The one lot trader in the index

123 comments / March 24, 2010

Sometimes there’s a serious news story on the Amsterdam derivative markets. Developments within trading firms, stockexchanges or some legal wars. This time it’s a little different. There’s nothing I have but question marks. Received some mail with questions on the one-lot-trader who’s dominating the AEX index options market in the front months, as well as the weekly and daily options.

Apparently some algorithm trader is having an ultrafast piece of software hitting and lifting orders with an electronic eye. Odd enough, it’s executing its trades with a size of just one lot – but at such speed it seems to be dominating the market. Transactions are filled with partial trades.

Nobody has yet been able to figure out what, why and how they’re doing it – and who it is. One could argue if it works for one lot, it could be done for a bigger size as well. But that doesn’t really seem to matter as the one-lot-trader captures a high market share anyway. At least some readers should know what’s going on – enlighten us in the comments!

Decreasing tick sizes

74 comments / March 9, 2010

Euronext announced today to slash the five cent tick size area. Beginning next month on April 1st, all stock options with a value below 50 cents will be trading with a tick size of one cent. This means a market of 0.47 – 0.48 instead of the current 0.45-0.50. The index options will remain unchanged.

At first this seems to be good news for retail investors, as the spreads will narrow. However, Euronext is still reluctant to lower their profit margin and maintains the transaction fees for retail investors and professional traders at high levels. A new trading environment is only for the others.

The exchange hopes to boost trading volume and pocket some extra profits. With the evaporating margins the transaction fees being paid to Euronext should definitely get extra attention. Euronext is very terribly expensive and the share of the profits taken by the exchange is very large when the spread is only one cent. Maybe it really takes another exchange for Euronext wake up and introduce competitive fees.

This so-called Premium Based Tick Size (PBTS) will have some more consequences. First of all, being a liquidity provider and quoting all the series will be a lot less attractive. This could eventually knock out some smaller market makers out of competition – or they will become market taker only. Quoting these kind of narrow spreads will require state-of-the-art technology with fast connections. Something which may be impossible for the small firms.

The art of firing at IMC and All Options

95 comments / March 3, 2010

There’s a good reason not to laugh at your former fellow traders being fired. You could be next. Especially when you’re working for IMC. After sacking two traders on bonus day, an additional twelve traders were shown the door. Management doesn’t escape from the cost cutting efforts neither, as the Hong Kong and Sydney offices are centralised under one management now.

One must admit IMC has developed a certain routine in firing their employees. Employees with a track record longer than five years make up for a just little more than 5% of the total staff.

All Options on firing spree

IMC isn’t the only trading firm letting people go. All Options has been trying to lay-off dozens of traders and support staff after the take-over of Saen Options. During the fall of 2009 results were pretty bad, bonuses were terminated and large numbers of employees were told to leave.

Economic reasons required

Here’s the funny part. Amsterdam is part of the Netherlands (really), and in this country it’s rather difficult to fire people at all. You’ll need a permit of the local government agency called the UWV, and explain the reason for firing people. If you have a good reason, you can proceed with the legal stuff in court. Give ‘m some money (say, 1 month per worked year for your firm) and you are done. When you’re trying to fire people because you’ve found other people to do the same job for less money – the government will generally show you the finger. You really need true economic reasons to cut staff.

UWV says “no”

And surprise, the UWV gave All Options the finger and didn’t grant a permit to fire people. It accused All Options to be cooking the books and the firm couldn’t come up with any economic reason. To worsen things for All Options : they face a court hearing for mishandling the labour rights of 100 employees.

One permit granted

A failed firing spree means continue paying the salaries, and take people back. Maybe All Options could persuade them to leave voluntarily, but quitting your job voluntarily means no unemployment benefits. Generally it’s wise to stay nice and as a trader avoid any signs of a “disturbed relationship” ; which could a viable reason to fire you. The firm will have to bleed. The one in charge for firing everyone, is now fired himself. Guess it wasn’t a problem to get a permit for that..

Jobs stil available

Anyway, still jobs available at IMC and All Options!

Van der Moolen’s garage sale

201 comments / February 24, 2010

The big auction of Van der Moolen’s possessions in January was a big success. The proceeds did amount €400.000. Which was more than expected by the administrator. In part this may have been caused by former employees. Maybe overpaying for the computer equipment. The involvement of former VDM traders has been confirmed by the administrator.

Picture of Hans Kroon

A lot less media exposure was given to the second auction, ending a couple of days ago. The most valuable asset in the auction was the large painting of Hans Kroon. This piece of art was sold for a tidy amount of 245 euro. Sadly enough, I’ve missed this great buying opportunity. The question is, who is the lucky buyer? Hans Kroon himself? Avalon Media Group? Or did Richard den Drijver bought it as a birthday present for his former partner-in-crime? Perfectly willing to pay ~~250~~ 300 euro for this masterpiece.

Missing objects

More interesting than the assets auctioned, are the missing goods. Nobody has ever seen the painting with the VOC ships again. After some research there appears to be something wrong with the traditional Mercurius statues, too. Two of them were sold in the first auction, correct. But the company had three of those statues. The third one ended as souvenir above the fireplace in the living room somewhere. Maybe next to the golden windmill, which also remains missing.

You’re fired, IMC style

111 comments / February 8, 2010

Firing people is never easy. Especially when you still want to feel good about yourself, and keep the other traders happy and confident. Scores of books are written on the fine art of laying people off.

Trading firm IMC doesn’t need any advice for firing people. They’ve found a perfect way to get rid of traders. Last year a few dozen traders and support staff were told to leave by surprise.

They have been fine tuning their approach to reach maximum effect. On the exciting day the bonuses were to be announced, two traders received a completely different message. “Your bonus over 2009 is… hey, guess what – you’re fired!”. Sounds too sadistic to be true. Some kind of urban legend. Strange enough, it appears to be completely true. The traders weren’t trainees, but experienced traders with a credible track record. This really seems to be the way IMC is treating their employees. Curious to know how management communicates this to their traders.

There’s a very good reason to be a reliable employer in the trading business : You reap what you sow.

Amsterdamtrader