The bankrupt trading firm Van der Moolen will start paying significant bonuses to their former option market makers in Amsterdam. These former Curvalue traders are rewarded for their profits in 2009. I always figured a bankrupt firm won’t pay out anything anymore – as it’s usually a little short on cash. When a golden treasure is found in the basement, there will be a long queue of companies and people waiting for payment.
Not this time. After the bankruptcy, Van der Moolen received 32 million EUR from a tax ruling. There are dozens of creditors at the door, but right behind the fee for the liquidators themselves are the market makers demanding their bonus. It may be hard to understand, but I understood this correct due to the nature of their labour-contracts. They are the only former traders from the company getting bonuses over 2009.
It wasn’t a terrific year for trading, but in eight months the traders earned a result of 4 million euro. In midst of a sinking ship, with ongoing conflicts with management on bonus agreements and traders leaving to start their own firm – that’s a significant amount. It contributed a net profit of 1,5 million to the company’s after all costs – which seems okay comparing it with Optiver’s 6 million profit over a full year in an ongoing operation. I understood the bonus deal at Curvalue/VDM was 40% of the nett result, but with salaries being paid out from this bonus pool. After subtracting all costs including salaries, an estimate of 400.000 euro was left for the group of option traders. It’s petty cash for a whole group, but keep in mind the circumstances.
However, there was a slight problem. While the total bonus amount of 400k was clear, dividing the money among 25 traders is a whole other ball game. Each trader has the right to start legal procedures trying to obtain a bigger share of the bonuspie, blocking payment to the rest for years. In a extraordinary version of the classic prisoners dilemma, all individual traders had to agree on their cut. Somehow they managed to agree, everyone from the highest bonus (over 100k) to the lowest (zero) agreed and on the division.
Socialists and shareholders will love it, greedy derivatives traders who have gotten rich in the past years by pocketing a huge bonus every year will receive a little additional cash. On the other hand, these option traders contributed around 1,5 million of clean profit to the company and they have a bonus deal on paper. You can’t really blame them for the board burning the balance sheet with expensive expeditions.
The court in Amsterdam has approved the preferred status of the bonuses last thursday.