Archive - Jul 25, 2009

"if you look at what's happened recently in the credit markets, it hasn't opened
our eyes to liquidity risk, but liquidity cost and liquidity risk is perhaps a different
animal. It's not just about price volatility. It's about volume volatility. It's about timing of
that volume volatility. It may be there today, and when you want to get out of your
position, it may not be there tomorrow. And how do you reflect that into your own
trading and into, not just your alpha generation, but on the risk side of the alpha
generation? Most risk models don't really take into consideration the kinds of anomalies
that we may see on a yearly basis."

A very informative series of presentations by Warren Pollock. As Warren says, a comprehensive political, economic and social forecast.

A piece by John Mauldin covers much of what we have been discussing regarding the macro picture over the past few months.

Zero Hedge will attempt to categorize all the relevant players in FlashTradingGate. This is the initial focus of Senator Charles Schumer's recent campaign for market equality and transparency. As we will undoubtedly miss critical connections between these and other pertinent industry players, we solicit readers' insight as we develop this org chart: we invite readers to send emails to: flashtrading@zerohedge.com with any input.

HFT creates systemic instability and makes market manipulation much easier.

Great recap piece in the New York Times on whether or not Wall Street is picking the pockets of "non-club" investors (read - the guys who do not generate 80% returns with a Sharpe > 5.0 - can someone explain how risk/return works again). The consensus sure looks good for class action lawsuit lawyers.

The piece also recognizes the tremendous contribution that Zero Hedge's readership has had in this ongoing debate, once more highlighting the interactive nature of new media and how crowdsourcing is the new dominant paradigm for Media 2.0. 

Here is the link.

Additionally, should it be odd that Direct Edge, the company in the eye of the Flash hurricane with its ELP program, has the following reported ownership structure:

Yes. Direct Edge is an independent broker-dealer owned by a consortium that includes the International Securities Exchange (“ISE"), Knight Capital Group, Inc., Citadel Derivatives Group, The Goldman Sachs Group, and J.P. Morgan. Knight Capital Group was originally the sole owner of Direct Edge and the firm was spun off in the third quarter of 2007 when Citadel and Goldman made investments. With a 31.54% stake, the ISE is currently the largest shareholder of Direct Edge, followed by Knight, Citadel, and Goldman, each with 19.9%.

And here are the latest ruminations out of Max Keiser, who takes on a curious angle in his most recent Goldman Sachs attack