Stock Trading Is About to Get 5.2 Milliseconds Faster

In April the Canadian research ship Coriolis II will set out from Halifax to survey parts of the continental shelf stretching 1,000 miles off the east coast of Nova Scotia. The ship has been hired by Hibernia Atlantic, a Summit (N.J.)-based company that operates undersea telecom cables, to map out a new $300 million transatlantic fiber-optic line called Project Express. The cable will stretch 3,000 miles beneath the North Atlantic, connecting financial markets in London and New York at record transmission speeds. A small group of U.S. and European high-speed trading firms will pay steep fees to use the cable.

When it opens in 2013, Project Express will be the fastest cable across the Atlantic, reducing the time it takes data to travel round-trip between New York and London to 59.6 milliseconds from the current top speed of 64.8 milliseconds, according to Hibernia Atlantic. Those five milliseconds might not seem like a big deal, but to the handful of electronic trading firms that will have exclusive access to the cable, it will be a huge advantage. “That extra five milliseconds could be worth millions every time they hit the button,” says Joseph Hilt, senior vice president of financial services at Hibernia Atlantic.

Read More at Businessweek

Greece's Fringe Parties Surge Amid Bailout Ire

ATHENS—Weeks after agreeing to an agonizing bailout deal with Europe, Greece is splintering politically ahead of national elections, raising the risk that it won't be able to make the economic sacrifices still needed to keep it in the euro.

The election, not yet scheduled but expected in April or May, is shaping up as a public revolt against Greece's political establishment, which has backed the austerity policies that are the price of financial life support from Europe and the International Monetary Fund. Mainstream politicians are increasingly painted as leading Greece into a debt trap, then impoverishing it in trying to escape.

Weeks after agreeing to an agonizing bailout deal with Europe, Greece is splintering politically ahead of national elections. Dow Jones's Costas Paris has the details. Photo: Reuters

As a result, Greece's major parties, which have promised Europe they will enact yet another round of deep public-spending cuts by summer, are struggling for support.

Read More at The WSJ

Europe's Debt Woes Getting a Spanish Accent

Could Europe’s next debt crisis have a Spanish accent? From swelling government debt to banks burdened with bad loans, the news from the euro zone’s fourth-largest economy is getting worse by the day.

Spain is tipping into its second recession since 2009, with the economy forecast to contract 1.7 percent this year under pressure from deep austerity measures and flagging exports. Public debt has soared to 68.5 percent of gross domestic product, the highest rate in at least two decades, and the government of Prime Minister Mariano Rajoy has had to scale back plans to reduce budget deficits. “Spain seems to be the main risk in the near future for Europe,” says Stéphane Déo, chief European economist for UBS (UBS). “The market is losing patience.”

Read More at Bloomberg Businessweek

The U.S. Cruises Toward a 2013 Fiscal Cliff

At some point, the spectacle America is now calling a presidential campaign will turn away from comedy and start focusing on things that really matter—such as the "fiscal cliff" our federal government is rapidly approaching.

The what? A cliff is something from which you don't want to fall. But as I'll explain shortly, a number of decisions to kick the budgetary can down the road have conspired to place a remarkably large fiscal contraction on the calendar for January 2013—unless Congress takes action to avoid it.

Well, that gives Congress plenty of time, right? Yes. But if you're like me, the phrase "unless Congress takes action" sends a chill down your spine—especially since the cliff came about because of Congress's past inability to agree.

Read More at the Wall Street Journal

Goldman's Double Game

Goldman Sachs (GS) was once a punchline. During the Great Depression, the then-small partnership on Pine Street became a target of national ridicule because of a scandal involving the Goldman Sachs Trading Corporation, a publicly traded investment trust that blew up after the stock market crash of 1929. For years, comedian Eddie Cantor, who had lost $100,000 and sued Goldman for $100 million, made Goldman Sachs a running joke in his stand-up routines. In one of his bits, Cantor would appear onstage with a stooge who tried to squeeze juice from a dry lemon. “Who are you?” Cantor would ask. Without missing a beat, the stooge would say, “The margin clerk for Goldman Sachs.”

Ever since being subjected to Cantor’s barbs, Goldman Sachs has cultivated an image not just as Wall Street’s preeminent firm but also as a paragon of financial virtue. But Goldman’s supposedly pristine reputation has always been more invented than earned. In 2010 the Securities and Exchange Commission, Goldman’s principal regulator at the time, sued the firm for failing to make adequate disclosures regarding a synthetic collateralized debt obligation it manufactured and sold at the height of the housing bubble. Rather than fight the SEC, Goldman settled the charges for $550 million, the largest fine ever extracted from a Wall Street firm.

Read More at Bloomberg Businessweek

A Political Shocker in China Has Implications for the Economy

In a terse announcement, China’s official Xinhua News Agency announced March 15 that the charismatic Chongqing party leader and princeling, Bo Xilai, has been replaced. It is the biggest setback for a senior Chinese Communist Party leader since at least the sacking of former Shanghai party secretary Chen Liangyu in a corruption scandal in 2006. “Bo will no longer serve as secretary, standing committee member, or member of the CPC Chongqing municipal committee,” according to the Xinhua announcement.

While Bo is still listed on a government website as one of the 25 members of China’s ruling Politburo, it is unclear whether he will also have to step down from that body. Even if he doesn’t, Bo’s political future seems finished, and his once-likely appointment to the nine-member Standing Committee of the Politburo—with seven positions up for grabs this fall in a major leadership transition—is finished.

Read More at Bloomberg Businessweek

U.S. hedge fund wins claim against Dubai's Drydocks

Monarch Alternative Capital said in an emailed statement that Drydocks, a unit of Dubai World DBWLD.UL, has been ordered to pay the entirety of the sum of $45.5 million claimed plus Monarch's legal costs.

Monarch sued Drydocks last year in the High Court of London casting a blow to the restructuring talks.

A week ago, Drydocks proposed repaying creditors in five years and said it was seeking more working capital as it tried to restructure a $2.2 bln loan facility, ending lengthy and complex debt talks.

The restructuring had been scheduled to be completed by April 2011, but it was slowed by a lack of government support and opposition from hedge fund creditors, including Monarch.
When asked how the judgment would affect its restructuring Khamis Juma Buamim, Drydocks World chairman, said:

"As made clear at all lender meetings, the company is confident that it can still implement its restructuring if it transpires that Monarch do not accept the terms on offer."
"But I would very much hope that notwithstanding their legal action Monarch will accept the very reasonable restructuring proposal." Read more at Reuters...