Archive - Jul 27, 2009 - Story

Yes, that's 585%. No comment needed

Spreads were tighter in the US as all the indices improved (with HY and IG back to early SEP08 levels on an adjusted index basis). Indices typically underperformed single-names (as despite the late day surge to new tights in IG, we heard more single-name protection buying hedged via the index) with skews mostly narrower as IG underperformed but narrowed the skew, HVOL outperformed but widened the skew, ExHVOL intrinsics beat and narrowed the skew, XO underperformed but compressed the skew, and HY outperformed but narrowed the skew.

Enough, already.

Hey Ron, didn't realize your new position as a contributing editor on CNBC came with the contributing title of "Portfolio Manager." Didn't Stevie put a one year kibbosh on that? But I digress... And in all honesty I am surprised that you seem to have the correct spin on things (as per letter below from Jim Cramer's failed media experiment TheStreet).

...Although once the debate moves away from Flash to its natural progression into dark pools and ultimately HFT, watch out below: "Any move to restrict high frequency trading could have a significant impact on exchanges’ transaction fees as well as revenue earned from co-location; there is also the chance that efforts to restrict HFT in the equities world could bleed over into other asset classes as well, including futures. We view potential regulatory changes as a net negative for exchanges, but it is far too early to assess the impact of potential regulation on these two issues."

The clock is now ticking on the rigger Echange - Broker/Dealer oligopoly

After numerous posts on this blog discussing speculation of assorted forced buy ins, it seems that this phenomenon is quite factual and quite pervasive among the asset management community. As Zero Hedge has noted previously, forced buy-ins are a critical issue as it leaves shorts at the mercy of their securities lenders and repo desks (most of which are TARP recipients and thus beneficiaries of higher stock prices) which generically have the option of recalling lent out shares at a moment's notice, and thus creating artificial purchasing pressure: i.e. a forced short squeeze. According to Securities Industry News, in a recent survey by Callan Associates, over half of the respondents said they are undergoing a "controlled unwind" with their securities lending desks (aka State Street, BoNY, and Northern Trust).

From an interview earlier with NYSE's Larry Leibowitz, who is surprisingly vocal against Flash trading. Larry - since the NYSE does not engage in Flash trading, can you please indicate whether or not the SLP program provides advance notice to Goldman Sachs ala Direct Edge's ELP program. Regardless, the escalation in the ECN wars is starting and should be a very interesting one to follow, especially now with a toothless and clueless Mary Schapiro stuck in the middle.

It seems only yesterday that Zero Hedge had some questions in regard to Goldman's VaR Fed exemption. No response was received from 85 Broad. Today it appears several Congressmen, lead by Alan Grayson, are willing to drive a sharp stick pretty deep into the hornets' nest, by sending a letter directly to Wall Street Don Ben Bernanke, demanding an explanation exactly to the question of Goldman's VaR Exemption.

Not much... In fact a mere 3.11% return YTD, below the 9.4% HFN aggregate average and the 4.7% return YTD. Of course, this excludes Goldman's $100MM trading days YTD. If one added those, the YTD MN return might easily be pushing 50%.

"I write out of concern that the integrity of our capital markets is being compromised by the ability of some insiders to view order information before it is available to the entire market, and use electronic trading strategies to profit from that information at the expense of other investors"

The mythical "TRADER - The Documentary" is finally available on You Tube. Relevant "full frontal" insights on the making of a hedge fund legend, and a paleolithic market dominated by monochrome PCs (what, no Bloomberg?), running to the municipal library for that 10-K, and no Flash orders frontrunning every trade. 

Damage control... Or is Goldman a little worried what Direct Edge may disclose.

From the appended Schumer piece on Bloomberg:

“Goldman Sachs believes high-frequency trading should have an accompanying obligation to provide liquidity, and be subject to appropriate regulatory oversight,” Canaday said.

Ed, we have been giving you the chance to provide your side of the story for months. Please take us up on the offer.

Bearish bets made impossible, compliments of UBS. Either that, or UBS' recently upgraded (with i7 chips of course) computers just cant handle the basis calculations. Either way, is something very fried with ETFs going on behind the scenes?

IMPORTANT NOTICE: Inverse, Leveraged and Inverse-Leveraged Exchange Traded Funds are no longer available for new or additional purchases at UBS

Effective July 27, 2009, UBS is suspending the offering of Inverse, Leveraged and Inverse-Leveraged Exchange Traded Funds (ETFs). You will no longer be able to make new or additional purchases and will only be able to liquidate current positions through UBS at this time. Any attempt to execute a trade of such ETFs will be rejected.

Please contact your Financial Advisor with questions.

• Administration looking for Chinese help to narrow trade gap and boost US jobs.
• Advertisers are getting cheaper rates than a year ago on television commercials.
• Aetna 2Q profit dropped to $346.6M due to greater commercial expenses and cuts full year forecast.
• Asian markets were higher Monday on hopes for further earnings recovery, Nikkei hits 10,000 mark.
• China's new small-company stock exchange gets 108 IPO applicants on 1st day as launch nears.
• China shares up for 4th day on high liquidity-driven sentiment, led by metals and airlines.
• Euro rises to $1.4263 in European morning trade as investors continue to leave dollar.

• Tenacious G - Is Goldman Sachs evil? Or really good? (NY Mag)
• Bernanke feared a second great depression; he may still very well get it (WSJ)
• Europe braced for rising credit card defaults (FT)
• Loans by U.S. banks shrink as fear lingers (WSJ)
• Credit crunch part deux (Merk Mutual Funds)