We all benefit when markets are regulated to protect us against fraud and other criminal conduct. Such protection reduces the risk of using markets, and so, it provides an incentive for market participants to take the limited risks of providing liquidity, and thereby reducing transaction costs. You are assuming, without giving any basis, that the IB Chairman's complaint about manipulation has no validity. Your philosophy seems to be that criminals, frauds, and manipulators should be permitted to run amok in our markets, without any restraints whatsoever, and that complaints against them should just be dismissed without any investigation or consideration. I think your position is totally unreasonable, and that if your policy were ever adopted officially, it would wreak havoc on financial markets and on entire economies.
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IB is Refco 2.0!
- Thread starter bsparkyman
- Start date
We all benefit when markets are regulated to protect us against fraud and other criminal conduct. Such protection reduces the risk of using markets, and so, it provides an incentive for market participants to take the limited risks of providing liquidity, and thereby reducing transaction costs. You are assuming, without giving any basis, that the IB Chairman's complaint about manipulation has no validity. Your philosophy seems to be that criminals, frauds, and manipulators should be permitted to run amok in our markets, without any restraints whatsoever, and that complaints against them should just be dismissed without any investigation or consideration. I think your position is totally unreasonable, and that if your policy were ever adopted officially, it would wreak havoc on financial markets and on entire economies.
IB would not complain about gain in case of being on right side of trade like it was planned. It is doubtful that they did not know about options calculation mechanism all the time, and apparently their trading system did not notify them about dangerous condition, and apparently this business of providing liquidity for options is very risky, though the probability of high risk is low. It looks like this is the situation of typical hedge fund when it gets in trouble, so what do they complain about and what law did company brake declaring special dividend before expiration?Quote from thrunner:
Options market makers gladly take your money when typically 80% of options expired worthless. It is interesting how they resort to lawsuits when they lose a position eventhough they are the ones setting the pricing of options.
IB had plenty of opportunity to hedge their position by buying the 25% sell off in AAA - they chose not to and took a hit. You can claim manipulation all you want when the trade goes against you but the bottom line is that there were good tax reasons for traders to unload AAA before the ex-dividend date and buy it back the next day. The 64% run up in AAA the next day was also the result of the panic buying on the part of IB and others after they neglected to hedge properly in the days prior to ex-dividend.The activity happened in shares of German company Altana (nyse: AAA - news - people ), which had declared a special dividend early in May to coincide with the sale of its pharmaceuticals division. On the ex-dividend date, 31 million shares, or about 44% of Altana's outstanding shares, crossed the electronic Xetra market. The price dropped 25%, pushing the price of the related options "into the money." Interactive Brokers, as a market maker for Altana, ended up on the wrong side of those trades, to the tune of $37 million.
Altana's shares recovered the next day, shooting up 64% after those who sold the previous day to avoid the taxes on the dividend payment bought up shares.
Interactive Brokers claims traders "unlawfully colluded" to manipulate the stock.
Quote from jimrockford:
IB Chairman Peterffy's act of covering IB's loss, in this situation, is ground for praise, not criticism and not suspicion. It short-circuits any conceivable accusation that IB's possible negligence harmed its shareholders.
Its interesting you say this above because the best line in the markwatch story was:
"As a practical matter, since Mr. Peterffy owns approximately 85% of Interactive Brokers, he would have been exposed to nearly as much of the loss if he had not purchased the claims."
Mr. Peterffy is actually buying just the other 15% of the lost. That little bit of the, % of the shares actually outstanding.
Quote from bsparkyman:
http://www.marketwatch.com/news/sto...x?guid={55C4F6E1-18FE-4145-B992-6E63005F808A}
another...seeking his 15 minutes of fame. you should find a more gullible venue.
i don't think you even understand the refco story.
present facts not insinuations.
Investors were frustrated by the clarity of the disclosures," Miller wrote. "We hope that in the future, management makes a stronger effort to communicate complex issues."
You all miss my point, by a mile. An overeaching CEO playing the cya card. This is a public company. Where was the board on this matter? Can the CEO personally buy and sell assets and liabilities of the company? And what are the covenants if he profits on the purchase of the liability? Not just this one but any.
It is a question of corporate governance and full disclosure.
You all miss my point, by a mile. An overeaching CEO playing the cya card. This is a public company. Where was the board on this matter? Can the CEO personally buy and sell assets and liabilities of the company? And what are the covenants if he profits on the purchase of the liability? Not just this one but any.
It is a question of corporate governance and full disclosure.
I am intrigued by the comment that TP purchased the claims so he can personally pursue them. Is this legal under German law? In the U.S., generally only insurers and lenders have subrogation rights. You may assign a claim, but not the right to sue to anyone else.
The other comment that the action frees IB from any claims of wrongdoing.... I don't know that those would be valid in the first place.
I think the lack of clarity in why the purchase was made, despite the fact that in does seem to clearly beneift IB shareholders viewed in isolation, is hurting on the communications front.
Oh, on the comment that 80% of options expire worthless -- MMs make money on the spread and want to offload risk as quickly as possible. Not from the 80% (or whatever) that expire worthless. As a matter of fact, most options MM are net long gamma, not net short gamma. Also, most MMs are unable to capture the full spread in aggregate bec MMs tend to make continuous markets by machine and are almost always the victims of inferior information on a particular underlying. Though again, in upsets me in this case when the multiplier adjustment is well known, that the risk wasn't correctly factored into the models.
The other comment that the action frees IB from any claims of wrongdoing.... I don't know that those would be valid in the first place.
I think the lack of clarity in why the purchase was made, despite the fact that in does seem to clearly beneift IB shareholders viewed in isolation, is hurting on the communications front.
Oh, on the comment that 80% of options expire worthless -- MMs make money on the spread and want to offload risk as quickly as possible. Not from the 80% (or whatever) that expire worthless. As a matter of fact, most options MM are net long gamma, not net short gamma. Also, most MMs are unable to capture the full spread in aggregate bec MMs tend to make continuous markets by machine and are almost always the victims of inferior information on a particular underlying. Though again, in upsets me in this case when the multiplier adjustment is well known, that the risk wasn't correctly factored into the models.
Quote from rayl:
Though again, in upsets me in this case when the multiplier adjustment is well known, that the risk wasn't correctly factored into the models.
One problem here is the multiplier adjustment. But the other problem has to do with thee 31 million shares sold at the close, and called "presumably prearranged" by Peterffy. You can be familiar with the adjustment....but how can you be familiar with a prearranged trade of 31 million shares?
OldTrader