Posts Tagged New York Stock Exchange
Explaining The Knightmare
Posted by TheRedPillGuide in Finance, News on August 6, 2012
via: ZeroHedge
by: Tyler Durden
August 6, 2012
This Is What Happens When An HFT Algo Goes Totally Berserk And Serves Knight Capital With The Bill
Posted by TheRedPillGuide in Economy, Finance, News on August 2, 2012
via: ZeroHedge
by: Tyler Durden
August 1, 2012
We all know something went horribly wrong in various NYSE-traded stocks today between 9:30 am and 10:15 am. So wrong in fact that the NYSE had to step in and cancel numerous trades in 6 symbols. However it did not DK millions of other trades in134 other symbols, the vast majority of which we assume traded errantly due to the market making of Knight Capital (as admittedby the company), which today saw its biggest drop ever since going public on volume about 60 times greater than its average. We also all know that one should buy low and sell high. At least that is what human traders are taught, and that is what they attempt. Because if one consistently does the opposite, one will simply run out of money. Well, the opposite is precisely what the berserk algo in Knight’s Market Making group may have done if Nanex, which has done a forensic analysis of one of the trades in question, is correct. In other words, instead of at least attempting to provide liquidity via limit trades, Knight’s algorithm acted as a market order… gone horribly wrong. As the third chart below shows what the algo did with furious repetition and steadfast consistency was to buy at the offer, and sell at the bid, in other words buy high and sell low. Over and over and over and over. As Nanex laconically notes, “In the case of EXC, that means losing about 15 cents on every pair of trades. Do that 40 times a second, 2400 times a minute, and you now have a system that’s very efficient at burning money.” Which also means that by not DK’ing several hundred million prints, the NYSE may have just thrown Knight under the bus, because the market maker is suddenly on the hook for tens if not hundreds of millions in inverse market making profits.
LIBOR Scandal Set to Rock U.S. as Experts Warn it Could Be ‘the Biggest Consumer Fraud in History’
Posted by TheRedPillGuide in Economy, Finance, News on July 14, 2012
via: TheIntelHub
Source: DailyMail
July 13, 2012
As the investigation into the LIBOR interest rate-rigging in the United Kingdom becomes a financial scandal of tsunami-like proportions, some analysts are openly wondering whether 16 of the world’s largest banks have perpetrated the biggest fraud in history.
With the public coming round to the global significance of banks potentially colluding like a cartel to favourably set the LIBOR, those same analysts predict lawsuits worth tens of billions being brought against the Western world’s largest financial institutions by average consumers.
Early analysis suggests that for a period of several years before and after the 2008 financial crisis, the London interbank offered rate (LIBOR) was manipulated to such an extent that a family with a $100,000 mortgage would have been $50 to $100 worse off a month because of the fixing.
As the fallout from Barclay’s $453 million fine for admitting influencing the LIBOR hits the U.S., Europe and Japan, banks such as Citigroup, JPMorgan Chase, HSBC and Deutsche Bank have admitted they are now under investigation for interest rate manipulation.
Economist and financial analysts are predicting that as the scale of the potential fraud becomes clear, the fines and litigation that engulfs the banking sector could dwarf the penalty handed to Barclay’s and even herald further, more stringent regulation on Wall Street and multinational banks.
Central to this is the fact that the LIBOR affects everyone from the ‘one percent’ who run the banks down to the man on Main Street who is paying off his credit card or car loan and affects the rate of return he will see on his pension or 401k savings.
Taken altogether, an awesome $360 trillion dollars in loans around the world are indexed to the LIBOR, a figure which is five times the value of the world’s entire annual GDP.
Despite being set in London, the LIBOR is the average interest rate agreed by the world’s largest international banks and indexes the short and long term interest rates for 10 currencies across 15 different time zones.
Treasury Secretary Tim Geithner has been called in front of the Senate Banking Committee as he faces questions about what level of knowledge the U.S. Government had over the LIBOR
The LIBOR impacts every financial service and product across the planet and in the U.S. in 2008, 60 percent of prime adjustable rate mortgages and almost all of sub-prime mortgages were tied to LIBOR.
It has been alleged that the world’s largest banks have been fraudulently fixing interest rates around the world for at least the past decade, if not for a much longer period of time.
The fraud was uncovered when Barclay’s Bank in London was discovered to have been submitting false figures to the LIBOR to improve their trading postion.
By manipulating the LIBOR, by raising or lowering it, banks allegedly could make their balance sheets appear healthier than they were, while consumers and members of the public apparently paid the shortfall.
‘LIBOR hearkens back to a time when finance operated like a gentlemen’s club, and its leading members behaved honestly,’ said Robert Shapiro, the former Under Secretary of Commerce for Economic Affairs in the Clinton administration and now chairman of Sonecon, an economic consultancy firm.
‘That is a universe away from the current Wall Street culture and behavior.
‘They take out bets and pay themselves fortunes for doing so, even when they cannot make good on those bets without taxpayer bailouts.
‘And now, we also know that when they bet on interest rates rising or falling, they stacked the LIBOR deck to nudge rates in the direction that made money. And they left everybody else with the bill.
Figures suggest that during the 2008 financial crisis, the London interbank offered rate (LIBOR) was manipulated to such an extent that a family with a $100,000 mortgage would have been $50 to $100 worse off because of the fixing.
‘So long as big finance will do almost anything to goose its own profits and bonuses, ‘self-regulation’ is a dangerous myth.
‘It should give way to sound law enforcement, which in economic terms is government regulation.’
Indeed, Shapiro breaks down the depth of the alleged fraud by noting that in his calculations, LIBOR was off by an average of 30-40 basis points on the interest rate for the best part of a decade.
With one hundred basis point equaling a full percentage point in the set interest rate, this would have added $50 to $100 to the monthly repayments on a $100,000 loan.
In addition, between 2007 and 2008, Americans held $11.1 trillion in residential mortgage debt during the time period of interest rate manipulations of 30 to 40 percent.
JPM Admits CIO Group Consistently Mismarked Hundreds Of Billions In CDS In Effort To Artificially Boost Profits
Posted by TheRedPillGuide in Economy, Finance, News on July 13, 2012
via: ZeroHedge
by: Tyler Durden
July 13, 2012
Back on May 30 we wrote “The Second Act Of The JPM CIO Fiasco Has Arrived – Mismarking Hundreds Of Billions In Credit Default Swaps” in which we made it abundantly clear that due to the Over The Counter nature of CDS one can easily make up whatever marks one wants in order to boost the P&L impact of a given position, this is precisely what JPM was doing in order to boost its P&L? As of moments ago this too has been proven to be the case. From a just filed very shocking 8K which takes the “Whale” saga to a whole new level. To wit: ‘the recently discovered information raises questions about the integrity of the trader marks, and suggests that certain individuals may have been seeking to avoid showing the full amount of the losses being incurred in the portfolio during the first quarter. As a result, the Firm is no longer confident that the trader marks used to prepare the Firm’s reported first quarter results (although within the established thresholds) reflect good faith estimates of fair value at quarter end.”
As a result of this, regulators who now are only 3 years behind the curve, are most likely snooping to inquire not only how JPM did it (call us: we can brief you in 2 minutes), but who else has been doing this? Hint: everyone.
