Exclusive: T. Rowe bans some American Air employees from fund trading

By Jed Horowitz

NEW YORK | Mon Aug 26, 2013 11:34am EDT

NEW YORK (Reuters) - T. Rowe Price Group Inc has permanently banned about 1,300 American Airlines employees from trading among its funds in their 401(k) retirement plans, a rare move to curb "collective" trading by subscribers to an investment newsletter.

About 800 additional employees have received warning letters about their trading patterns, according to sources at the airline and at JPMorgan Chase & Co, administrator of the retirement plan.

The ban, confirmed by the airline and the fund company in response to a Reuters inquiry, follows a period of several years in which T. Rowe Price imposed a series of temporary trading restrictions on some subscribers to the EZTracker LLC newsletter for American Airlines employees.

The newsletter suggests monthly mutual fund trades to more than 2,000 subscribers who invest in the company's defined contribution plan known as $uper $aver 401(k). The plan has more than 80,000 participants.

When large numbers of investors trade mutual funds in lockstep, it can force fund managers to buy and sell securities at inopportune times. They may have to find securities to buy in a hurry if the pack invests all at once, and may have to sell quickly to pay off sellers who cash out together.

T. Rowe Price spokesman Bill Benintende said collective trading can disrupt portfolio managers' strategies and raise costs for long-term investors.

"In limited situations" the company's funds restrict investors who significantly alter their holdings on the advice of a newsletter, he wrote in an emailed statement confirming the ban. He declined to name the newsletter or discuss other specifics.

Investment newsletter veterans said a permanent ban is highly unusual, and raises questions about why a giant like T. Rowe Price, which manages $614 billion, would single out activities of a small group of people. The controversy comes as workers' anxiety about managing their own retirement investments grows, while employers close company-paid and professionally managed pension plans.

"It's like taking a chainsaw to an ingrown toenail," said Dan Wiener, publisher of "Independent Advisor," a newsletter for investors in Vanguard Group funds. Wiener said he knew of no similar cases.

PILOT COMPLAINTS

The publishers of EZTracker's newsletter for American Airlines employees said many of its subscribers were banned. They did not know if other airline employees were also affected.

An American Airlines spokesman said the company in its role as plan sponsor has acted appropriately. Despite the ban, all plan participants still can put new payroll deductions into T. Rowe Price's funds or cash out of them, he emphasized. They cannot trade among the four T. Rowe Price funds in the plan, which has about 26 other investment choices.

Still, the restriction is rankling employees at a sensitive time.

Two weeks ago, the U.S. Justice Department sued to block the merger of American Airlines' bankrupt parent AMR Corp with U.S. Airways Group.

Last month, American distributed about $3.5 billion to pilots from a company-funded, professionally managed pension plan it had shuttered.

To avoid tax penalties, most pilots are reinvesting the money in 401(k) plans and other retirement vehicles.

"They have kept me from some of the better performing funds," William Simons, an American Airlines pilot wrote to Reuters in an e-mail. "We thought we were doing everything legally, yet we were punished."

HIGH-YIELD TRIGGER?

T. Rowe Price covered itself by amending the prospectuses of its funds in the American plan in 2010, according to some lawyers who declined to be named because they work with the firm. The new language permits each fund at its discretion to reject trades that "could dilute the value of the fund's shares, including trading by shareholders acting collectively (e.g., following the advice of a newsletter)."

EZTracker's co-publishers Paul Burger and former American Airlines captain Michael DiBerardino call the restrictions anti-competitive and vague. "We are being held to a standard that's not being applied to other newsletters, publications or investment advisers," Burger said.

The permanent ban was probably triggered by EZTracker's April 1 suggestion that employees sell T. Rowe's High Yield Fund, which it had suggested buying five months earlier, he said in an interview.

EZTracker has recommended exiting T. Rowe Price funds in American's 401(k) plan six times since mid-2010 after a holding period of less than a year, Burger said.

The recommendations trigger a rush of buys and sells in the days following the end-of-month release of the newsletter, Burger acknowledges. He voiced doubts that those would be significant enough to affect the performance of such large funds. The other funds in the plan are T. Rowe's Science & Technology, MidCap Growth and New Horizons funds.

Since 2010, T. Rowe Price has sent a series of warning letters and outright one-year trading bans to several subscribers, some of whom complained to EZTracker.

SEC COMPLAINT

In May 2012, EZTracker filed a complaint with the U.S. Securities and Exchange Commission, saying that the then-temporary restrictions were "discriminatory and anti- competitive." It said it had received complaints from hundreds of subscribers, claiming they were injured by the bans.

SEC spokesman John Nester declined to comment on the status of the complaint.

The T. Rowe Price letters were sent through JPMorgan, which also markets a managed account service called JPMorgan Personal Asset Manager to participants in many of the plans it administers.

EZTracker charges $84.95 a year for its newsletter while JPMorgan charges an asset management fee that can result in charges of $945 for a $250,000 account. Unlike the newsletter, which simply advises subscribers who make their own trades, the JPMorgan program makes trades on behalf of participants.

Burger said he suspected JPMorgan helped orchestrate the trading bans to further its own advisory services among highly compensated airline employees. The complaint to the SEC said the bank's willingness to enforce the bans is "self-serving."

"I'm sure they would like to manage the 401(k) plans of all our subscribers," Burger wrote in an email.

The bank dismissed the claims.

"JPMorgan in its role as a plan service provider and financial intermediary for the funds has acted appropriately and as directed by the plan sponsor and the fund provider," bank spokeswoman Kristen Chambers wrote in an email.

"All communication to participants is plan-sanctioned, including any mention of the managed account feature."

(Reporting by Jed Horowitz; Editing by Paritosh Bansal, Andrew Hay and Jeffrey Benkoe)

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Exclusive: United Tech, Pentagon in $1 billion-plus deal for F-35 engines

Third Marine Aircraft Wing's first F-35B arrives on the Marine Corps Air Station Yuma flightline, in Yuma, Arizona, in this U.S. Marine Corps handout photo taken November 16, 2012.

Credit: Reuters/U.S. Marine Corps/DVIDS/Lance Cpl. William Waterstreet/Handout

By Andrea Shalal-Esa

WASHINGTON | Mon Aug 26, 2013 1:42pm EDT

WASHINGTON (Reuters) - Pratt & Whitney, a unit of United Technologies Corp, has reached an agreement in principle with the Pentagon on a contract to build 39 engines for a sixth batch of F-35 Joint Strike Fighters, three sources familiar with the deal said on Monday.

The agreement - which Pratt had expected to reach over a month ago - is valued at more than $1 billion, said the sources, who were not authorized to speak publicly.

The Pentagon agreed on the terms of a contract for the sixth and seventh orders of F-35s with Lockheed Martin Corp, which builds the jets, in late July. The government buys the engines separately from Pratt & Whitney, which is the sole producer of engines for the radar-evading warplane.

The negotiations between Pratt and the Pentagon's F-35 program office had focused only on engines for the sixth batch, with separate discussions planned for a seventh batch of F135 engines.

Pratt President Dave Hess had told Reuters in June that he expected to reach a deal with the Pentagon within 30 days on the next engine contract, reflecting a cost reduction of less than 10 percent.

No further details were immediately available about the new agreement in principle, which the sources said was reached by Pratt and government officials last week but which has yet to be announced.

Officials at Pratt and the Pentagon's F-35 program office had no immediate comment on the deal, whose terms will now be finalized in coming weeks and months.

Pratt has said the cost of the F135 engine it builds for the F-35 fighters is down about 40 percent from 2001, when the program began. The company finalized a $1 billion deal for a fifth batch of 35 engines with the Pentagon in May.

The sixth engine contract includes 39 engines - 36 for F-35 planes and three spares, according to Pratt & Whitney.

Hess told Reuters in June that F-35 engine sales would account for more than 50 percent of the company's military engine revenue in coming years, when production ramps up, reaching $2 billion by around 2018.

Hess said that last year, military engine revenue accounted for about $4 billion of Pratt's total revenue of $14 billion.

Shares of United Technologies were up 0.6 percent at $103.41 on Monday morning on the New York Stock Exchange.

(Editing by Gerald E. McCormick and Matthew Lewis)

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Fatal clash on West Bank could threaten peace talks, Palestinians say

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Fatal clash on West Bank could threaten peace talks, Palestinians say

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Fiat Industrial says Tobin to be CNH Industrial CEO after merger

MILAN | Mon Aug 26, 2013 8:19am EDT

MILAN (Reuters) - Fiat Industrial (FI.MI) said on Monday its Chief Operating Officer Richard Tobin would run CNH Industrial, the new company that will be formed CNH in the autumn.

The appointment, which was widely expected, completes top management appointments at the new group which is expected to be created at the end of September.

"Rich will be assuming the position of Chief Executive of CNH Industrial upon completion of the merger," Fiat Industrial and CNH Chairman Sergio Marchionne said in a statement.

Tobin, CFO at Switzerland's SGS Group in Geneva before joining CNH in 2010, is currently also CNH's CEO.

Fiat Industrial and CNH also said in a joint statement that Massimiliano Chiara will take over as chief financial officer of the new company from Pablo Di Si, who was leaving the group.

After the merger Fiat Industrial will move its corporate headquarters to the Netherlands. The new CNH Industrial group will have a primary stock listing in the U.S.

Marchionne, who is also CEO of Fiat (FIA.MI), has previously said the Fiat Industrial-CNH merger "is one of the technical blueprints" for a future Fiat-Chrysler marriage".

The Turin-based Fiat, Italy's biggest private employer, is in talks with Chrysler's minority shareholder VEBA to buy the 41.5 percent stake it does not already own.

(Reporting by Silvia Aloisi and Stephen Jewkes; Editing by Louise Heavens)

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Five observations from the Redskins' win over the Bills

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Fukushima operator to seek foreign advice on toxic water

Japan's Economy, Trade and Industry Minister Toshimitsu Motegi (R), wearing a protective suit and a mask, inspects contaminated water tanks at the tsunami-crippled Fukushima Daiichi nuclear power plant in Fukushima prefecture August 26, 2013, in this photo released by Kyodo.

Credit: Reuters/Kyodo

By Antoni Slodkowski

HIRONO, Japan | Mon Aug 26, 2013 2:14pm EDT

HIRONO, Japan (Reuters) - Tokyo Electric Power Co, the operator of the stricken Fukushima nuclear plant, said it would invite foreign decommissioning experts to advise it on how to deal with highly radioactive water leaking from the site, and Japan signaled it may dip into a $3.6 billion emergency reserve fund to help pay for the clean-up.

Visiting the plant crippled by an earthquake and tsunami in March 2011, Toshimitsu Motegi, the trade and industry minister, said on Monday he would set up a taskforce to take charge of the clean-up, and send officials to Fukushima to oversee operations.

"I strongly feel that the government should get fully involved," he told reporters after touring the Fukushima Daiichi facility, which is 220 km (137 miles) north of Tokyo.

Motegi ordered Tokyo Electric Power, or Tepco, to replace storage tanks that are at risk of leaking radioactive water. Tepco acknowledged last week that hundreds of tons of highly radioactive water had leaked from one of around 350 tanks that were assembled quickly after the 2011 nuclear meltdowns at the site. The tanks are used to store water pumped through the reactors to keep fuel in the melted cores from overheating.

Motegi said Tepco should have more frequent patrols around the tanks and better documentation of inspections. He said the utility should replace weaker bolted tanks with sturdier welded storage units. Tepco said it was setting up its own group of experts to oversee toxic water and storage tanks at the Fukushima site.

"For measures that require sophisticated technology, we will appropriately implement them as the government while collaborating with authorities on fiscal measures, including the use of a reserve fund," Motegi said.

Earlier on Monday, Chief Cabinet Secretary Yoshihide Suga said the situation at Fukushima was "deplorable", and signaled the government could use some of the 350 billion yen set aside in this year's budget as a reserve for natural disasters and other emergencies.

Tepco's revelation of the toxic leaks is the most serious problem in a series of recent mishaps, including power outages, contaminated workers and other leaks. Tepco also said last month - after repeated denials - that the Fukushima plant was leaking contaminated water into the Pacific Ocean from trenches between the reactor buildings and the shoreline.

Japan's Nuclear Regulation Authority said last week it feared the disaster was "in some respects" beyond Tepco's ability to cope.

The latest crisis comes as Prime Minister Shinzo Abe has been touting Japan's nuclear technology abroad to countries like Turkey, promising that its nuclear reactor makers have learned vital safety lessons from the disaster.

Tepco shares ended down 6.9 percent on Monday after falling as much as 10 percent to their lowest level in 12 weeks.

CHERNOBYL LESSONS

Foreign Minister Fumio Kishida on Sunday visited Chernobyl in Ukraine, the site of the 1986 nuclear disaster, and said he hoped to apply lessons learned there to Fukushima.

"I directly saw that the battle to contain the accident still continues 27 years after the disaster. Ukraine's experience and knowledge serve as a useful reference for workers coping with the Fukushima nuclear crisis," Kyodo news agency quoted Kishida as telling reporters.

China on Sunday said it was paying close attention to developments at Fukushima, noting it has the right to request entry into waters near the facility to conduct checks and assess the impact of the nuclear accident on the Western Pacific.

The country's State Oceanic Administration said it hadn't found any evidence of a "direct impact" from radiation on Chinese waters, but will closely monitor developments.

Public distrust towards Tepco's handling of the Fukushima plant clean-up has also intensified, with a Mainichi newspaper poll finding 91 percent of respondents saying the government should take a more active role in the contaminated water issue.

($1 = 98.47 Japanese yen)

(Additional reporting by David Stanway in Beijing, and Leng Cheng, Tetsushi Kajimoto and Mari Saito in Tokyo.; Editing by Linda Sieg, Aaron Sheldrick and Ian Geoghegan)

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Germany's GSW sees some merit in Deutsche Wohnen tie-up

1 of 2. The logo of the GSW property firm is seen at its headquarters in Berlin, August 20, 2013. Deutsche Wohnen offered to buy rival property group GSW Immobilien for 1.75 billion euros ($2.3 billion) to expand in Berlin's booming real-estate market, as a tentative pick-up in Europe's economy attracts international investors.

Credit: Reuters/Thomas Peter

FRANKFURT | Mon Aug 26, 2013 5:07am EDT

FRANKFURT (Reuters) - German residential landlord GSW Immobilien (GIBG.DE) said a proposed $2.3 billion takeover by rival Deutsche Wohnen (DWNG.DE) could make sense and it will make a decision after full details are published.

Deutsche Wohnen made the all-share offer for GSW last week to expand in Berlin's booming rental market and tap nascent interest from international investors.

The bidder plans to publish full offer documents after its extraordinary shareholder meeting scheduled for September 30, which will vote in the issue of new shares to fund the takeover.

The tie-up would increase Deutsche Wohnen's portfolio of flats by around 63 percent to more than 147,000, pushing it into second place behind market leader Deutsche Annington (ANNGn.DE) with 179,000 apartments.

"A combination of GSW and Deutsche Wohnen could make sense from an operational and an industry point of view," GSW said on Monday.

GSW, which is scrambling to rebuild its leadership after a shareholder rebellion forced out the chairman and chief executive last month, said the all-share nature of the bid required a particularly detailed assessment.

Some analysts have said Deutsche Wohnen may struggle to win GSW investors' support for a non-cash offer.

"GSW will thoroughly analyze the bidder's strategy and intentions, which have not yet been made public but which will need to be set out in the bidder's offer document," GSW said.

Deutsche Wohnen and GSW traded 0.1 percent lower at 0732 GMT. GSW has added 5.2 percent since the offer was made public, while Deutsche Wohnen has fallen 5.3 percent.

GSW said it hired Goldman Sachs (GS.N), Citigroup (C.N) and Dutch bank Kempen & Co to advise on the offer.

The company appointed its remaining executive board members Joerg Schwagenscheidt and Andreas Segal as co-CEOs on Friday. ($1 = 0.7493 euros)

(Writing by Ludwig Burger; Editing by Erica Billingham)

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Huge shortage of caregivers looms for baby boomers, report says

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Huge shortage of caregivers looms for baby boomers, report says

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Military’s handling of sex assault cases on trial at Naval Academy rape hearing

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Military’s handling of sex assault cases on trial at Naval Academy rape hearing By Melinda Henneberger and Annys Shin, E-mail the writers

She was too drained to go on, she said.

After four days and more than 20 hours of relentless questions about her medical history and motivations, her dance moves and underwear, the 21-year-old midshipman who has accused three former Naval Academy football players of raping her pleaded on Saturday for a day off from testimony. It was granted by the hearing’s presiding officer but not before the request triggered more skepticism from defense attorneys, who said the young woman was faking her exhaustion.

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“What was she going to be doing anyway?” asked Ronald “Chip” Herrington, one of the defense attorneys for Eric Graham, a 21-year-old senior from Eight Mile, Ala. “Something more strenuous than sitting in a chair? We don’t concede there’s been any stress involved.”

At a time when the military is under attack for how it handles sexual violence in its ranks, the proceedings underway at the Washington Navy Yard offer a case study on why women in uniform are so reluctant to report sexual assaults. The hearing highlights significant disparities between the way the military and civilian world treat accusers and the accused.

As many as 26,000 service members said they were the targets of unwanted sexual contact last year, but only 3,374 incidents of sexual assault were reported, the Pentagon said in May.

Those numbers were accompanied by several high-profile scandals earlier this year, including the decision of an Air Force general to overturn the conviction of a fighter pilot on sexual assault charges and the arrest of the Air Force officer in charge of sexual assault prevention in the alleged groping of a woman outside a Crystal City bar.

The result has been demands by some lawmakers to turn sexual assault investigations and prosecutions over to civilian authorities instead of leaving them in the hands of the military chain of command — a proposal that is expected to be debated in the Senate this fall.

Last month, Defense Secretary Chuck Hagel approved new regulations aimed at providing more support to alleged victims of sexual assault, standardizing how each service handles cases, and making sure senior commanders learn about every reported incident. Hagel’s reforms will require that every presiding officer at what is known as an Article 32 hearing — the legal proceeding in the Naval Academy rape case — be a lawyer. But that won’t necessarily change how alleged victims are treated during those hearings.

An Article 32 is sometimes compared to a civilian grand jury proceeding because its purpose is to determine whether a trial, or court-martial in military parlance, is warranted. But legal experts say it differs in a number of ways, with looser procedural rules and open-ended cross-examinations that can be trial-like in nature and scathing in tone.

Roger Canaff, a former prosecutor who has helped the military improve its handling of sexual assault cases, said that no civilian court in any state in the country would allow the kind of questions that are routinely permitted at Article 32 hearings. The legal proceedings are so hard on women who allege sexual assault that “a lot of cases die there as a result,” said Canaff, who now works at End Violence Against Women International. “You hear questions that would be highly objectionable in a court-martial or any civilian hearing.”

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India's fiscal deficit target getting more challenging: Fitch

A clock is seen inside the lobby of the headquarters of Fitch Ratings headquarters in New York, February 6, 2013.

Credit: Reuters/Brendan McDermid

MUMBAI | Mon Aug 26, 2013 3:56am EDT

MUMBAI (Reuters) - Fitch ratings said it was getting more challenging for India to meet its fiscal deficit target in the current fiscal year ending March 2014 with revenues slowing.

The rating agency is also monitoring India's growth, inflation, public finances and the current account deficit and its funding, analyst Art Woo said in a teleconference on Monday.

Fitch has a stable outlook on the 'BBB-' sovereign credit ratings. BBB- is the last rung on the ratings ladder above the so-called "junk" status that mainstream investors tend to avoid.

Last week, Fitch said India and Indonesia are not at immediate risk of credit rating downgrades, but warned it could act if the governments of these countries fail to calm current financial market tensions.

(Reporting by Suvashree Dey Choudhury and Neha Dasgupta; Editing by Prateek Chatterjee)

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India's ONGC to buy $2.64-billion stake in Anadarko Mozambique gas block

A worker examines the valve of a pump on an Oil and Natural Gas Corp (ONGC) well on the western Indian city of Ahmedabad March 1, 2012.

Credit: Reuters/Amit Dave

MUMBAI/NEW YORK | Mon Aug 26, 2013 6:09am EDT

MUMBAI/NEW YORK (Reuters) - India's Oil and Natural Gas Corp (ONGC.NS) has agreed to buy 10 percent in a gas field offshore Mozambique from Anadarko Petroleum Corp for $2.64 billion, as the explorer looks to offset diminishing supplies from domestic gas fields by buying overseas assets.

The purchase of U.S. oil company Anadarko's (APC.N) stake is the latest in a handful of overseas assets that ONGC Videsh, the overseas business unit of state-controlled ONGC, has bought in the last couple of years to boost India's energy needs.

In June, ONGC and state-run Oil India Ltd (OILI.NS) signed a deal to buy a 10 percent stake in a Mozambique gas field from Videocon Group (VEDI.NS) for $2.48 billion.

"There is a lot of energy demand and whatever volumes of gas we are able to bring to the country are of utmost significance," A. K. Srinivasan, ONGC's group general manager for finance, told Reuters. "Mozambique will be a big LNG hub for the future."

Anadarko said it would remain the operator of Area 1, with a working interest of 26.5 percent in the block, which is located in Mozambique's deepwater Rovuma Basin.

Recent discoveries have turned the Rovuma field into a major draw for global energy producers and boosted Mozambique's natural gas reserves to around 150 trillion cubic feet or enough to supply Japan, the world's top LNG importer, for 35 years.

Rovuma has the potential to become one of the world's largest liquefied natural gas (LNG) producing hubs by 2018, and is strategically located to supply gas to India at competitive prices.

SEEN CLOSING BY MARCH 2014

ONGC, which expects the cash transaction to close by March 2014, is likely to finance the deal through internal cash balance and fresh borrowings, Srinivasan said, adding that financing details would be finalized over the next few months.

The company's bonds were trading at marginally wider spreads on Monday, underperforming tightness in the market, and shares fell as much as 3.8 percent in the Mumbai market .NSEI that was trading flat, on worries about its higher debt levels.

Analysts expect ONGC's two recent acquisitions to lead to higher debt levels, although a credit downgrade is unlikely.

"Given current market conditions and uncertainty about India, financing may be a challenge and we think most of it will come from the bank market. That said, a potential bond activity cannot be ruled out," a U.S. bank said in a note.

STARVING FOR GAS

ONGC, which has struggled to maintain output from its ageing wells off India's west coast, will be interested in buying more overseas assets to feed the energy needs of Asia's third-largest economy, Srinivasan said, but declined to give details.

"The country is starving for gas, for our power development and any other development," he said.

Demand for gas in India far outstrips consumption, but prices have been kept low for strategic industries, deterring investment in the sector. India has few energy resources other than coal and is the world's fourth-biggest importer of fuel.

After Anadarko, which has been looking to focus more on its domestic assets, Japan's Mitsui & Co Ltd is the second-biggest holder in Mozambique's offshore Area 1 block, with a stake of 20 percent.

Indian state refiner Bharat Petroleum Corp (BPCL.NS) owns 10 percent while Thai state oil company PTT Exploration and Production PCL PTTE.BK has an 8.5 percent interest and Mozambique's state-owned ENH 15 percent.

Outbound announced deals involving Indian companies so far this year stand at $35.8 billion, compared to $62 billion last year and a record $70.3 billion in 2008, Thomson Reuters data shows.

Bank of America Merrill Lynch (BAC.N) advised ONGC Videsh and Citigroup (C.N) advised Anadarko on the transaction.

(Reporting by Sumeet Chatterjee and Michael Erman; Additional reporting by Umesh Desai and Denny Thomas in HONG KONG; Editing by G Crosse and Clarence Fernandez)

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Perry ups ownership stake in J.C. Penney to 8.6 percent

n">(Reuters) - Hedge fund manager Richard Perry, already a big owner in J.C. Penney Co Inc (JCP.N), bought additional shares in the retailer on Friday, according to a regulatory filing made just days after the largest investor announced plans to sell his stake.

Perry Corp said it bought an additional 3 million shares of Plano, Texas-based Penney in a secondary offering for $12.90 a share and that it now owns 8.62 percent of the company.

Perry now ranks as Penney's second-largest investor after George Soros. Perry Corp did not immediately return a call seeking comment.

The announcement comes four days after William Ackman, whose Pershing Square Capital Management had been the largest shareholder, said he was exiting his entire 18 percent stake. Citigroup Inc (C.N) was offering the shares in the secondary market at $12.90 in a deal scheduled to close on Friday, Ackman said on Monday.

Penney shares were flat at $12.40 on Friday afternoon, having tumbled 37.3 percent since January as the company struggles to attract new customers after former chief executive Ron Johnson alienated many shoppers with plans to upgrade merchandise and streamline pricing strategies.

(Reporting by Svea Herbst-Bayliss in Boston; editing by Matthew Lewis)

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Regulators agree on global swap rules ahead of G20 summit

By Douwe Miedema

WASHINGTON | Fri Aug 30, 2013 4:32pm EDT

WASHINGTON (Reuters) - Finance watchdogs on Friday laid out joint rules for the $630 trillion derivatives industry that was at the core of the 2007-09 credit meltdown, in a report to the G20 most powerful economies of the world.

The high-level agreement comes ahead of a G20 summit next week in St Petersburg, Russia, where world leaders will discuss progress they have made to tighten the rules for banks and prevent a repeat of the devastating crisis.

While much progress toward the global reform agenda had been made, other points still needed to be sorted out, regulators from around the world said in a statement.

"The resolution of the unresolved issues is important," the group of supervisory agencies said in a report that was disseminated by the U.S. Commodity Futures Trading Commission, the country's top derivatives regulator.

Diverging views on how to rein in the banks that dominate derivatives trading caused a trans-Atlantic rift last year between Gary Gensler, head of the CFTC, and politicians and regulators in Europe and elsewhere.

But in July, the CFTC reached an agreement with the European Union that allowed foreign branches of banks to comply with local rules, as long as they are compatible with the rules their parent organizations must obey at home.

Regulators from Australia, Brazil, Europe, Hong Kong, Japan, Canada, Singapore, Switzerland and the United States now also broadly subscribe to that view, they said, explaining how they would assess whether the rules are comparable.

The principle allowing a bank branch to comply with foreign rules is known as equivalence, or substituted compliance.

While seemingly abstract, minute details in the hundreds of pages of new regulation written after the crisis can have a life-changing impact on banks such as JP Morgan Chase & Co (JPM.N), Bank of America Corp (BAC.N) or Citigroup Inc (C.N).

There could be an exception from the equivalence principle if a jurisdiction imposed requirements on trading that did not exist in the other jurisdiction, the regulators said.

In that case, the market parties would still have to comply with the requirements even if the rules in the two jurisdictions were comparable, the report said.

The same was true for clearing - the process where buyers and sellers send their orders through clearing houses, which function as traffic control centers.

Two areas still needed to be resolved, the regulators said. One was how to deal with local data protection laws that could block regulators' access to banks' books.

More work was also needed on the exact legal status of bank branches and guaranteed subsidiaries in foreign jurisdictions, something that can have an impact on whether the parent company is responsible for losses or not.

(Editing by Matthew Lewis)

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Trial date of November 25 set for U.S. challenge to AMR-US Airways merger

An American Airlines jet takes off while U.S. Airways jets are lined up at Reagan National Airport in Washington July 12, 2013.

Credit: Reuters/Larry Downing

By David Ingram and Diane Bartz

WASHINGTON | Fri Aug 30, 2013 6:03pm EDT

WASHINGTON (Reuters) - American Airlines and US Airways voiced a fresh sense of optimism on Friday after a U.S. judge granted their request for a speedy trial to determine whether the two carriers are allowed to form the world's largest airline.

U.S. District Judge Colleen Kollar-Kotelly said a trial pitting the airlines against the U.S. Justice Department and several states would begin on Monday, November 25.

The trial date is close to what the airlines wanted and months earlier than the Justice Department had hoped, meaning the government will need to work faster than it thought if it hopes to succeed in blocking the $11 billion merger.

Both airline stocks got a boost from the news. US Airways Group Inc (LCC.N) shares closed up 1.3 percent at $16.16 in New York Stock Exchange trading, against a lower market. Shares of AMR Corp (AAMRQ.PK), American's parent, were up 4.4 percent at $3.54 in thin over-the-counter trading.

"We are confident in our case and eager to get to court," the airlines said in a joint statement. "We are pleased to have a trial date that will enable us to resolve this litigation in a reasonable time frame."

Justice Department spokesman Peter Carr said in a statement: "We appreciate the court's careful consideration of the scheduling issues and will be ready to present our case."

The Justice Department sued on August 13 to block the deal, saying it would lead to higher prices for customers, while the companies said it would make them more competitive and strengthen the market.

Barring a settlement, which both sides said they are open to, lawyers will spend the next three months in intense preparation that will involve most of the U.S. commercial airline industry.

Executives of American Airlines and US Airways will be asked to sit for pre-trial depositions, lawyers said during a court hearing on Friday. Rivals including Delta Air Lines Inc (DAL.N) and Southwest Airlines Co (LUV.N) will be asked to turn over documents related to how the industry sets fares and fees.

The Justice Department proposes depositions of as many as 50 people in all, while the airlines said they want to depose 10 people. Lawyers said they could exchange millions of documents.

Kollar-Kotelly will appoint a special master to help the discovery process move along faster. She set a status conference for October 1.

The judge will try the case without a jury. It was expected to last 10 to 12 business days, lawyers for the two sides said. The Justice Department plans to call about 15 witnesses and the airlines plan to call approximately six.

MARCH VS. NOVEMBER

The U.S. Justice Department had asked for a March trial. The airlines had pushed for November because holding a deal together for months puts a strain on the parties. During the merger review and challenge process, the companies said they are essentially in limbo, unable to merge but unable to make independent long-range plans.

"March 3, I think, is too far off. It needs to be a tighter, expedited schedule," Kollar-Kotelly said in court.

The trial date sets up "an aggressive schedule to be sure," said Diana Moss, vice president of the American Antitrust Institute, which has been critical of the deal. But, she wrote in an email, "given the depth and strength of the DOJ's case, the government should be ready."

In its complaint, the Justice Department focused on Ronald Reagan National Airport, just outside Washington, D.C., where the two companies control a combined 69 percent of takeoff and landing slots. It also listed more than 1,000 city pairs where the two airlines dominate the market.

SETTLEMENT POSSIBILITIES

The two airlines and the Justice Department indicated in a joint court filing on Wednesday they were open to settling the matter. The government said it was, too, but added that it had not been given an offer from US Airways and American that "addresses the anticompetitive harms posed by the merger."

In response, a US Airways spokesman said in a statement in part: "The concessions we were willing to offer were designed to address competitive concerns that DOJ had raised during the investigation. We continue to believe there ought to be a realistic possibility of settlement."

The companies have said that the deal is critical for American Airlines, whose parent, AMR Corp, has been operating under Chapter 11 bankruptcy protection since late 2011.

A U.S. bankruptcy judge on Thursday hinted he would approve AMR's bankruptcy exit plan despite the government's challenge to its main component - AMR's planned merger with US Airways. Judge Sean Lane said he found "arguments in favor of confirmation to be fairly persuasive.

Comments from the antitrust and bankruptcy case judges were positive for the airlines' shares because they suggested a speedy trial process and bankruptcy-court approval incorporating the merger, said George Hamlin, president of Hamlin Transportation Consulting, in Fairfax, Virginia.

It was surprising that the Justice Department wanted a lengthy period before trial, because its suit implied it had a slam-dunk case, Hamlin said. "They had the element of surprise. The airlines weren't expecting this. Why wouldn't you want to do it sooner rather than later?"

The case at the U.S. District Court for the District of Columbia is No. 1:13-cv-12346.

(Additional reporting by Alwyn Scott and Nick Brown; Editing by Howard Goller, Steve Orlofsky and Tim Dobbyn)

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Vodafone investors split on best use of Verizon windfall

1 of 2. The Vodafone logo is seen at the counter of the shop as customers look at mobile phones in Prague February 7, 2012.

Credit: Reuters/David W Cerny

By Sinead Cruise and Chris Vellacott

LONDON | Fri Aug 30, 2013 1:28pm EDT

LONDON (Reuters) - Top investors in Vodafone Group (VOD.L) are set to clash over what the company should do with perhaps as much as $130 billion in proceeds from the sale of its stake in Verizon Wireless, which is expected to be announced imminently.

Vodafone shareholders contacted by Reuters as talks continued between the British firm and Verizon Communications (VZ.N) were split between those wanting to see the cash returned as dividends and those wanting the firm to invest it.

Verizon is close to buying the 45 percent stake in the joint venture Verizon Wireless from Vodafone, according to sources.

While some investors relish the idea of a special dividend and buyback spree, others say Vodafone is selling its best asset and must reinvest much of the proceeds in the company's future to avoid reliance on low-growth European markets.

Vodafone's 12-month dividend yield stands at 5.5 percent compared with an average of 5.1 percent for its European and UK peer group, according to Thomson Reuters data.

A lucrative sale of its Verizon stake would free up cash to invest in new infrastructure or to acquire smaller players to diversify and offset a squeeze on revenues in the mobile phone market, where competition is strong and prices are declining.

"You only want a deal done if they are going to do something with it," said a fund manager at one of Vodafone's 10 largest shareholders, who declined to be named.

"The worst-case scenario is that Vodafone takes the money and just hands it all back to shareholders. Then you are left with a weird company that isn't really doing anything."

CHANGING TACK

Vodafone has increasingly diversified from its "pure play" mobile strategy in the last 18 months, buying British fixed-line operator Cable & Wireless Worldwide for $1.6 billion last year and German cable operator Kabel Deutschland for $10 billion in June, its largest deal for six years.

It is also building a 1 billion euro fiber-optic network in Spain with France's Orange (ORAN.PA). Analysts have said fixed-line assets in Spain such as ONO or Italian broadband specialist Fastweb, which is owned by Swisscom (SCMN.VX), could be next on its shopping list.

Investors said Vodafone needed to make quick progress on this strategic shift or run the risk of becoming commercially obsolete in a market where many peers are selling packages that combine cable or satellite television, fixed-line services, broadband Internet and mobile phone deals.

"The problem for Vodafone is that they have no infrastructure to be able to offer this quad play ... Pure mobile phone operators are struggling; they have to keep cutting their prices to stay in line with players who can fall back on rising revenues from broadband," the top 10 investor said.

DEBT REPAYMENT

Even some of the company's debtholders, who typically call for conservative use of sale proceeds to pay down debt, suggest some acquisitions might be beneficial for the long-term financial stability of the firm.

Vodafone's net debt is twice its 2013 earnings, according to Thomson Reuters data, in line with the industry median. Its debt is rated A- by ratings agencies Fitch and S&P.

"From a bondholder's perspective, we'd always prefer actions that boost creditworthiness," said Matt Eagan, co-manager of the $22 billion Loomis Sayles Bond Fund and a Vodafone bondholder.

"That would could come from debt reduction in the case of Vodafone. However, I'm not opposed to acquisitions to the extent they boost the firm's business position. Consolidation in this industry has generally been positive from a credit standpoint."

But a second of Vodafone's 10 largest shareholders said he thought investors would want most of the proceeds from a stake sale returned to them as a condition of approving any proposal.

His sentiments echoed those of a third investor among Vodafone's 30 largest shareholders, who said he feared the firm was already too far behind rivals who have the infrastructure in place to offer the combined packages, and the chances of overpaying for assets to catch up with them was too high.

Assuming Vodafone receives $116-132 billion of proceeds from the sale, analysts at Citi said on Friday it could distribute $40 billion in cash and Verizon common stock valued at around $26-34 billion to shareholders. That would equate to a cash distribution of 52 pence a share.

The analysts expect Vodafone to pay around $5 billion in tax, keep $15 billion to reduce debt and retain $30-38 billion in deferred proceeds.

That plan could prove unpopular among some investors.

"We would want as much cash back as possible. I appreciate they have to invest in the core of what will be left post the Verizon disposal, but I think a lot of people once they have their money back will look to exit the equity."

"Look at this another way: people who dispose of assets tend to drive their share price up. People who acquire assets, tend to drive their share price down," the investor said.

However, Vodafone should have enough money to appease both camps, a third fund manager at a top 10 shareholder said.

"Any (acquisition) by Vodafone is going to be in the low-single-digit billions, which in the context of $110 or $120 billion of proceeds, it's a small proportion ... you can give at least half of the cash back, have a bit of a war chest and strengthen your balance sheet," the investor said.

(Additional reporting by Paul Sandle; Editing by Will Waterman)

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Wall Street falls, ends worst month since May 2012

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Wall Street Week Ahead: Jobs data could spur Fed action on stimulus

Traders work on the floor of the New York Stock Exchange August 28, 2013.

Credit: Reuters/Brendan McDermid

By Richard Leong

NEW YORK | Fri Aug 30, 2013 6:24pm EDT

NEW YORK (Reuters) - Wall Street is bracing for a wave of economic reports next week, including the August jobs report, which might prove decisive in determining whether the economy is strong enough for the Federal Reserve to dial back its bond purchases in mid-September.

Anxiety about the Fed possibly reducing its $85 billion monthly stimulus, also known as QE3, has hurt the stock market, which recorded its steepest monthly fall since May 2012.

But the stock market's greater anxiety, which has developed in recent weeks, is that the Fed will press ahead with a reduction in support, even as the economy remains fragile. The recent data has failed to provide evidence of the convincing growth the Fed says it wants to see. Until then, stocks will benefit from the cheap money resulting from the Fed's bond purchases.

"Next week's data should make or break the September expectations," said Mike O'Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut.

A strong jobs report will likely reinforce the view the Fed will opt to decrease its bond purchases at its September 17-18 meeting, while a weak one would do the opposite, analysts said.

"From a real economy perspective, QE3 has done very little. From a financial markets perspective, it has had a major influence. If it is really not helping the real economy beyond pushing financial assets higher, there is no point in continuing the risk of increasing the balance sheet," said O'Rourke.

For the month, the Standard & Poor's 500 index fell 3.1 percent in August; the Dow Jones industrial average lost 4.4 percent and the Nasdaq slipped 1 percent. .N

Speculation on the timing of Fed action has triggered a bond market sell-off that sent mortgage rates to two-year highs. The surge in home borrowing costs this summer has shown signs of slowing the housing recovery. Analysts also are watching if the higher rates have discouraged employers from adding workers.

Economists polled by Reuters forecast domestic employers likely hired 180,000 workers in August, more than 162,000 in July, while the jobless rate likely held steady at 7.4 percent, which is a four-year low.

Deutsche Bank economists said that if the payrolls figure exceeds 190,000 and the unemployment rate falls to 7.3 percent, they expect the Fed will start cutting bond purchases. "August employment would have to meaningfully disappoint for the Fed to back away from the timetable presented by Chairman Bernanke in the June post-meeting press conference," they wrote.

Prior to the payrolls data on Friday, traders will face a heavy schedule of economic releases after the three-day holiday weekend. They include the latest readings on vehicle sales and national factory and service activities.

U.S. financial markets will close on Monday for the Labor Day holiday.

Investors are watching the tense situation between the West and Syria. Signs of a U.S.-led military strike against Syria after chemical weapons were used to kill civilians could hurt the appetite for stocks globally.

Traders pared expectations on such a move after the British parliament voted against a military strike. But France said it supported punishing the Syrian government for the attack on civilians. U.S. Secretary of State John Kerry said on Friday the chemical weapons attack in Damascus last week killed more than 1,400 people.

Despite the sharp moves in equities due to the Syrian unrest, "we still expect the market to stop short of a 10 percent decline," said Mike Dueker, head economist for North America at Russell Investments in Seattle.

Light volume in late summer likely exaggerated August's stock decline, analysts said. The uncertainty has also boosted measures of volatility. The CBOE Volatility Index .VIX rose above 17 on Friday, a two-month high.

Bonds, in comparison, posted small losses. They were poised to lose 0.54 percent in August, according to Barclays' Aggregate bond index that tracks U.S. investment-grade debt returns.

SHAKY SEPTEMBER

While Syria and economic data will be next week's main concerns, other developments, such as President Barack Obama's nominee to succeed Ben Bernanke as Fed chief and another possible showdown between Obama and congressional Republicans over the federal debt might keep investors on edge, analysts said.

"There is no doubt that September is teed up for a tsunami of data coming at us and headlines coming at us," said David Lyon, investment specialist at JP Morgan Private Bank in San Francisco, California, which manages $910 billion in assets.

"So the market will look at September and really start to find its footing based on some of the economic data that comes out as well as clarity around some of these policy decisions at the central bank level or the geopolitical level," he said

History might complicate that view.

September has traditionally been the worst month for stocks, with an average 0.6 percent decline in the S&P 500 index over the past 62 years, although it rose 2.4 percent last September.

This September marks a milestone - the five-year anniversary of the global credit meltdown during which Wall Street witnessed the downfall of Lehman Brothers, the sale of Merrill Lynch, the near-demise of insurance giant AIG.

In that turbulent September 2008, the market tumbled 9.1 percent.

(Additional reporting by Chuck Mikolajczak and Rodrigo Campos; Editing by Kenneth Barry)

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