ABN Amro had “employed two former employees of S&P” to learn the agency’s methods, the judge said. It knew, for example, that for S&P to give the derivatives the top rating, its models had to show a likely default rate of less than 0.728%.
Category: Economics
Getting to Normal
The de facto default by Greece early this year ended investors’ complacency. The government bonds of peripheral eurozone countries thus became toxic. Given the unprecedented nature of the Greek default, the market valuation of peripheral debt has been fluctuating widely, still searching for “fundamentals,” such as deficit or debt levels, that could explain the evolution of risk premia over time.
Mysterious Algorithm Was 4% of Trading Activity Last Week
Translation: the ultimate goal of many of these programs is to gum up the system so it slows down the quote feed to others and allows the computer traders (with their co-located servers at the exchanges) to gain a money-making arbitrage opportunity.
Quote Stuffing in Michael Kors Holdings ($KORS)
On February 14, 2012 at 10:48am, someone stuffed KORS with quotes from multiple exchanges at rates exceeding 18,000 quotes/sec. What is the purpose of blasting hundreds of thousands of quotes to millions of computers around the world in a single stock that had a few hundred trades at the time? Why is this tolerated?
To Regulate Rapid Traders, S.E.C. Turns to One of Them
With the Tradeworx program, the agency will gain access to every bid to buy stocks and every offer to sell shares on each of the nation’s 13 public exchanges. The system, akin to an X-ray machine for the stock market, could enable regulators to detect whether trading firms are overwhelming the market’s plumbing when they rapidly submit and cancel orders.
Abnormal Capitalist 