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Regardless of the actual exposures, multiple failures of system-forming banks it definitely might. A scenario that comes to mind is when some stuff on their balance sheets goes bust - e.g. if some big borrower like Italy goes bust.

No, that's not what I am saying. I am saying exactly what I am saying, but let me go over it once more. Netted risk exposure between counterparties,as opposed to adding up all of the notionals, is the right way of looking at this risk . Imagine that I pay you 2.5% in a 10 year USD interest...

LOL, yes. What's your point? For starters, reread what I wrote (reading comprehension is an important skill, even for a thinker :D). Then, instead of copy-pasting some pseudo-educated crap you found on the internet, try to understand the difference between gross notional and netted MtM exposure.

Just to add my 2c. * Bloomberg has institutional data package going back to the mid-2000 and it's pretty good. Very expensive, though, as licenses start at mid-six digits. * The institutional standard is the Thomson Reuters Tick History. Not cheap.

I am sure you know better, but do you mind elaborating?

That looking at gross notional of OTC derivatives is silly (netted exposures is what matters). For example, a billion dollars in 2s/5s spread option is much less risk than a 100 million in 30 year interest rates swap. Both interest rate products, so they fall in the same category.

Dude, it simply prevents faster arbitrage players from aggressing on the slower passive players. If anything, the delay would reduce negative selection and should improve liquidity.

Lemme get my popcorn as this is going to be a bonfire of ignorance.

Matt (being a bona fide HFT person, FWIW) has been ranting about speed bumps for a while, but it's not always applicable. In this particular case, they are delaying aggressive orders only but the passive trader will not be notified of the incoming aggressive order. It's pretty clever, as they...

I think we are describing the same thing. It's an SMA that takes 45-ish percent of profit in exchange for the leverage with you pledging the first loss. Coincidentally, I am meeting one of these guys today and will ask what was his motivation for using this setup years ago. Also, as you said...

Usually it's 8-10x leverage, as long as you avoid instruments that are inherently leveraged like futures. I know a few people that have used first loss money at the inception of their funds, but not via any commingled program. The way it was described to me it looks like a regular SMA but you...

I am not aware of anything like that and there are good reasons why that model would not work. Now, if want the economy of scale that comes with large AUM, you kinda have two choices (neither is very pleasant). You can take first-loss money to pad your AUM - scary but effective and you gain the...

Oh, trust me - there is a big difference between running a few hundred thousands and several hundred millions.

I wish they tried something that's related but not identical (e.g. maybe an index based on ATM volatility?). Also, not having a delta-one product makes it rather difficult to take it seriously. What's verdict? :P

LOL. IMHO, it's gonna be DoA. Zero innovation, this is just a futile attempt to take liquidity away from CBOE/CFE.

How the f*ck do they expect people to make markets on these options without a market in the underlying?

So, what do you think chances are for this thing to actually get any meaningful liquidity?

Exactly. Also, just like a trader, there are days you get fucked more than you'd like to.

I am not pretty enough to have worked as one, if that's what you are implying :P On a serious note, I did know a few people "in the business". Way back when I was in college I was sharing an apartment with two young ladies both of whom were in the trade. Lemme tell ya, it's not as glamorous as...