BofA to Pay $2.43 billion Over Merrill Acqusition

On September 28, 2012, Charlotte-based Bank of America agreed to settle a case from its shareholders for $2.43 billion. The plaintiffs, including several pension funds such as Teacher Retirement Systemof Texas, accused BofA of misleading the then-shareholders on the health of Merrill Lynch prior to September 2008 acquisition. The $20 billion transaction came under scathing criticism when BofA said afterward that Merrill would lose $27.6 billion that year. Also, the Charlotte-based bank failed to disclose, prior to shareholders' vote, $5.8 billion bonus to be paid to Merrill employees. The Securities and Exchange Commission won a $150 million settlement in 2009 regarding BofA acquisition of Merrill. Now, the $2.43 billion settlement goes to US District Judge Kevin Castel of the Southern District of New York. Bank of America faced host of lawsuits regarding its July 2008 acquisition Countrywide Financial and September 2008 acquisition of Merrill Lynch. BofA on the Countrywide acquisition entered into an $8.4 billion settlement with 12 states and another $600 million with Countrywide shareholders.

Source: The Dallas Morning News

High-Speed Trader Knight's Debacle

A new software almost obliterated the existence of Knight Capital Group and put the focus squarely on high-speed trading on August 1, 2012 as erroneous trading orders for some 140 stocks roiled the stock market for almost 45 minutes, and the high-speed brokerage hod lost almost $440 million. Knight is a trading firm that takes orders from the big firms such as TD Ameritrade and E-Trade, and then funnels them to the markets such as NYSE. One of the roles played by Knight is that of a "designated market maker", who are responsible for keeping trading of stocks they oversee orderly. Knight is responsible for trading of 524 NYSE-listed stocks, a sizable proportion of a total of roughly 2,300. On August 6, 2012, Knight secured a rescue package of $400 million from a  group of financial firms led by Jefferies Group that had also included Blackstone; trading firm Getco, owned by private equity firm General Atlantic; Stephens; Stifel Financial and TD Ameritrade. Knight represents a new generation of traders who are specialized in stock transactions using Mathematical algorithms in lightening speed with a span of milliseconds.