Posts tagged 'internalisation'

Internalisation as the last great collateral financing unknown

We’ve been harping on about the rise and importance of the central execution desk and internalisation practices more generally for a long while.

But we haven’t touched the topic recently because, well, banks and concerned parties tend not to enjoy discussing it very much. 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

Banks as volume gobbling monsters

Tabb’s latest statistics on US equity volumes are really raising some eyebrows, and not just because of the share of trade heading to the old bogey man the “dark pool”.

Nope. We’re talking about the share being gobbled up by banks and broker dealers direct. Something known as “internalisation”, and discussed at length on FT Alphaville before — something we’ve referred to as dark inventory. Read more

The power of the dark inventory

FT Alphaville is reading Robert Harris’ The Fear Index at the moment, and would like to take this opportunity to recommend it as required reading for anyone who enjoys a good Jason Bourne style adventure, especially when set in the context of modern market meltdowns.

Though, it’s actually come to inspire the plot to our very own action-packed markets adventure, one we’re calling “Dark inventory: The ultimate financial frontier.” Read more

NYSE Euronext’s bizarre internalisation U-turn

US market structure watchers may have noticed something very interesting occur this week.

On Oct 12, the NYSE Euronext filed a proposal to the SEC to create a new “Retail Liquidity Pilot Progam“. According to Joe Saluzzi at Themis Trading, this can best be described as the NYSE Euronext’s very own “internalisation” programme. 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

Some smart – but conflicted – routers

A block trade, born in a US-based pension fund, is traveling the electronic execution highway.

The trade — let’s call him Benny — is sent to the fund’s broker for execution. That broker, now sitting in his office in New York, has a number of options when it comes to Benny. He can send Benny to an exchange like the NYSE or attempt the trade over-the-counter. Or he can send it to another division of the brokers’ own firm, to be filled using the company’s own inventory. He can internalise little Benny. Read more

The unequalizers

We spell ‘unequalizer’ with a ‘z’ in the title as an homage to Edward Woodward, (naturally).

Although, in this case, we’re actually referring to the new breed of internalising institutions on Wall Street and in Europe, which make a point of only redirecting orders to exchanges and alternative dark pools which have been unmatched internally. Read more

The non-role of internalisers during the flash crash

Themis Trading’s Sal Arnuk picks up on a really important point from the SEC-CFTC’s joint flash crash report published last Friday.

That being: the clear and demonstrable non-role played by broker-dealer/large market maker internalisation desks on May 6. Read more

A penny for the Freddie, Fannie guys?

On Wednesday, the Federal Housing Finance Agency announced it would de-list both Freddie Mac and Fannie Mae from the New York Stock Exchange.

As the FHFA stated, Fannie Mae’s closing stock price had been below the required $1 average price for the past 30 trading days. And so: Read more

All eyes on broker-dealer internalisation

While the issue of dark pools and electronic communication networks (ECNs) has fetched a fair share of attention in the media, a little less scrutiny has befallen the SEC’s other area of concern — the practice of broker-dealer internalisation. Public comment on the topic, however, has been increasingly focusing on the issue of internalisation and sub-pennying, reports FT Alphaville. Read more