Overview
This presentation is the property of its rightful owner.
Sponsored Links
1 / 20

Overview PowerPoint PPT Presentation


  • 69 Views
  • Uploaded on
  • Presentation posted in: General

Overview. In this segment ... Securities Firms and Investment Banks: Activities of securities firms and investment banks Size, structure and composition Balance sheets and recent trends Regulation of securities firms and investment banks Global issues. Securities Firms &Investment Banks.

Download Presentation

Overview

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript


Overview

Overview

  • In this segment ... Securities Firms and Investment Banks:

    • Activities of securities firms and investment banks

    • Size, structure and composition

    • Balance sheets and recent trends

    • Regulation of securities firms and investment banks

    • Global issues


Securities firms investment banks

Securities Firms &Investment Banks

  • Nature of business:

    • Underwrite securities.

    • Market making.

    • Advising (example: M&A, restructurings).


Securities firms investment banks1

Securities Firms &Investment Banks

  • Growth in domestic M&A:

    • Less than $200 billion in 1990.

    • $1.83 trillion in 2000

    • In US: bottomed out at $458 billion in 2002 ($1.2 trillion worldwide)

    • $525 billion 2003 ($535 trillion worldwide)


The largest m a transactions

The Largest M&A Transactions


Size structure and composition

Size, Structure and Composition

  • Dramatic increase in number of firms from 1980 to 1987. Decline of 31% following the 1987 crash, to year 2003.

  • 1987: Salomon Brothers held $3.21 billion in capital.

  • 2003: Merrill Lynch held capital of $24.8 billion.

  • Many recent inter-industry mergers (i.e., insurance companies and investment banks).

    • Role of Financial Services Modernization Act, 1999


Types and relative sizes of firms

Types and Relative Sizes of Firms

  • National full-line firms are largest.

    • Merrill Lynch, Morgan Stanley

  • National full-line firms specializing in corporate finance are second in size.

    • Goldman Sachs, Salomon Brothers/Smith Barney

  • Remainder of industry:

    • Specialized investment subsidiaries of BHCs.

    • Discount brokers.

    • Regional securities firms (subdivided into large, medium and small).

    • Specialized electronic trading securities firms


Top u s underwriters 2003

Top U.S.Underwriters, 2003


Key activities

Key Activities

  • Investing

  • Investment banking

    • Activities related to underwriting and distributing new issues of debt and equity.

  • Market making

    • Increasing importance of online trading

  • Trading

    • Position trading, pure arbitrage, risk arbitrage, program trading


Key activities continued

Key Activities (continued)

  • Cash management

  • Assisting with M&A

  • Back-office and service functions.


Trends

Trends

  • Decline in trading volume and brokerage commissions

    • particularly since crash of 1987, although some recovery since 1992. Record volumes 1995-2000.

  • Declines in market values--and commission income 2001-2002

  • Resurgence in market values and commissions 2003-2004.


Trends continued

Trends (continued)

  • Pretax net income over $9 billion per year 1997-2000

  • Pretax profits soared to $21.0 billion in 2000

    • curtailed by economic slowdown and September 11 attacks 2001.

  • 2003 record pre-tax profits of $22.5 billion.

  • Continuing concerns over conflicts of interest and other ethical concerns

    • Soft dollars

    • Analysts’ recommendations to buy or hold collapsing technology stocks


Balance sheet

Balance Sheet

  • Key assets:

    • Long positions in securities and commodities.

    • Reverse repurchase agreements.

  • Key liabilities:

    • Repurchase agreements major source of funds.

    • Securities and commodities sold short.

    • Broker call loans from banks

  • Capital levels much lower than levels in banks


Regulation

Regulation

  • Primary regulator: SEC

    • Reiterated by National Securities Markets Improvement Act (NSMIA) of 1996.

    • Prior to NSMIA, regulated by SEC and states.

    • Regulate trading activities such as shelf registration


Regulation1

Regulation

  • Early 2000s erosion of SEC dominance

    • Increased vigilance by State Attorneys General

    • Spring 2003, $1.4 billion in penalties over investor abuses.

  • Sarbanes-Oxley Act of 2002

    • Independent auditing oversight board under SEC

    • Instigated by Enron, Global Crossings, Tyco, WorldCom


Regulation continued

Regulation (continued)

  • Day-to-day regulation: NYSE, NASD

  • October 2003 implementation of provisions of Patriot Act to combat money laundering

    • Scrutiny of individual identities and affiliations with terrorists


Investor protection other monitoring

Investor Protection & Other Monitoring

  • Securities Investors Protection Corporation (SIPC).

    • Protection level of $500,000

  • Federal Reserve also has role in overseeing securities firms and investment banks

    • Vulnerability of the financial system

    • Issue of timely settlement raised by Greenspan


Web resources

Web Resources

  • For details of regulation of securities firms and investment banks, visit:

    SEC: www.sec.gov

    NYSE: www.nyse.com

    NASD: www.nasd.com

    SIPC: www.sipc.org


Global issues

Global Issues

  • Global nature of securities firms

    • Demonstrated by recent mergers such as Deutsche Bank/Bankers Trust

    • Dominance of UBS in U.S. mortgage backed securities markets

  • Growth in securities trading and underwriting is a global event


Pertinent websites

Pertinent Websites

Federal Reserve: www.federalreserve.gov

NASD: www.nasd.com

NYSE: www.nyse.com

SEC: www.sec.gov

Securities Industry Association: www.sia.com

SIPC: www.sipc.org

The Banker: www.thebanker.com

Thompson Fin. Securities Data: www.tfibcm.com

Wall Street Journal www.wsj.com


  • Login