6 ms·
There are other reasons, but the analogy is, to me, obviously inapplicable. Not quite. Use your example of a large block trade. * Because it is incredibly exp
by 001sky 13y ago
There are other reasons, but the analogy is, to me, obviously inapplicable.
Not quite. Use your example of a large block trade.
* Because it is incredibly expensive: check
* Because the B/D agmt usually has conditions: check
* Because the execution is provided after all the details of the trade/'s financials: check
* Because the ruthless withdrawal of a term sheet could put the [trader's book] in a distress situation that harms their ability to obtain [another execution]: check.
- tptacek 13y agoNo, you "checked" these by moving the goalposts. Obtaining funding is incredibly hard. Each individual term sheet is also incredibly hard. Shopping a block is hard. Posting a limit order is incredibly cheap, cheaper than it has ever been in human history. Failing to execute also doesn't make posting a next limit order more expensive.
- 001sky 13y agoWhat I outlined above is why your BD acting in bad faith is illegal under the securities law. It's not even a grey area. Put your security research hat on for a moment. The "other side" of the trade wants to get the info subject to BD confidentiality (pt 2) and the exploit them (pt 3,4). When your BD does this it is expressly illegal. This has a name but mentioning it here would just confuse the issue. The question is this: what tools are available to this "other side" that would put the NPI in the hands of the "other side" but not divulge it more broadly? Would a bad-faith offer to do a ("sweet") biz deal be good enough bait to social engineer selective disclosure? Unless you can rule this out technologically, you have to rule it in for consideration. It's best not to get sidetracked on whether the divulged info is legally NPI or PI (just yet) and look at it purely from a pragmatic perspective like a security credential. The BD either has it under control or not. And is it physically possible in terms of bits to have selective disclosure? And if it is does the pretext matter? Make no mistake: the BD cannot hide if he abuses the information directly. He's like an authorized user. The issue is what level of authorization you give the counter-party and how to protect its abuse. The technical details and legality of pretexting security credentials is something I'm sure you could speak authoritatively to. I'm only using it as an example here for illustrative purposes.
- tptacek 13y agoCanceling an order isn't "illegal under the securities law". In fact, neither is backing out of a term sheet.
- 001sky 13y agoBD == your agent, has fiduciary duty to you...etc "When executing trade orders on behalf of a customer, the institution is said to be acting as a broker" https://en.wikipedia.org/wiki/Broker-dealer https://en.wikipedia.org/wiki/Broker-dealer
- tptacek 13y agoNobody you are talking about in either scenario is doing that.
- 001sky 13y agoExplain 'nobody', 'scenario' and 'that'? This sidebar conv. seems to be degrading a bit. General comment: I think you are over simplifying the P&L of a trader. The HFT stuff impacts hedging costs. And the ability to solicit grey/NPI. Note they are not urelated. Also, if you just look at bid/ask and Volume...you never see the $$ value of this. Las comment: the so called: "profit guarantees" just means perfectly hedged trades with no ∆ (net exposure). its not literal its a simplification yet directionally correct.
- tptacek 13y agoWith all due respect, this discussion is degrading because you've responded to each of my comments with a non-sequitur. I write responses to you with zero hope of us coming any closer to shared understanding; I have the feeling less of building anything interesting in these discussions, but instead of having taken the bait.
- 001sky 13y ago