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CFTC aims to define high-frequency trading so it might be regulated

Section: Daily Dispatches

By Scott Patterson and Jenny Strasburg
The Wall Street Journal
Tuesday, June 19, 2012

U.S. regulators are about to take a big step toward reining in high-frequency trading: defining what it is.

On Wednesday, a Commodity Futures Trading Commission subcommittee is expected to propose a roughly 60-word definition of high-frequency trading that would define it broadly, a bad sign for traders who had hoped for narrower language. The announcement follows three months of sometimes contentious meetings by an industry group that was formed by the CFTC to help the agency wrestle with the impact of rapid-fire trading on financial markets.

Such trades now generate more than half of all U.S. stock- and futures-trading volume, and critics claim the surge in high-frequency trading has left Wall Street more vulnerable to computer-driven failures that sap investor confidence.

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Sona Discovers Potential High-Grade Gold Mineralization
at Blackdome in British Columbia -- 13.6g over 1.5 Meters

From a Company Press Release
November 22, 2011

VANCOUVER, British Columbia -- With its latest surface diamond drilling program at its 100-percent-owned, formerly producing Blackdome gold mine in southern British Columbia, Sona Resources Corp. has discovered a potentially high-grade gold-mineralized area, with one hole intersecting 13.6 grams of gold in 1.5 meters of core drilling.

"We intersected a promising new mineralized zone, and we feel optimistic about the assay results," says Sona's president and CEO, John P. Thompson. "We have undertaken an aggressive exploration program that has tested a number of target zones. Our discovery of this new gold-bearing structure is significant, and it represents a positive development for the company."

Sona aims to bring its permitted Blackdome mill back into production over the next year and a half, at a rate of 200 tonnes per day, with feed from the formerly producing Blackdome mine and the nearby Elizabeth gold deposit property. A positive preliminary economic assessment by Micon International Ltd., based on a gold price of $950 per ounce over eight years, has estimated a cash cost of $208 per tonne milled, or $686 per gold ounce recovered.

For the company's complete press release, please visit:

In response, officials at the CFTC and Securities and Exchange Commission have been exploring ways to track the orders and trades of high-speed firms, which use powerful computers to jump in and out of markets, trying to exploit fleeting price moves.

Much as the proposed "Volcker rule" has spurred sweeping changes on trading desks, the official definition of high-frequency trading likely will guide regulators as they seek to crack down on trading that allegedly is manipulative or undermines investor trust. The Volcker rule would restrict bets banks could make with their own money.

In a sign of the effort's importance, the process of crafting a definition is being overseen by the CFTC's enforcement division. The subcommittee that meets Wednesday is part of the CFTC's Technology Advisory Committee, led by Scott O'Malia, a Republican commissioner who has spearheaded the effort to increase oversight of computer-driven trading at the agency.

According to a draft version reviewed by The Wall Street Journal, a subcommittee working group is proposing to define high-frequency trading as a form of trading that uses sophisticated computer programs to make automated decisions in the markets, with no human decision-making involved in individual transactions. The draft also defines such trading as using technology to amplify the speeds at which firms send orders to exchanges and other trading venues, and generating large volumes of messages, orders and cancellations compared with other, slower types of trading.

The subcommittee still could make changes before Wednesday's meeting. The definition, which isn't subject to approval by the full commission, eventually could help guide the CFTC's rule-making process as it ramps of regulation of high-speed trading. The subcommittee faces a tough balancing act between writing a definition narrow enough to apply to specific trading activities and broad enough to rope in a wide swath of firms. The wording in the draft version is potentially wide-ranging enough to include the algorithmic-trading desks at big Wall Street firms that help clients buy and sell securities, as well as smaller firms specializing in high-frequency trading.

But the definition also may be so broad that it could be difficult to enforce and might face challenges in court, according to a person involved in the discussions about the definition.

High-frequency trading firms and others, including members of the CFTC's advisory groups, have argued that it is fruitless to try to define a group of market participants before identifying what exact behaviors should concern regulators. Doing so could mean tagging certain players while others slip through the cracks or potentially change their behaviors to elude scrutiny. Some involved in discussing the definition wanted it to be "toothless" to ward off what they view as potentially harmful regulation, according to two people involved in the discussions. The definition-writing group includes representatives of high-frequency trading firms Virtu Financial and Getco LLC, Deutsche Bank AG, research firm Tabb Group LLC, and Themis Trading LLC, a New Jersey broker and critic of some high-frequency trading practices, as well as NYSE Euronext.

The rise of high-frequency trading also will get attention Wednesday at a hearing of the House Financial Services Committee's subcommittee on capital markets. The hearing is focused on the health of the financial markets for investors and companies seeking to raise capital by selling stock. Likely to dominate at least part of the hearing: Facebook Inc.'s glitch-riddled initial public offering on the Nasdaq Stock Market last month.

Last week, officials from Nasdaq OMX Group Inc. and NYSE Euronext told House subcommittee members in a joint presentation that the proliferation of trading venues such as dark pools, in which orders are posted by firms away from public exchanges, has hurt the quality of the market and investor confidence.

The two exchange operators claimed that such trading operations helped trigger the May 6, 2010, flash crash, when stocks plunged sharply in a short period. "Liquidity evaporates quickly when it is spread too thinly" across the market, the presentation said.

In testimony for Wednesday's hearing, Dan Mathisson, head of U.S. stock trading at Credit Suisse Group, compared the Facebook offering to the flash crash, saying the bungled stock sale caused "significant chaos in the markets."

NYSE Euronext Chief Executive Duncan Niederauer is scheduled to testify at the hearing, as well as executives of high-frequency trading firms and securities firms. Mr. Niederauer will urge regulators for measures that would bring trading back onto public exchanges, according to prepared testimony. "We should not wait for another May 6 to address" questions such as why "the volume of securities trading in dark pools tripled" in recent years.

Nasdaq CEO Robert Greifeld declined an invitation to appear at the hearing, according to a subcommittee spokeswoman. A Nasdaq spokesman declined to comment on Mr. Greifeld's decision not to attend the hearing.

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Prophecy Platinum Announces Wellgreen Preliminary Economic Assessment:
38% Pre-Tax IRR, $3.0 Billion NPV, and a 37-Year Mine Life

Company Press Release

VANCOUVER, British Columbia, Canada -- Prophecy Platinum Corp. (TSX-V: NKL, OTC-QX: PNIKF, Frankfurt: P94P) reports the results of an independent NI 43-101-compliant preliminary economic assessment for its fully owned Wellgreen nickel-copper-platinum group metals project in the Yukon Territory.

The independent assessment, prepared by Tetra Tech, evaluated a base case of an open-pit mine (with a mining rate of 111,500 tonnes per day), an on-site concentrator (with a milling rate of 32,000 tonnes per day), and an initial capital cost of $863 million. The project is expected to produce (in concentrate) 1.959 billion pounds of nickel, 2.058 billion pounds of copper, and 7.119 million ounces of platinum, palladium, and gold during a mine life of 37 years with an average strip ratio of 2.57.

The financial highlights of the preliminary economic assessment, shown in U.S. dollars, are as follows:

Payback period: 3.55 years
Initial capital investment: $863 million
IRR pre-tax (100% equity): 38 percent
NPV pre-tax (8% discount): $3 billion
Mine life: 37 years
Total mill feed: 405.3 million tonnes
Mill throughput: 32,000 tonnes per day

Prophecy Chairman John Lee says: "We are pleased with the preliminary economic assessment results. The numbers indicate that Wellgreen is one of most exciting mineral projects in the Yukon. The company is drilling to upgrade and expand the resource base. The infrastructure is excellent as the project is only 1,400 meters in altitude and 14 kilometers from the paved Alaska Highway, which leads to the Haines deep seaport. Discussions are under way with support from local stakeholders regarding permitting and logistics."

For the complete press release, please visit: