mar2012

In the Mar 2012 issue of “Advanced Trading” magazine , I found these points worth noting down :

  • Gone are the days when you could take a prime brokerage account from Goldman/big Prime brokerage  and start your hedge fund. In Today’s world, launching a hedge fund is becoming harder than ever. You have to have the tech platform that talks to multiple primes , an ops team , at least two counter parties. Further compounding matters for new hedge funds are much more stringent compliance requirements
    than a decade ago. Under the Dodd-Frank Act, firms with at least $150 million in private assets under management will have to periodically file Form PF documents with the Securities and Exchange Commission. The Financial Stability Oversight Council will use those filings to gauge how much risk is flowing

  • CDS Futures, still a work in progress instrument . The irony is that after legislators and regulators spent years trying to convince the world that CDSs are evil and have caused everything from the credit crisis to the rising price for a cup of coffee at Starbucks, the rules they are putting in place to control the market in fact drive more rather than fewer people to take bets on creditworthiness.

  • Hedge funds are relying on cloud technology to for their tech needs. Case in point :  PVE Capital relies on cloud technology to power its operations in overcast London and in perpetually sun-blasted Malta in the Mediterranean just south of Sicily. The small macro credit fund manager, which has roughly 14 employees, including five traders, and manages an estimated $280 million in assets, recently adopted Options PIPE Core, a cloud based financial office delivery and support system from Options IT.

  • Swap Market poised for a BIG change : In a bid to prevent catastrophes such as Lehman Brothers’ $9 trillion interest rate swap default in 2008, lawmakers mandated that OTC derivatives trades be conducted out in the open, on swap execution facilities, or SEFs. Basically they are planning to bring the $600 trillion OTC derivatives market out into the open. So that means a huge opportunity is for Liquidity Aggregation tool providers

  • Does HFT hurt the markets? When you look at the number of offers and cancelations made each second of the trading day — we’re talking in the millions — the people with concerns don’t sound like Chicken Little. Industry observers estimate that HFT shops cancel a jaw dropping 95 percent of their offers only to make hundreds more in the next instant.

  • Regulators including the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission are struggling to keep up with and keep a grip on this warp-speed world. Keeping a tab on HFT is no joke as you need to be one step ahead of technology as compared to all the HFT shops. After the 2010 Flash Crash,CFTC commissioner admitted that  his group lacked a fundamental understanding of the new trading patterns being used in the markets.One of the reports say that they need a system that will take 4 Billion USD to build and additional 2 Billion USD annually.

  • Argument against HFT “liquidity” marketing slogan

  • High-speed trading leads to very high degrees of market fragmentation. Liquidity is only valuable when it can be aggregated and aggregated in a space where there’s very high transparency and regulation that allows capital and ideas to trade freely.This is why we have high profile exchanges located in major cities, such as New York, London and Tokyo.

  • What’s being proposed or debated for  “containing HFT” ?

  • HFT Tax on cancelled orders

  • HFT traders should hold to a trade for one full second

  • To get a better handle of HFT and what’s inside the algorithms, the SEC has also proposed requiring HFT firms to hand over their data and trading formulas for detailed analysis.