not strategize. “We’re inundated with this idea of beating the market,” says Bill Schultheis, creator of the Coffeehouse Investor, “but, in fact, that’s the most destructive activity you can engage in for your portfolio.”Because index funds and ETFs mimic the return of various market segments (stocks, bonds, real estate), you do as well as the markets do. Over the past 10 years, the S&P 500 stock index ($INX) (often used as a proxy for the stock market as a whole) has returned an average of 11.3% per year.

I admit this had an instant appeal. Because doing nothing when you don’t know what to do can be profitable when you’re using one of these low-impact strategies.

1. Let the pros do it

This is the easiest way to go. You invest your money in a single fund today and just leave it alone for 10, 20, 30 years or more. The fund’s managers invest your money in a variety of other funds offered by that same company, and the mix of asset types is tailored to your risk tolerance, your expected retirement date or both.Lifecycle funds: Sometimes called “targeted-maturity funds,” these are a relatively new concept. But they’re increasingly popular in many 401k plans. These one-stop-shopping investments are a mix of mutual funds representing various asset classes (mainly U.S. stocks, foreign stocks and bonds). The percentages allocated to each asset vary depending on when you plan to retire.

For example, I could put my entire IRA into the Fidelity Freedom 2035 Fund (FFTHX) and forget about it until I’m 70. The fund managers will rebalance annually and gradually reduce investment risk, mainly by increasing the percentage of bonds, as I get nearer to retirement.

Funds of funds: These are similar to the life-cycle funds in that they are comprised of a collection of a company’s other funds. Like the life-cycle funds, they’re meant to cover all your bases and deliver comfortable returns while you watch TV.

The Vanguard Star Fund (VGSTX) is the classic balanced model, a ready-made portfolio of 11 mutual funds. Similar funds worth considering are the T. Rowe Price Personal Strategy Balanced Fund (TRPBX), PIMCO All Asset D Fund (PASDX) and TIAA-CREF Managed Allocation Fund (TIMAX). These are all great for novice investors but don’t include the age-adjusted risk reduction of the life-cycle funds.

2. Manage-it-yourself methods

These strategies are a little more hands-on, requiring you to do your own rebalancing once a year. What does that mean? It means that you buy and sell additional shares of the funds you own to restore them to their original allocation percentages.The Couch Potato Portfolio: The brainchild of Dallas Morning News and MSN Money columnist Scott Burns puts 50% of your money into each of two index funds: Vanguard Total Stock Market Index (VTSMX) and Vanguard Total Bond Market Index (VBMFX). That’s right. If you can count to two, you can do this. Burns recently expanded the portfolio to optionally include a few more funds for greater diversification. You can view the expanded portfolios here (site registration is required).

The Coffeehouse Investor: Bill Schultheis, who explains his portfolio strategy in a book of the same name, increases the number of index funds to seven to cover a greater variety of asset types. In addition to bonds and U.S. stocks, the Coffeehouse Investor adds a smattering of foreign and real estate funds.

Source: The Coffeehouse Investor

ETF Starter Portfolio: MSN Money’s managing editor, Richard Jenkins, suggests this beginner portfolio for investors interested in exchange-traded funds who want to get started with as little as $100. The strategy relies on ETFs to capture the performance of five different asset classes: U.S. and international stocks, domestic bonds, real estate and commodities.

3. Follow a guru

If you want to learn a little something while you invest, following the moves of an experienced investor can be enlightening, as well as profitable. It can also be comforting to feel like there’s a real person at the helm of your finances (even if that person isn’t you). Here are a few options:Tim Middleton’s ETF portfolio: MSN Money’s mutual fund columnist maintains an unchanging 40% core of stocks and bonds, then adjusts his allocation in the remaining 60% among various ETFs, depending on his assessment of the prospects for those asset classes. You can read more about his most recent moves here.The Upgrader Portfolio: The top-rated No-Load FUNDX newsletter offers a somewhat sexier approach called “upgrading.” They aim to capture the returns of hot areas of the overall market to deliver higher returns. You can subscribe to the newsletter ($149 a year) and follow the fund picks on your own or simply buy the FundX Upgrader Fund (FUNDX).

All Star-Fund Trader: This top-performing newsletter uses a technique called “sector rotation” to recommend investments in mutual funds and ETFs that track hot industries and market segments. A year’s subscription will set you back $199, though.

One way to cut through the clutter and find out which guru has the best track record over time is with the Hulbert Financial Digest, a newsletter about newsletters that objectively tracks the claims and results of the gurus. A copy of the HFD Honor Roll, a list of the top-performing newsletters, will tack on $89.50 to your newsletter subscription costs.

My feeling is that you want to be careful whenever following a guru, no matter how impressive the track record. What I like about passive investment strategies is that by following the market I’ll never do better, but I’ll also never do worse. It really boils down to your comfort level when it comes to risk.

Our final choices

Jill has picked the Coffeehouse Investor for her retirement strategy — for now. And I’m going to start off in a life-cycle fund, primarily because I don’t have much money right now and this is the least expensive way for me to go. (But also, I’m still warming up to this whole investment thing, and the no-brainer option is the one I can handle as I keep learning.)By no means have we reached our final investment strategies. We’ve simply taken the vital step of getting our retirement savings out of limbo and into the market, using a broad array of assets to deliver a steady return. Even if we did nothing else from this day forward, we’d still have an 8% to 10% return to look forward to, instead of practically zilch. As Jill said, it’s a relief to feel like we’re taking control.

*Results are as of Dec. 31, 2004. **Performance is net of commission costs.

NA=Not applicable

]]> http://capitalmarkets.wordpress.com/2007/08/06/3-simple-solutions-for-fearful-new-investors-2/feed/ 0 rm http://capitalmarkets.wordpress.com/2007/08/02/retrieve-excel-column-letter/ http://capitalmarkets.wordpress.com/2007/08/02/retrieve-excel-column-letter/#comments Thu, 02 Aug 2007 00:09:00 +0000 rm http://pulivaal.wordpress.com/2007/08/02/retrieve-excel-column-letter/ Continue reading →]]> Function to return back the column letter in Excel.  I came across a situation, where I had to use Excel VBA to retrieve the active cell column.  But ActiveCell.Column only returns the column number ( I don’t know why Microsoft decided to keep it this way).  Came across a function that retrieves the column letter given the column number.