TheChek News Flow

Nikkei -0.18% Hang Seng -0.33% CSI +0.94% Shanghai +0.76% Shenzen +1.87%

Eur$ 1.2196 CNH 6.5319 CNY 6.5489 JPY 103.43 GBP 1.3344 CHF 0.8864 RUB 74.2794 TRY 7.7106 WTI$ 47.60- 3.08%

S&P -0.29% Nasdaq +0.10% EuroStoxx -1.73% FTSE -1.30% Dax -1.42% SMI -0.65%

Macro :

- FTSE 100 Futures Tumble on Lockdown, Brexit Deadline Miss

- Hungry Index Funds Cram Tesla Into the S&P 500 at a Record High

- U.S. to Back $1.9B to Replace Huawei, ZTE Telecom Equipment:Rtrs

- Congress Deal on Stimulus Includes $82 Billion for Education

- Airlines Get $15 Billion Payroll Reimbursement in Funding Deal

Keep an eye on :

- ADS GY : *NIKE SHARES GAIN MORE THAN 3% POSTMARKET *NIKE 2Q REV. $11.24B, EST. $10.55B

- AF FP : Kenya Airways, Air France-KLM End Africa-Europe Cooperation Pact

- AD NA : Stop & Shop to End Participation in UFCW Union Pension Plan

- AJRD US : Lockheed Martin to Buy Aerojet Rocketdyne for $56/Share in Cash

- AKSO NO : Aker Solutions Wins Bid for Ormen Lange Onshore Scope

- ARYN SW : *ARYZTA SAYS BOARD DECIDED UNANIMOUSLY TO REJECT ELLIOTT OFFER

- AML LN : Tobias Moers paves way for engineering renaissance as he launches fresh model offensive at luxury car brand - FT

- BCP PL : BCP’s Maya Sees Room for Consolidation in Portugal, Publico Says

- EN FP : Bouygues, Bina Istra Win EU197m Highway Contract in Croatia

- IAG LN : British Airways Balks at Refunds for Tier 4 Travel Cancellations

- BVI FP : Bureau Veritas Extends Vesting Period for CEO Compensation

- CAST SS : Castellum Had Discussions With Entra Prior to Raised Offer: CEO

- DBHN GY : Pandemic Could Cost Deutsche Bahn as Much as $17 Billion: Welt

- DEQ GY : CFO Borkers: aware that shareholders are mostly interested in investing in the company because of dividends, and the company aims to reinstate it without forgetting the need to finance itself, which is also in the interest of shareholders - German press

- EDP PL : EDP Says Interim CEO Stilwell de Andrade Proposed as Chairman

- EL FP : EssilorLuxottica Details Compensation for Sagnieres, Del Vecchio

- ENGI FP : Engie Solutions Acquires Saudi Arabia’s Allied Maintenance Co.

- ENTRA NO : Entra Says It Will ‘Diligently Consider’ Castellum’s New Offer

- RF FP : Eurazeo Agrees to Sell C2S Stake to Elsan, Sees EU400m Proceeds

- ICAD FP : Icade Buys Healthcare Facilities, Nursing Homes for EU163m

- ILD FP : Iliad Announces Squeeze-Out of Play Owners at PLN39/Share

- ISP IM : Intesa’s UBI Finalizes Securitization of EU800M in Bad Loans

- EMG LN : Man Group’s Rattray Says High Volatility to Lift Trend Followers

- ENI IM : Eni, PTTEP to Invest up to $412m in Abu Dhabi Exploration

- MTRO LN : Metro Bank Sells Residential Mortgage Portfolio to Natwest

- MOWI NO : Mowi Sells 50% DESS Aquaculture Shipping Stake to Antin

- MNR US : Blackwells Said to Make Unsolicited Offer for Monmouth REIT (1)

- NTGY SM : Naturgy Weighs Joining Allianz in Bid for WPD Stake: Expansion

- NOKIA FH : U.S. to Back $1.9B to Replace Huawei, ZTE Telecom Equipment:Rtrs

- OVS IM : Ovs Says It’s in Exclusive Negotiations With Stefanel for Brand

- PEABB SS : Peab Sells Four Tenancy Projects for SEK824m

- UG FP : Fiat Chrysler CEO Manley to Lead Americas After PSA Merger (1)

- PHIA NA : Philips Seeks to Block U.S. Imports of 3G, 4G IoT Devices

- PHIA NA : Buyout Firms Said to Vie for $4 Billion Philips Appliances Unit

- RCN LN : Redcentric Holder Coltrane Asset Management to Offer 35m Shrs

- RMG LN : Royal Mail Reaches Negotiators’ Agreement With Workers Union

- RWE GY : RWE Power Output to Be Cut By a Third in Germany by 2022: Welt

- RYA ID : Ryanair to Offer Refunds on U.K. Flights Banned by EU States

- STG DC : Scandinavian Tobacco Group Raises FY Guidance

- RDSA NA : Shell Inks $2.5 Billion Australian LNG Stake Sale to GIP (1)

- RP US : Thoma Bravo Agrees to Buy RealPage for $88.75 Per Share: DJ

- URW NA : Unibail-Rodamco-Westfield Sells Three Paris Buildings for EU213m

- WPP LN : WPP to Shed up to a Third of NYC Office Space: Business Insider

- ZURN SW : Zurich Sees Higher Premiums for Corp. Clients: SonntagsZeitung

Regulators in the finance industry must be brought under the same umbrella

It was an ignominious way to celebrate an 18th birthday. Only a month after BaFin came of age in May, Germany’s financial regulator was confronting a huge national embarrassment: a vast fraud that led to the collapse of payments company Wirecard. It marked the first time in history that a blue-chip Dax 30 company had failed.

Not only had BaFin failed to supervise Wirecard effectively. It had actively frustrated critics’ attempts to expose the fraud. With an unprecedented short-selling ban, it had barred a growing group of sceptical investors from betting that Wirecard’s share price would fall. And it had launched a criminal complaint against journalists at the Financial Times, who had spent years unearthing the scandal. 

BaFin has defended itself against criticism in the Wirecard saga by arguing that it did not have full jurisdiction over the group. But it did regulate Wirecard Bank, a crucial subsidiary. And it clearly could and should have been raising alarm bells, rather than silencing those set off by others.

Now more details have emerged about BaFin’s shortcomings in the affair. Dozens of staff had been trading Wirecard shares, some in accordance with the regulator’s disclosure rules, some in breach of them. Only two months ago did BaFin finally ban staff from investing in the companies that they regulate — leaving regulators in other jurisdictions aghast at the lax standards in place at the German watchdog. In recent months, understandable questions have been raised by parliamentarians about whether BaFin’s chief executive Felix Hufeld should stay in his job. But is it also time to abolish BaFin itself?

The Bundesanstalt für Finanzdienstleistungsaufsicht has had a troubled history. Within two years of its creation in 2002, it allowed a senior manager to embezzle millions of euros, later being lambasted in court over its “non-existent” internal controls. Five years later, it suffered a serious data breach when details of the banking sector’s troubled loans were leaked. 

Most importantly, it was for many years a weak regulator of the country’s most systemic financial institution, Deutsche Bank.

In the run-up to the 2008 financial crisis, it failed to curb Deutsche’s runaway excesses as the group piled headlong into investment banking. Deutsche became notorious with US authorities for its aggressive leverage and lax supervision. BaFin was slow to demand fresh capital injections, imperilling the bank’s survival at various points in recent years.

Regulating finance is always a challenge. But the odds are particularly stacked against BaFin. It is based in the small city of Bonn, two hours from Frankfurt, thanks to a political settlement to secure jobs in the former West German capital. The base suggests a provincialism appropriate for the supervision of domestically focused savings banks and insurers, but not for global giants.

The decision to make the European Central Bank the central supervisor for big banks has boosted quality, but it has been a further blow to BaFin, denuding it of some of its best people. The regulator also suffers from a poor-relation mentality versus the globally respected Bundesbank, which oversees the economy and monetary policy, under the wing of the ECB. The Bundesbank’s image reflects global perceptions of a strong German economy. BaFin’s reflects perceptions of a weak German banking market.

Axing it and folding regulatory responsibility into the Bundesbank and ECB looks even more logical now than a decade ago when such a move was first suggested by the government (but declined by the Bundesbank).

To do so would be to take a leaf out of the UK’s book. In the run-up to the 2008 financial crisis the UK got financial regulation catastrophically wrong and much of the banking sector collapsed. But the response to failure was effective: the government abolished the then Financial Services Authority and handed stability regulation to the less tarnished Bank of England. That eliminated gaps between their respective responsibilities and streamlined the links among economic policymaking, financial stability and supervision.

But more fundamental change is needed. The truth for policymakers everywhere, not just in Germany, is that regulation has not kept pace with rapid change in the finance industry. Payments and financial technology companies such as Wirecard are now far bigger than many banks and just as systemically important. They must be brought under the same regulatory umbrella before the next storm comes.

Fractional shares are a new way for investors to own a small slice of a high-priced stock. Whether that’s good or bad depends on how you use it.

Stocks are near record highs, but they’re finally getting cheaper to buy.

No longer do investors need to buy a minimum of 100 shares at a time or even one full share, often at prohibitive cost. Fractional-share trading enables you to purchase a sliver of a share with as little as $1, putting a stake in single stocks within anyone’s reach. As with any technology, whether that’s good or bad depends on how you use it.

After a decadelong bull market, buying the average stock has never required more capital. Seven companies in the S&P 500 have share prices above $1,000, including Google’s parent Alphabet Inc., GOOG -0.97% Amazon.com Inc., AMZN -1.06% AutoZone Inc. and Chipotle Mexican Grill Inc. CMG 0.63% Berkshire Hathaway Inc.’s BRK.B -0.56% Class A stock costs more than $330,000 per share.

Let’s say you want to invest in Tesla Inc., TSLA 5.96% which joins the S&P 500 next week. But you can’t spare nearly $70,000 to buy 100 shares—or even almost $700 to buy one. At several leading brokerage firms, you can put up $5 or less and buy about 1/120th of a share, commission-free.

Earlier this month, the Securities and Exchange Commission adopted rules redefining a “round lot,” which has long been 100 shares. From now on, it will consist of 100 shares only for stocks priced up to $250. At higher prices, the size of a round lot drops to 40 shares, then 10. Above $10,000, a single share will constitute a round lot.

Analyst Richard Repetto, who follows the financial-services industry at Piper Sandler & Co. in New York, calls this “one of the most significant changes to market structure in a decade and a half.” The SEC rule is a long-overdue recognition that you shouldn’t need thousands of dollars to buy a single stock—though the regulator’s definition of a round lot has mattered less to small investors in recent years.

That wasn’t always the case. When I bought my first stock as a teenager in 1976, my parents’ broker at Shearson Hammill & Co. wouldn’t handle less than a 100-share round lot. My order to buy MacAndrews & Forbes Inc. went through at 9 ⅜, so my total cost for 100 shares, including commissions, was nearly $990.

Fortunately, I ended up selling my stake in the company (which later went private) for about a 25% net profit.

But I’d had to venture most of my life’s savings to place the smallest possible order. If you can afford to buy only one stock at a time, investing is far riskier than it should be.

That inability to diversify with small sums turned me off buying individual stocks for years. (I used mutual funds instead.)

Today, fractional shares enable you to build a homemade diversified portfolio, one stock at a time, even with the tiniest sums.

Interactive Brokers Group, Inc., based in Greenwich, Conn., introduced fractional trading last November. Its customers do about 7,500 fractional trades a day at a minimum of $1 (or 0.0001 share) per stock, says Chairman Thomas Peterffy.

Using Interactive Brokers’ Portfolio Builder tool, customers can make fractional trades in as many stocks as they wish, effectively creating personalized index funds using criteria they can customize. Other major brokers, including Charles Schwab, say they are developing similar “custom indexing” services with fractional shares.

Some small investors want to buy stocks with high prices, such as Amazon, but experience “sticker shock” at paying thousands of dollars apiece, says Neesha Hathi, chief digital officer at Schwab. Other, larger investors want to set up a gift or starter account for their children or grandchildren with a few hundred dollars or less.

At Schwab’s minimum of $5 per stock, an investor “can diversify even if you’re only doing $50,” says Ms. Hathi. The average buy order in Schwab’s fractional service is about $300.

At Fidelity, more than 700,000 customers have invested in fractional shares since the firm began offering them in February, says a spokesman.

Fractional trading can have a dark side, however.

Robinhood, the trading app, permits users to put as little as $1 apiece into a stock, highlighting even the tiniest positions with its dynamic, colorful graphics.

Being able to own dozens of stocks at a time with as little as $1 in each can be addicting, says New York University cultural anthropologist Natasha Schüll, author of the book “Addiction by Design: Machine Gambling in Las Vegas.”

In what she calls nanomonetization, casinos and sports-betting platforms break a single event into myriad opportunities for speculation. Slot machines, which used to have three reels, now often offer the opportunity to bet on 20 lines or more at once.

“That way you’re almost always winning on some lines even though you’re losing overall, which encourages you to play more often and play longer,” says Prof. Schüll. “The more time you spend on the device, the more likely you are to have a ‘slow bleed’ to zero.”

I felt that myself when I tried trading on Robinhood recently. I always seemed to have a win even when my total balance was shrinking. That kept me coming back for more trades. In the end, I lost money.

“Allowing investors to buy and hold more stocks through [our] fractional share program can help investors build more diversified portfolios of shares they would not have been able to afford in the past,” says Madhu Muthukumar, senior director of product management at Robinhood. “Suggesting that holding many small positions ‘mutes’ the perception of losses on the portfolio feels like an argument against diversification.”

Fractional shares have enormous potential for introducing millions of fledgling investors to stocks. They also could help enable almost anyone to design a custom index fund that can encourage long-term investing at near-zero cost and high tax efficiency. But there’s a fine line between using them and abusing them.

Trying to salvage his relationship with regulators in a Nov. 2 meeting, the Chinese billionaire said he was ready to do what the country needed

As Jack Ma was trying to salvage his relationship with Beijing in early November, the beleaguered Chinese billionaire offered to hand over parts of his financial-technology giant, Ant Group, to the Chinese government, according to people with knowledge of the matter.

“You can take any of the platforms Ant has, as long as the country needs it,” Mr. Ma, China’s richest man, proposed at an unusual sit-down with regulators, the people said.

The offer, not previously reported, appeared a mea culpa of sorts from Mr. Ma as he found himself face to face with officials from China’s central bank and agencies overseeing securities, banking and insurance. The Nov. 2 meeting took place a few days before Ant was supposed to go public, in what would have been the world’s biggest initial public offering.

Mr. Ma had angered Beijing by lashing out in a speech in October at President Xi Jinping’s signature campaign to control financial risks, saying it stifled innovation. Now, the regulators had called the meeting to voice their concerns about Ant’s business model.

His olive-branch offer at the meeting failed at saving the IPO and Beijing has since stepped up efforts to rein in China’s Big Tech giants.

“Ant Group cannot confirm the details of the meeting with regulators held on Nov. 2, 2020, because it is confidential,” a spokesman at the company said.

Mr. Ma’s effort highlights how one of China’s most famous entrepreneurs tried to dig out of his predicament as he and some of his peers attempt to navigate a policy landscape where priorities have shifted toward greater state control over companies deemed to have grown too big and powerful.

The suspension of Ant’s share sale of more than $34 billion that followed the Nov. 2 meeting was just the start. It was followed by a barrage of actions against what is dubbed the “platform economy,” or internet-based businesses championed by large tech firms.

Mr. Xi personally ordered Chinese regulators to investigate the risks posed by Ant, according to Chinese officials with knowledge of the matter, and to shut down Ant’s IPO.

People close to China’s financial regulators say there is no decision, for now, to take Mr. Ma up on his offer. One plan being considered involves subjecting Ant to tighter capital and leverage regulations, according to the people. Under that scenario, state banks or other types of state investors would buy into Ant to help cover any potential capital shortfall as a result of the tightened rules.

“The Chinese state has already effectively nationalized some of the financial infrastructure Ant built, such as the interbank payment system that became NetsUnion,” said Martin Chorzempa, a research fellow at the Peterson Institute for International Economics who specializes in China’s fintech sector, referring to the firm now controlled by the central bank that clears transactions between banks and third-party payment providers. “So there is a precedent for nationalizing platforms that are viewed as serving a critical policy purpose.”

The government under Mr. Xi’s leadership in recent years has shown a resolve to bring to heel private conglomerates viewed as undisciplined—however politically invincible their founders might have appeared.

Property tycoon Wang Jianlin’s Dalian Wanda Group, for instance, has been forced to sell assets, shrink its business and pay back bank loans. Anbang Insurance Group, another private high roller, has been taken over by the state, while its founder Wu Xiaohui in 2018 was sentenced to 18 years in prison for fraud and embezzlement. In addition, HNA Group, an airlines-and-hotel conglomerate, has had to pull back on aggressive acquisitions overseas and sell assets.

Until recently, Mr. Ma also had a reputation for well-cultivated political ties. He hasn’t made any public appearance since his Oct. 24 speech.

For years, companies including Ant and e-commerce giant Alibaba Group Holding Ltd. BABA -1.68% , both controlled by Mr. Ma, and internet conglomerate Tencent Holdings had largely enjoyed relatively little government oversight of their quest to build and expand internet-based payment, lending and other businesses.

With Tencent’s WeChat and other apps developed by these firms, millions of Chinese consumers and small-business owners can make a purchase, hail a taxi, execute an investment or even take out a loan with a swipe on their smartphones. Firms such as Alibaba and Tencent have become so successful that Chinese leaders including Premier Li Keqiang regularly hail the use of the internet and big data as crucial in driving future economic growth.

However, Beijing’s leadership also has shown increasing unease with the wealth and influence these firms have built as well as the risks posed by their lightly regulated activities, such as online lending made popular by Mr. Ma’s Ant. In addition, the big tech firms in some instances have complicated the government’s own effort to use data and technology to tighten social control.

In November, China released draft regulations aimed at preventing these firms from colluding to share sensitive consumer data, forming agreements to block out smaller rivals and engaging in other anticompetitive behavior. Earlier this month, a meeting chaired by Mr. Xi of the Communist Party’s Politburo pledged to strengthen antimonopoly efforts next year and to “prevent the disorderly expansion of capital”—a message seen as portending a larger crackdown on internet giants.

Chinese officials say the leadership is particularly concerned that highflying entrepreneurs such as Mr. Ma keep attracting capital while exposing the financial system to greater risks.

Even before the halt of Ant’s IPO, for instance, regulators were already worried about the frenzy over the deal. The stock sale would have valued the company at more than the likes of JPMorgan Chase & Co. and Goldman Sachs Group.

Shortly after the Politburo meeting, China’s antitrust regulator fined Alibaba and a Tencent subsidiary for some acquisitions made in years past—again signaling the days of laissez-faire are over.

The trend has its parallel elsewhere in the world. The U.S., for example, is stepping up its antitrust investigations into Facebook Inc. and Alphabet Inc.’s Google to determine whether they abused their dominance of social media and online search and advertising, respectively, in the internet economy.

In China’s case, however, state-owned enterprises tower over the country’s telecommunications, financial services, airlines, energy and other sectors. By emphasizing “antimonopoly” now, Mr. Xi is squarely aiming at China’s internet giants that have harnessed unprecedented data on millions of Chinese consumers and businesses.

Alibaba and Tencent have sometimes heeded demands from law enforcement and other authorities to access user data, but they have so far resisted routinely sharing swaths of data that could help the government in other ways, such as building a consumer-credit scoring system akin to FICO used in the U.S.

The country’s central bank and traditional lenders don’t have the direct line to China’s free-spending younger consumers as Ant does. The company’s Alipay app is used by one billion Chinese, which has enabled it to collect troves of consumer data and use proprietary algorithms to assess individuals’ creditworthiness. But its data so far hasn’t been fully integrated into the central bank’s credit-scoring system, and such information gaps positioned Ant as a valuable partner to originate microloans for banks, especially smaller ones. In return, Ant pocketed handsome profits.

For now, regulators are debating whether Alipay or any other parts of Ant’s business represent monopolistic competition and if so, what actions should be taken against the firm.

“The odds of nationalizing at least parts of the company are not zero,” says a government adviser in Beijing.

Deal could have been valued at around $70 billion as payments industry continues wave of consolidations

Fidelity National Information Services Inc. FIS -0.51% and Global Payments Inc. GPN 0.47% recently held unsuccessful talks for a merger deal that could have been valued at around $70 billion, people familiar with the matter said, in a sign that a wave of consolidation is still sweeping through the payments industry.

The companies, which make technology that facilitates merchant payments and banking, were in advanced talks and aiming to announce a deal this coming week before the negotiations broke down in the last few days, the people said. It couldn’t be learned what specifically caused them to falter.

Had the companies managed to strike a deal, it would have been the biggest of the year by far, eclipsing several transactions valued at about $40 billion, according to Dealogic. Global Payments has a market capitalization of nearly $59 billion. Fidelity National, widely known as FIS, has a market value of around $90 billion.

Though there is little prospect of the talks coming back to life imminently, they could get revived later, some of the people said.

Atlanta-based Global Payments primarily provides technology and point-of-sale services to merchants. A combination would have expanded FIS’s merchant-facing business, which currently accounts for roughly 20% of its revenue. The bulk of the Jacksonville, Fla., company’s revenue last year came from serving banks, helping them with such tasks as commercial lending and risk management.

There has been a rush of deal making in the sector in recent years as established companies seek to gain economies of scale and better compete with upstarts. Early last year, Fiserv Inc. agreed to pay about $22 billion for First Data Corp. Then FIS struck a $35 billion deal for Worldpay Inc., the largest payments deal to date. Months later, Global Payments did a roughly $22 billion deal for Total Systems Services Inc., which was better known as TSYS.

FIS’s deal for Worldpay, which closed in July 2019, expanded its merchant business and brought it into more countries. Global Payments’s purchase of TSYS closed in September 2019 and was meant to expand its e-commerce presence in the U.S. and boost market share.

Both companies’ chief executives—FIS’s Gary Norcross and Jeffrey Sloan of Global Payments—are experienced deal makers and influential figures in a sector with a shrinking number of major players. Mr. Norcross in particular has been open about wanting to continue to grow through acquisitions.

One question likely to have arisen had they struck a deal is whether it would have passed muster with regulators, given it would merge two of the largest companies in the payments industry. But the ground is shifting given the rapid rise of newer rivals such as Adyen NV, Square Inc. and Stripe Inc.

The abortive deal is a fitting coda to an erratic year of deal making. The pandemic brought mergers and acquisitions to a virtual halt early in 2020 that persisted through the second quarter. But activity soon snapped back with several megadeals—especially among sectors that weathered the crisis relatively well such as technology and health care—and the year’s global deal volume trails last year’s by just 8%, according to Dealogic.

Together with AstraZeneca PLC’s agreement to buy Alexion Pharmaceuticals Inc. for $39 billion, the payments talks underscore what many deal makers have been saying for weeks—that with stock prices high, interest rates at rock-bottom levels and many sectors of the economy performing well, the ground is fertile for more big mergers heading into next year.