IMC is trading for size. Against IMC.

48 comments / July 5, 2010

IMC’s trading business is growing rapidly down under. It has taken the zero sum game of derivative trading to a distinct higher level. The company has been buying derivatives from itself in six months in 2007. Agreed, at times it’s useful to mark the last traded price in your favour so it looks your big position is doing well. However, the exchange isn’t particularly happy with you trying to manipulate the market.
The exchange of Australia, ASX, has found evidence of IMC trading against itself for an astonishing number of 9705 times between February 1th and September 14th in 2007. Over nine thousand times of selftrading, that’s more than an occasional junior trader “defending” a position. Last month the exchange tribunal fined the company for $85.000.
All the trades occurred when an algo trading system traded actively against the market, including the market maker unit of IMC. For some reason this innocent explanation of IMC doesn’t sound like the whole story. Don’t exactly know which prices have been manipulated, but the high number of selftrading and the sudden stop in September suggest something else. The lawyers advised IMC not to contest the malpractice, which was apparently highly appreciated by the ASX tribunal. On the other hand, a $85k fine is small change for IMC but still a lot when it’s really a matter of innocent different systems doing occassional trades with other company units.
Anyway, ASX believes IMC Pacific didn’t do it on purpose and no investor got hurt during the party (right). Let’s fine them for $8,75 per selftrade. That will teach them. In the meantime, rival market maker Optiver in the Pacific earned the 35th place in the most wanted employers in Australia in Business Review Weekly last month.

Weekly options for Mittal, ING and R2D2

29 comments / June 29, 2010

The weekly and daily options on the AEX index are extremely popular, and Euronext decided to have a go at weekly options in the equity single stocks. Onwards from July 16th we will be trading weekly’s on Mittal, ING and Royal Dutch Shell (RD). The basic idea is pretty similar compared with the AEX weekly options. However, there are a few small differences.

Just like in the index, the weekly options in the single stocks won’t be just a new maturity in the regular options. It will be a separate class, called 1RD, 2RD, 4RD and if applicaple 5RD – with the number for the first friday, the second friday etc. For obvious reasons there won’t be a new class for options expiring the regular third Friday. Except some extra useless series in expiration week, though.

The reason for introducing these weekly’s as a separate class isn’t to bully investors (who can’t roll over their positions with simple time spreads). Systems at several institutions monitor options with a four digit maturity code (“1212” for Dec ’12) and hence lack the flexibility to include the weekly maturity schedule. Sounds like the Y2K problem.

The weekly options for 4MT, 4IN and 4RD will commence 16th of July with 11 strikes each. The strike interval will be in small steps. Take ING for instance, it will have five strikes around the at-the-money with a 10 cent interval, and three more strikes on the upside and the downside with steps of 20 cent. A larger strike interval for higher stock levels of course.

We will witness tight spreads, low absolute values and regular early exercise options. Nice as well are the dividend games to be expected a few times a year. All current liquidity providers can join as primary market maker in the new classes. There won’t be any competitive market makers selected.

Hard to say whether or not this single stock options will become a success. For retail investors the transaction costs are killing them with these low priced options. They need a real home run to make some profit. Euronext should have cut the transaction fees for investors to bring this 4MT, 4IN and 4RD markets alive.

Riots against financial transaction tax in Toronto

33 comments / June 27, 2010

The G20 summit in ever peaceful Toronto has just finished. The undefined group of nations decided not to agree on anything special, so far so good. There was a serious risk at stake for the trading community. Angela Merkel and a few other presidents of countries knocked out of the world cup pitched the idea of a financial transaction tax.

Difficult to understand

Popcorn hour at VDM

25 comments / June 20, 2010

After Van der Moolen’s the garage sale last winter, most of us expected this firm to vanish from the daily news. Could be an interesting textbook case of a company inadequate to adapt itself to the a new climate, with some curious human interest side stories. While the court investigations are ongoing into the board’s mismanagement, some small news has already been released.

Den Drijver versus VDM Liquidators versus Zwart

First of all, the ousted CEO Richard den Drijver suddenly appeared back on stage – and he surprised the world by talking. He gave a short interview. His message wasn’t anything new, the company was in perfect shape when he was forced to leave and he blames the advisory board for the collapse of the firm. Especially Peter Zwart, his successor, was guilty for ruining VDM with requesting the financial watchdogs to raid the firm. My bet is this Den Drijver actually believes his own theory. Then a strange thing happened which is in big contrast with virtually everything written on this website and all official newspapers. The official lawyer and accountant cleaning up the mess confirm Den Drijver has got a point. “Zwart told me himself he invited the financial watchdogs to raid the house”. Peter Zwart denies “that’s bullshit, never requested for any raid at all. We didn’t ruin the company in three months, that has been done in the years before”. I assume the liquidating accountant and lawyer (Gelderloos and Schaink) have been misquoted, and put my money on Peter Zwart. Speaking As someone mentioned in the comments elsewhere on this website, in the Worldcup betting poule of former VDM employees RDD is leading the pack. Visiting the foreign football in Spain paid by the company certainly pays off! (and no, don’t seriously believe it is the real RDD playing. Nice subleague name though.)

The angels of Avalon

With everyone disagreeing with everyone, let’s move on to someone else who absolutely does not agree at all. Enter the company Avalon Media Group, or AMG for friends. Avalon borrowed 6 million euro from VDM in 2008, partly to payback a loan from Avalon to Hans Kroon. It’s a perfect mess with Hans Kroon acting in the advisory board of Avalon (well, according to their website before the press discovered it) and his son Gaby Kroon tied to the same firm. The administrators of VDM reclaim their money with interest, amounting 7,2 million. Because of some alleged hustle with legal entities, other private companies from the director have been seized and a private home has seized as well. These liquidators really bite. (source : fd.nl)

Avalon even hired a well-known Dutch spindoctor, Charles Huijskens, to handle the press. A good read is their highly unbelievable explanation of their view of the story with VDM. They developed a trading platform in stocks and options for the iPhone, a television channel and internet. Especially the iPhone platform must have been way ahead of its time, as it was finished a year before the iPhone itself was released by Apple. Anyway, the AMG / Avalon family claim 10 million from VDM. Feed for the shredder.

IMC founder Schelvis buys a new car

71 comments / June 9, 2010

Rene Schelvis just bought a brand new car, quotenet (nl) reports. Together with Rob Defares he has founded IMC back in the old days of the open outcry trading. Schelvis was known for being the cautious one, whereas Defares had more appetite for risk. Schelvis sold his 30% stake in IMC to Wiet Pot in October 2007. With an estimated net worth of 50 million euro he entered the Quote 500 rich list on place 471 in 2009.

Full tax for the Lamborghini

His new Lamborghini Murciélago LP670-4 SuperVeloce is a true supercar with a corresponding price ticket. Schelvis paid €510.736, of which €158.674 of the high Dutch tax. Escaping this car tax is possible by using a foreign license plate – but that would give too much hassle. Fans are excited to see this SuperVeloce cruising through the streets of Amsterdam. A few have even been taken for a tour by Schelvis.

Supersize spoiler, for the sound

There’s just one little thing. To create a better sound, Schelvis had the car tuned with an extra size spoil-er. Fans aren’t very enthusiast about the Reiter tuning. See for yourselves.

Amsterdamtrader