Go Fund Yourself: The SEC finalizes Regulation A+

blog_6_26 By Christian Kaiser

In March, the Securities and Exchange Commission (SEC) approved final rules of Title IV of the JOBS Act, changing Regulation A into “Regulation A+.” Entrepreneurs selling securities to private investors are no longer limited to using Regulation D or the old Regulation A. Entrepreneurs can now crowdfund their startup online through a “mini IPO.” Many believe these new rules show that the government has embraced technological changes. Some are optimistic about what they see as an opening of the crowdfunding floodgates, but the rules’ restrictions and requirements suggest such sweeping optimism may be misplaced.  Continue reading

Investing In Alibaba Group: Sure Payoff Or Legal Nightmare?

Screen Shot 2014-10-24 at 7.33.18 PMBy Yayi Ding

Last month, Chinese e-commerce giant Alibaba Group announced one of the biggest initial public offerings (IPOs) in US history, raising more than $21 billion USD. However, one could argue that the entire scheme might have been borderline illegal; of all the investors who “purchased” Alibaba’s stocks at IPO, none of them ended up actually owning a single share in Alibaba.

How could this be? Well, for starters, Chinese government regulations do not allow foreigners to own stock in Chinese Internet companies, Alibaba included. To circumvent these regulations and pursue an IPO on an American stock exchange, Alibaba had to adopt a complicated ownership structure known as a “Variable Interest Entity” (VIE). Through this structure, foreign shareholders do not buy into Alibaba, but rather buy into Alibaba Holdings, an offshore “holding company” that is registered in the Cayman Islands. Shareholders get a stake in the holding company and in Alibaba’s profits, but ultimately do not own shares in Alibaba and have no say in how the company is run. Continue reading

Is High-Frequency Trading The Future, Or Will It Soon Be History?

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By Stephen Anson

Equipped with some of the most powerful super-computers in the world, high-frequency traders anticipate millisecond changes in the market, allowing them to score immediate gains and affect the market index. These trading practices have been used for years, and though there are many federal rules criminalizing insider trading and securities fraud, no one has used these rules to go after high-frequency traders until recently. Whether or not these trades are illegal remains an open question. In the interim, growing public discontent will likely lead to more lawsuits and perhaps eventual securities reform.

Public interest in high-frequency trading has grown lately, spurred in part by Michael Lewis’s new book “Flash Boys.” In his book, Lewis described the market as being “rigged” by “high-frequency traders armed with fiber-optic lines and computer servers located next to, or even inside, the exchanges.” This advanced technology gives high-frequency traders an advantage over other traders. The technology provides faster access to information about the flow of the market, and the traders then use advanced algorithms to purchase as many of the “in demand” securities as possible. Their computer programs will then, nearly instantaneously, sell those same securities back out in the market, often for a nice little margin. High-frequency traders can still turn a profit, even if they are buying large volumes of stock and selling them for the same price, because they receive a liquidity rebate for each transaction from the relevant exchange. The exchanges, such as the New York Stock Exchange (“NYSE”), pay these liquidity rebates, which typically amount to a fraction of a penny per share, because it increases the overall liquidity in that marketplace.

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