7 ms·

I have a hard time drumming up sympathy for these guys. They're mad because they couldn't make a quick buck. Isn't a hedge fund just gambling? It's high time

by dos1 14y ago

I have a hard time drumming up sympathy for these guys. They're mad because they couldn't make a quick buck. Isn't a hedge fund just gambling? It's high time Wall St. learns that it's never a good idea to put more in the pot than you can lose. The part that is most striking to me is that share price and a company's intrinsic value are seemingly in different galaxies. This guy is talking about decisions based on hype. I'm floored. Do these guys really trade based on public opinion?

sp332 14y ago
You go to Vegas and put $5,000 on the roulette wheel and it breaks, it's like, hold on, I'm not going to do that. I like this analogy. You want to play the market, fine. But if NASDAQ breaks, is that really part of the game?
- zackzackzack 14y ago
  If they signed a legally binding agreement, then I imagine NASDAQ breaking would be part of the game.
  - veyron 14y ago
    The contracts absolve NASDAQ of liability in calamities of this nature (my business was almost destroyed -- had to take a 250K loss -- thanks to an order entry server failure), but it doesn't make you feel better. Having had something similar happen to me, I know how much it sucks. You accept its a possibility, but don't really believe it will happen until it does.
    - joering2 14y ago
      I am sorry about you loss. The frustration must be tremendous, especially since we know the fault was so clearly on their system's part. How can you make $400MM (last year) and yet cannot come up with robust bullet proof transactional system, no idea.. Ain't that vicious on their part that the rules of game change when there is no other place to "gamble". Bet this 2648 (or whatever rule # it is) would not stand a chance when NASDAQ just started, but now it is "play with us or don't play at all". Ps. Do you think there is any business behind being a "trade insurer"? Similar to car accidents, every high volume trader would be given an options to be insured up to X amount by paying substantially smaller Y fee.
    - bbrtyth 14y ago
      But then why do exchanges feel free to reverse trades after the flash crash, but not after something like this flash freeze? From a non-trader's perspective it's as if they do whatever they like.
      - luriel 14y ago
        It might look like they do whatever they like because pretty much they do whatever they like.
  - sp332 14y ago
    It depends on the agreement, and whether the NASDAQ guys could reasonably have known there was going to be trouble. I'm pretty sure that agreement only covers unforeseen problems, so if they knew something was funky, they might be liable for a lot more than $3MM.
  - TimGebhardt 14y ago
    If you're a small fry then your broker will probably assume the risk. If you're a big guy, like it sounds like this guy is, then he should know he assumes the risk. Buying and selling in a market carries some credit/counterparty risk. NASDAQ probably handled this poorly (Seriously, did they ask traders to be honest and self-report their trade executions as part of the official books of record?!?!), but this guy's fund will be on the hook until it all gets settled out if it does at all. EBay's an open market with buyers and sellers and people just take it for granted they'll get screwed by EBay/PayPal at some point in their lives. I understand that there is probably more at stake in the NASDAQ than on EBay, but their Risk/Compliance department should have advised the principles of his fund to hold some capital off to the side for a situation like this.
- philwelch 14y ago
  In fact, if an actual casino fucked up due to technical glitches, I think legally it's on them to fix it.
  - mcherm 14y ago
    Nope.Vegas law says casinos are not liable for technical errors. There have been cases of slot machines setting off the giant "You Win Millions" buzzer but not getting it.
    - sp332 14y ago
      But if the roulette wheel is broken so that the ball occasionally flies off, and the casino just says "ok, everyone loses" I don't think that would stand.
      - mcherm 14y ago
        True. But in this analogy, I hardly think you can claim "everyone loses".
    - Spoom 14y ago
      I'm curious; what's to prevent a casino from saying that prizes were actually technical errors whenever it was convenient to them?
      - joezydeco 14y ago
        If the casino believes that the machine has been corrupted or is broken, they call in the state's gaming commission which is supposed to act as an independent technical 3rd party. The machine is inspected and it's code compared to a known registered checksum. Casinos can say "technical error!", but there is an advocate for the player in this situation. Usually. (Avoid Indian casinos in the USA for this reason).
veyron 14y ago
He is complaining because he was sandbagged. He didnt know what his position was, and NASDAQ and MS both dropped the ball here. You can vilify hedge funds till kingdom come, but it sounds here that this guy played by the rules and lost due to a circumstance that he didn't believe was fair. If the opposite happened (price spiked) yet the same technology problems happened, you'd have a bunch of people complaining that they were over or under filled. The complaints would not be justified if there was no confusion on his position.
- AznHisoka 14y ago
  Problem is there's no rules. Noone got in any legal trouble over at NASDAQ. People do insider trading without getting caught. It's a rigged game.
  - joering2 14y ago
    +1. And also - am I the only one visiting this article and thinking this is quite hilarious: "yahoo! fantasy finance, a stock trading game".
  - marshray 14y ago
    I'd say former Nasdaq chairman Madoff got himself in a little legal trouble, though perhaps that was after he left Nasdaq.
- minimax 14y ago
  What gets me is how mysterious it sounds, when there is a ton of obvious troubleshooting that should have happened... and probably did but I can't find reported anywhere. Hedge fund places order. NASDAQ returns an order id. Did that order show up in the market data feed? Did they see that order get hit on the market data side? Did they get an order accept? Did they try to cancel? What happened when they tried to cancel? What actually happened? Did the orders really just get accepted and then go into a black hole?
  - joezydeco 14y ago
    Black hole sounds about right. Apparently NASDAQ's systems went completely quiet for 17 seconds centered around the 11:30am open of Facebook: http://www.nanex.net/aqck/3122.html http://www.nanex.net/aqck/3122.html
seanalltogether 14y ago
> Do these guys really trade based on public opinion? What is the stock market if not a giant popularity contest? Real investors make deals with companies, stock buyers are just hoping to catch the right wave.
elorant 14y ago
What did you really think, that those guys are magicians who can trace trends and predict the future? Some may be but the vast majority isn't. The whole notion of markets is largely based on psychology.
hef19898 14y ago
Yeah, these guys are funny. One day they agressivly take over companies. And the other day, as it happened with VW stock in Germany, the sue others when their gambles don't work. What I remeber from the VW stock story happened back then was the following. Porsche tried to take over VW, so they bought every stock they could. Hedge funds bet on falling values and sold VW stock short. Since Porsche continued buying, stock prices raised. Then the hedge funds had to buy the stock short selled, values raised further (up to 1k € if I remeber well). The result were funds obliged to buy stock for almost 1K they sold earlier for a fracture of that. And after that they sued Porsche for stock manipulation. Yes, these guys are funny. And yes, that FBs IPO stumbled over a computer system is ironic!
- brazzy 14y ago
  VM was a very special case, since most free floating stock is non-voting (I think this has since changed); at that time only about 6% of the voting stock was free floating.

by dos1 14y ago

sp332 14y ago

You go to Vegas and put $5,000 on the roulette wheel and it breaks, it's like, hold on, I'm not going to do that. I like this analogy. You want to play the market, fine. But if NASDAQ breaks, is that really part of the game?

zackzackzack 14y ago
If they signed a legally binding agreement, then I imagine NASDAQ breaking would be part of the game.
- veyron 14y ago
  The contracts absolve NASDAQ of liability in calamities of this nature (my business was almost destroyed -- had to take a 250K loss -- thanks to an order entry server failure), but it doesn't make you feel better. Having had something similar happen to me, I know how much it sucks. You accept its a possibility, but don't really believe it will happen until it does.
  - joering2 14y ago
    I am sorry about you loss. The frustration must be tremendous, especially since we know the fault was so clearly on their system's part. How can you make $400MM (last year) and yet cannot come up with robust bullet proof transactional system, no idea.. Ain't that vicious on their part that the rules of game change when there is no other place to "gamble". Bet this 2648 (or whatever rule # it is) would not stand a chance when NASDAQ just started, but now it is "play with us or don't play at all". Ps. Do you think there is any business behind being a "trade insurer"? Similar to car accidents, every high volume trader would be given an options to be insured up to X amount by paying substantially smaller Y fee.
  - bbrtyth 14y ago
    But then why do exchanges feel free to reverse trades after the flash crash, but not after something like this flash freeze? From a non-trader's perspective it's as if they do whatever they like.
    - luriel 14y ago
      It might look like they do whatever they like because pretty much they do whatever they like.
- sp332 14y ago
  It depends on the agreement, and whether the NASDAQ guys could reasonably have known there was going to be trouble. I'm pretty sure that agreement only covers unforeseen problems, so if they knew something was funky, they might be liable for a lot more than $3MM.
- TimGebhardt 14y ago
  If you're a small fry then your broker will probably assume the risk. If you're a big guy, like it sounds like this guy is, then he should know he assumes the risk. Buying and selling in a market carries some credit/counterparty risk. NASDAQ probably handled this poorly (Seriously, did they ask traders to be honest and self-report their trade executions as part of the official books of record?!?!), but this guy's fund will be on the hook until it all gets settled out if it does at all. EBay's an open market with buyers and sellers and people just take it for granted they'll get screwed by EBay/PayPal at some point in their lives. I understand that there is probably more at stake in the NASDAQ than on EBay, but their Risk/Compliance department should have advised the principles of his fund to hold some capital off to the side for a situation like this.
philwelch 14y ago
In fact, if an actual casino fucked up due to technical glitches, I think legally it's on them to fix it.
- mcherm 14y ago
  Nope.Vegas law says casinos are not liable for technical errors. There have been cases of slot machines setting off the giant "You Win Millions" buzzer but not getting it.
  - sp332 14y ago
    But if the roulette wheel is broken so that the ball occasionally flies off, and the casino just says "ok, everyone loses" I don't think that would stand.
    - mcherm 14y ago
      True. But in this analogy, I hardly think you can claim "everyone loses".
  - Spoom 14y ago
    I'm curious; what's to prevent a casino from saying that prizes were actually technical errors whenever it was convenient to them?
    - joezydeco 14y ago
      If the casino believes that the machine has been corrupted or is broken, they call in the state's gaming commission which is supposed to act as an independent technical 3rd party. The machine is inspected and it's code compared to a known registered checksum. Casinos can say "technical error!", but there is an advocate for the player in this situation. Usually. (Avoid Indian casinos in the USA for this reason).

veyron 14y ago

He is complaining because he was sandbagged. He didnt know what his position was, and NASDAQ and MS both dropped the ball here. You can vilify hedge funds till kingdom come, but it sounds here that this guy played by the rules and lost due to a circumstance that he didn't believe was fair. If the opposite happened (price spiked) yet the same technology problems happened, you'd have a bunch of people complaining that they were over or under filled. The complaints would not be justified if there was no confusion on his position.

AznHisoka 14y ago
Problem is there's no rules. Noone got in any legal trouble over at NASDAQ. People do insider trading without getting caught. It's a rigged game.
- joering2 14y ago
  +1. And also - am I the only one visiting this article and thinking this is quite hilarious: "yahoo! fantasy finance, a stock trading game".
- marshray 14y ago
  I'd say former Nasdaq chairman Madoff got himself in a little legal trouble, though perhaps that was after he left Nasdaq.
minimax 14y ago
What gets me is how mysterious it sounds, when there is a ton of obvious troubleshooting that should have happened... and probably did but I can't find reported anywhere. Hedge fund places order. NASDAQ returns an order id. Did that order show up in the market data feed? Did they see that order get hit on the market data side? Did they get an order accept? Did they try to cancel? What happened when they tried to cancel? What actually happened? Did the orders really just get accepted and then go into a black hole?
- joezydeco 14y ago
  Black hole sounds about right. Apparently NASDAQ's systems went completely quiet for 17 seconds centered around the 11:30am open of Facebook: http://www.nanex.net/aqck/3122.html http://www.nanex.net/aqck/3122.html

seanalltogether 14y ago

> Do these guys really trade based on public opinion? What is the stock market if not a giant popularity contest? Real investors make deals with companies, stock buyers are just hoping to catch the right wave.

elorant 14y ago

What did you really think, that those guys are magicians who can trace trends and predict the future? Some may be but the vast majority isn't. The whole notion of markets is largely based on psychology.

hef19898 14y ago

Yeah, these guys are funny. One day they agressivly take over companies. And the other day, as it happened with VW stock in Germany, the sue others when their gambles don't work. What I remeber from the VW stock story happened back then was the following. Porsche tried to take over VW, so they bought every stock they could. Hedge funds bet on falling values and sold VW stock short. Since Porsche continued buying, stock prices raised. Then the hedge funds had to buy the stock short selled, values raised further (up to 1k € if I remeber well). The result were funds obliged to buy stock for almost 1K they sold earlier for a fracture of that. And after that they sued Porsche for stock manipulation. Yes, these guys are funny. And yes, that FBs IPO stumbled over a computer system is ironic!

brazzy 14y ago
VM was a very special case, since most free floating stock is non-voting (I think this has since changed); at that time only about 6% of the voting stock was free floating.