Finally, a Dutch rogue trader

4 comments / October 7, 2015

Tim RemieA Dutch rogue trader has been busted. With many trading firms in the country, it was about time. France has Jérôme Kerviel, US has John Rusnak, Japan “Mr. 5%” Hamanaka and the UK has even two winners with Nick Leeson and Kweku Adoboli.

Thanks to Tim Remie, Holland is on the map again. He allegedly created trading losses with unauthorized gambling, accumulating to at least $200 million for his employer Nidera. The Rotterdam based grain trader firm lost it on mr Remie’s biofuel rogue trading positions.

WSJ reported mr Remie had “another side of the story”. Nobody has yet discovered what his story is. There have been some rumors of a more complicated story than plain simple rogue trading. After all, losing $200 million on rogue trading in the Nederlands can’t be true, can it?

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How the NSA financed Atlantic cable for HFT

5 comments / October 6, 2015

Kabeltje leggenThere’s a new episode in the speed race among the top HFT shops. The Express cable under the Atlantic ocean by Hibernia Networks is finally finished. It has taken years longer than expected, but now it’s pretty fast. It takes 59.5 58,95 milliseconds for a round trip across the Atlantic ocean. That’s six milliseconds faster than the former speed king, the Atlantic Crossing 1 line of Level 3 Communications.

As usual, time is money. The high speed cable rent will set you back for $20 million for five years. That’s $333k per month. A slower version (62,5 ms) is only $35k a month. The 59.5 line (which is in reality 58.95) is guaranteed by Hibernia. If they fail to deliver, you’ll get your money back.

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DeGiro ignores the elephant

27 comments / September 29, 2015

Elephant in the roomDeGiro’s response to the previous post on matching client flow to their own hedgefund was a 3 page long pdf. While ignoring the big elephant in the room, they had some valid points too. And some nonsense.

Counterparty risk

Valid points first. When your broker collapses, your position in derivatives isn’t secured nor guaranteed. Whether the transactions are executed on exchange or matched inhouse, this doesn’t really matter. When your broker goes down, you’re screwed with derivative positions. This applies to any broker, not only DeGiro.

The Central Counter Party (CCP) is safeguarding firms higher in the hierarchy, such as ABN Amro Clearing. Therefore the CCP protects you against “risk through the chain” impacting your broker. So, DeGiro is just as safe as any other broker? Not so fast. DeGiro is closely tied to their hedge fund. If the hedge fund collapses with a bang, so will DeGiro.

The elephant in the room

The main point remains client orders are sent to DeGiro’s hedge fund. DeGiro argues hedge fund HiQ is just a regular client. And clients match with clients – so retail customers match with HiQ. Anyone believing HiQ is a regular client just like any other, is believing in fairy tales (and/or working for the AFM).

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DeGiro : clients as counterparty for hedgefund

79 comments / September 17, 2015

DeGiro logoThis is shocking news. The discount broker DeGiro has been executing client option orders against their own hedge fund, HiQ. These option trades have been matched inhouse, which means the retail clients effectively have traded over-the-counter options against DeGiro.

And these “OTC” options means you run counterparty risk, the options are only guaranteed by DeGiro instead of a Central Counterparty like Clearnet (used by Euronext).

This internalizing happened without clearly informing clients. Retail investors are unaware they may have done option trades against DeGiro instead of safely cleared by LCH.Clearnet on Euronext. There’s no opt out possibility. This can be devastating for the markets, and implies a lot of extra risk for investors. Finally, this seems to be the “catch” for the low fees at DeGiro.

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Webb traders keep the bells ringing

WEBB Traders’ opening bell

2 comments / September 16, 2015

imgresJust two months ago Flow Traders was invited for the opening bell ceremony at Euronext. Was quite a puzzle to find out who’s who at the balcony – but with linkedin and a little help from my friends it worked. This monday Sjoerd and Dennis from Flow Traders rang the bell again, after the options on Flow Traders shares started trading (well, trading..). Susquehanna committed itself to quoting options Flow Traders (code FLW).

WEBB Traders

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