Quote from cohenmichaela:
1. This is an absurd question. It's equivelant to asking why throwing money away would matter to your profitability.
2. For the same reason as the answer to your first question. You're paying the B/A spread twice thus giving money to the MMs for no good reason.
You're instincts seem completely contrary to the goals of any trader, to make money and not give it away.
i am going to assume for a moment, without having read a single one of your past posts to confirm or deny who you may or may not be, that you are somehow related to SAC, or SAC himself. again, this is purely an ignorant assumption on my part, knowingly, so flame away God, this is your chance to attack.
if you are, then you've read this about SAC in businessweek, which i just read for the first time last night, curious to know something about this mysterious shark, other than what i've read about his art purchases, disgusting mansion, and generally vile reputation among, well, human beings inhabiting the planet as a greed mongering tyrant. you can't always believe what you read, and if the article's mention of SAC's charitable focus is true, then he must not be the scumbag the world portrays him. or at least, not as bad.
"Of course, Cohen usually makes nice with the Street. For example, former traders and rivals say one way he built his business and his relationships with brokers was by buying secondary offerings -- when public companies decide to bring more shares to market -- on which brokers receive around 40 cents to $2 a share on a built-in sales commission. "If you take down a million shares of a secondary, you've just paid your broker $1.5 million," says a fund manager. "That's how Stevie started off paying the Street."
http://www.businessweek.com/magazine/content/03_29/b3842001_mz001.htm
as for giving money away to market makers, it seems SAC has "mastered" that skill as well.
"In another tactic, Cohen and his core group of traders sometimes "take the Street," according to former traders. SAC buys large blocks of a particular stock through a handful of major brokers simultaneously in an attempt to clean out their inventories. Often, the big investment banks have to buy back shares on the open market to replenish the inventories they need to hold as market makers, thus causing a pop in the price. Says a former SAC trader, "Stevie can take 8 desks in 10 minutes. The more guys he has doing what he's doing, the more he can move stocks." Once the stock has risen, SAC might even sell the same shares back to the brokers, making a tidy profit. Sources familiar with SAC say the firm doesn't engage in the practice. Says Coffee: "There's nothing wrong with trying to clean out market makers to get a lot of stock quickly at a reasonable price. If a large hedge fund buys slowly, the word gets out and that drives the price up more."
as for commissions, i think this is self-explnatory:
"His firm routinely accounts for as much as 3% of the New York Stock Exchange's average daily trading, plus up to 1% of the NASDAQ's -- a total of at least 20 million shares a day. And while most of his rivals struggle to keep their trading costs down, "Stevie," as he's known on Wall Street, is one of the few to pay full freight. He hands over about $150 million a year in commissions to Wall Street, making him one of its 10-largest customers."
but i have to ask, why would a billionaire want to give his money away?
please, tell me.
i'm dying to read your answers to my questions, mike.
rb.
