CHICAGO, May 13, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the The Goldman Sachs Group, Inc. (NYSE:GS-Free Report), Barclays PLC (NYSE:BCS-Free Report), Credit Suisse Group AG (NYSE:CS-Free Report), The Charles Schwab Corporation (NYSE:SCHW-Free Report) andRoche (OTC:RHHBY-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Monday's Analyst Blog:
Goldman (GS) at Risk from High-Speed Trading?
Adding to growing concerns related to high-speed trading, The Goldman Sachs Group, Inc. (NYSE:GS-Free Report) revealed in its latest quarterly filing that the company is facing investigations regarding the practice. The company stands among several other defendants including high-frequency trading firms, securities exchanges and broker-dealers in a putative class action filed on Apr 18, 2014 in the U.S. District Court for the Southern District of New York.
The Charge
The class action has been brought on behalf of public investors who traded in the U.S stock market on a registered public stock exchange or on a U.S. based alternative trading platform since Apr 18, 2009.
The class action alleges that the securities exchanges together with the brokerage firms and the high-frequency trading firms resorted to inappropriate methods while carrying out business transactions. Further, they are accused of sharing non-public information with certain market players who capitalized on such information, causing manipulation in stock prices. Precisely, the defendants are alleged to have violated the federal securities laws related to market manipulation and insider trading.
Such fraudulent activities amounted to market rigging. Consequently, the plaintiffs traded at artificial manipulative prices instead of true and actual prices.
The defendants include exchanges like NYSE and NASDAQ, while Barclays PLC (NYSE:BCS-Free Report), Credit Suisse Group AG (NYSE:CS-Free Report) and The Charles Schwab Corporation (NYSE:SCHW-Free Report) were among other alleged companies.
High Frequency Trading: What's the Buzz?
With the advent of technology, trading has become much faster and easier. As a result, electronic trading is currently dominating the market.
With speed and algorithms, the high speed traders buy and sell securities within fraction of seconds, some times measured in microseconds, or millionths of a second. The main objective is to gain profit from the smallest price changes. This trading are not meant for the general public, rather these are carried on by high-frequency trading firms that use supercomputers specially designed for similar transactions. These firms get direct access to exchanges through their brokers' accounts - referred to as "naked access".
However, in 2010, high-frequency trading was held responsible for wiping out hundreds of billions of dollars of market value in a "flash crash."
Following the release of Flash Boys: A Wall Street Revolt by Michael Lewis, that focused on the role of high frequency trading firms rigging the US stock market, the U.S. Federal Bureau of Investigation (FBI) and the U.S Justice Department (DOJ) announced investigations into high frequency trades for possible violations of the law. Also New York Attorney General Eric Schneiderman and the SEC and are undertaking similar investigation.
Where Goldman Stands
The class action mentioned that Goldman's brokerage division traded on behalf of the plaintiffs during the aforementioned period on stock exchanges and alternate trading venues. It also hinted at Goldman's own trading operations engaged in high frequency trading that once garnered about 10% of the company's total revenue.
Further, the class action mentioned that during the said period Goldman realized profits from defendants like NASDAQ and NYSE owing to transactions through its own trading venues including Sigma X. Sigma X at present stands as one of the largest dark pools in the market.
Dark pools are private platforms wherein the secrecy of investors is guarded well in comparison to public exchanges. Notably, many dark pools offer access to their trade data to outsiders including high frequency trading firms. With increasing competition in the dark pool industry, the technical faults and issues have heightened the associated risks and raised concerns over the relationship that the high frequency firms and the dark pools share.
According to a report in The Wall Street Journal last month, Goldman was contemplating the closure of Sigma X. However, there has been no official revelation to date.
Bottom Line
Undoubtedly, any negative outcome of the investigations will force Goldman to stop such trading practices, which may result in lower trading revenues. In fact, it could be high enough to mar the total revenue. However, nothing can be certainly said until the extent of Goldman's involvement in high-frequency trading is known.
Pipeline Products at Roche
Pipeline updates are highly awaited events in the pharma/biotech sector as they play an important role in deciding whether or not to invest in a particular company. These updates provide information on experimental drugs and at times give an insight into the commercial potential of the candidate once it is successfully developed and commercialized.
Roche (OTC:RHHBY-Free Report) recently announced positive new data on candidate cobimetinib (GDC-0973) from the phase Ib BRIM7 study at the 10th European Association of Dermato Oncology (EADO) Congress.
The BRIM7 study was an open label, dose-finding and dose expansion study which evaluated the safety and tolerability of cobimetinib in combination with Zelboraf among patients suffering from advanced BRAFV600 mutation-positive metastatic melanoma. The primary endpoint of the study was to evaluate the safety and tolerability of the combination. Roche also expects to identify the optimal dosing schedule for use in further clinical studies. The results from the study showed promising anti-tumour activity for the combination.
We note that Roche is currently conducting a phase III study (coBRIM; GO28141) to evaluate the efficacy and tolerability of the cobimetinib and Zelboraf combination as compared to only Zelboraf in patients with previously untreated BRAFV600 mutation-positive, unresectable locally advanced or metastatic melanoma. Roche expects primary results from the coBRIM study later in 2014.
We remind investors that Zelboraf, a BRAFV600-targeted therapy, is approved for the treatment of adult patients with BRAFV600 mutation-positive unresectable or metastatic melanoma in more than 80 countries. The drug was launched in 2011.
Sales from Zelboraf came in at CHF 79 million in the first quarter of 2014, down 2% due to competition in the U.S. The successful development and commercialization of cobimetinib will further boost sales.
Roche currently carries a Zacks Rank #3 (Hold).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
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