Posts tagged 'Delta One'

The Europe-based flow monster is under siege

Bank “trading” is all about flow. And in Europe there has never been a bigger flow monster than Deutsche Bank.

But as has been well reported, FICC flow profits are beginning to wane.

So it is with some interest we note the following charts from Morgan Stanley’s European Banking team: Read more

UBS fined £29.7m for significant failings in Adoboli case

Definitely a turn-around for the books in the Kweku Adoboli case.

From the FSA on Monday, emphasis FT Alphaville’s (and the whole release really is worth a read): Read more

The unconventional hedge, redux

FT Alphaville’s resident credit expert Lisa Pollack is on the case regarding JP Morgan’s “egregious” loss announced on Thursday.

But, as we wait for her analysis, here’s a great little snippet from Kid Dynamite with regards to what counts as a viable hedge and what doesn’t in this crazy financial world of ours. Read more

How ‘Delta One’ really works

One thing we’ve learnt about Delta One is that it’s head-scratchingly, mind-bogglingly tricky to explain.

And exactly how the division makes money, outside of the fees it charges investors is even harder to work out. Read more

Volcker’s ‘Delta one’ loophole

Last week, Bloomberg provided more details of what’s to be expected from the upcoming Volcker rule.

The headline focused on the fact that all bank divisions would be subject to restrictions that would limit their ability to take advantage of short-term price movements in securities and derivatives markets for proprietary gain (or loss, as the case may be). Read more

Rise of the central execution desk

The UBS rogue-trading scandal has shone a light on the way banks have transformed their trading divisions in the last decade.

Simply put, trading is not what it used to be. Read more

Singapore fund hits at UBS ‘lapses’

The biggest shareholder in UBS broke its silence about the $2.3bn rogue trading scandal that has engulfed the Swiss group, criticising “lapses” in the bank’s controls ahead of a pivotal UBS board meeting in Singapore. Government of Singapore Investment Corporation (GIC), Singapore’s sovereign wealth fund, was already sitting on a substantial loss on its 6.4 per cent stake in UBS before last week’s shock disclosure that a 31-year-old trader on the bank’s “Delta One” desk allegedly lost billions by taking unauthorised futures positions. Oswald Grübel, UBS’s embattled chief executive, met GIC as the bank’s board gathered to review the implications of the scandal, and to consider sweeping changes to the bank’s business model in a long-scheduled meeting timed to coincide with the Singapore Grand Prix. “[We] discussed the alleged fraudulent trading that led to the large financial loss for UBS,” GIC said in a rare statement. “GIC expressed disappointment and concern at the lapses and urged UBS to take firm action to restore confidence in the bank.”

UBS trader held over $2bn loss

A 31-year-old trader, Kweku Adoboli, has been arrested in London on suspicion of blowing a $2bn hole in its books, the FT reports. UBS warned that the discovery could push the group into a loss for the third quarter. People close to the matter told the FT UBS did not discover the suspected rogue trading activity until midday on Wednesday, about 12 hours before they asked police for Mr Adoboli to be arrested. Separately, the FT explains Delta One and the ETF connection. NYT’s DealBook reports that Moody’s may downgrade UBS over the trading loss.

The curse of Delta one strikes UBS

This is a snapshot of the Linkedin page of UBS equity trader Kweku Adoboli, the man the FT understands was arrested in connection to the €2bn unauthorised UBS trade, as seen through FT Alphaville reporter Izabella Kaminska’s Linkedin profile:

 Read more

If you pay peanuts for ETFs, you get…

We had always heard stories about how profitable ETFs were for banks.

For example, people had told us that official management fees were clearly a red herring. By and large, the money was being made in the background, from the ETF plumbing. Read more

Equity shorts in disguise

Synthetic prime – a.k.a — the art of transforming client exposures.

But, we wonder, could there be more to it than meets the eye? Read more

Do banks see ETFs as inexpensive funding for illiquid securities? – Part II

(continued)

Here’s our favourite part from the FSB report. Read more

Do banks see ETFs as inexpensive funding for illiquid securities? – Part I

Recent trends in Exchange Traded Funds (ETFs) could create “potential financial stability issues” says the Financial Stability Board.

We say: about time someone stated the obvious. Read more

Delta one: the special ops of equity trading

FT Alphaville moderated a panel on “The rise and rise of Delta One” at the FOW European equity options conference in Amsterdam on Friday.

There was an excellent range of speakers representing a good slice of the Delta one industry in Europe, from market-makers to providers, to derivatives strategists. Read more

FT Alphaville/FOW take on optionality in Amsterdam

FT Alphaville has joined forces with Futures and Options World to bring you the latest news and skew from the European Equity Options Trading Conference taking place this Thursday and Friday in Amsterdam.

Volatility, options, futures, ETFs, Delta One, high frequency trading … you name it. We’ll be covering it. Read more

Sucden Financial turns its attention to Delta One

An interesting press release via Mondo Visione on Wednesday (our emphasis):

Sucden Financial has announced that it will be launching a new service geared towards institutions to capture brokerage opportunities in the Delta One and Equity derivatives and finance arena with effect from January 2011. Read more

Kauffman: ETFs are the problem, not HFT

Finally, a report that dares to outline the previously-taboo: Exchange-Traded Funds may pose a greater systemic threat to markets than high-frequency, or algorithmic, trading.

Writing for the Kauffman Foundation, a Kansas City-based private and nonpartisan foundation, authors Harold Bradley and Robert E. Litan lay the case out in a 86-page report on Monday. Both these guys have testified to the US Congress on things like market structure and financial crises, so they’re well worth listening to. Read more

Unintended consequences of a prop desk’s extinction

FT Alphaville attended an introductory course to securities lending and shorting the other day.

And amongst the interesting snippets divulged — especially in light of Michael Lewis’ recent article on the mysterious disappearance of prop traders — was a chart, from the International Securities Lending Association (which we’ve since been told we can’t show you). Read more

Delta One is the HOT new area for banks

FT Alphaville has written about the rise of Delta One and equity derivative divisions before.

But here’s further proof that banks are now increasingly setting themselves to profit from their Delta-One departments — divisions like the one Jerome Kerviel at SocGen worked forRead more

Overcoming the Volcker rule, with ETFs

We heard last week how Goldman Sachs was taking its prop trading over to the asset management side of its business, in a bid to outmanoeuvre US financial reform’s use of the Volcker rule to clamp down on in-house risk-taking.

Compone accomoda supera – improvise, adapt and overcome, so to speak. Read more

Did Socgen use ETFs to liquidate Kerviel positions?

Jerome Kerviel stood accused by Société Générale of taking mass positions in DAX, CAC and Eurostoxx futures; positions which the bank later had to liquidate at a well publicised cost of €4.9bn over the end of January 2008.

However, in all the coverage generated there has been scant mention of the fact that Kerviel’s responsibilities on the Delta 1 desk included the trading of Socgen ETFs (as marketed under the Lyxor brand name). Or that Lyxor CAC, DAX and Euro Stoxx 50 ETFs were impacted disproportionally over the liquidation period. Read more