In a breaking news, it would appear that one of the greatest cause for irritation among retail traders, notably that some big institutions used “flash” computer systems to front-run their client’s orders will be ended shortly, as the Securities and Exchange Commission voted unanimously to ban the practice, accused of allowing among others GS to pocket its enormous trading gains. More also here.
May 12 (Reuters) – U.S. federal investigators are probing whether Morgan Stanley (MS.N) misled investors about mortgage derivative products it helped create and sometimes bet against, the Wall Street Journal said, citing people familiar with the matter.
Morgan Stanley arranged and marketed to investors pools of bond-related investments called collateralized debt obligations (CDOs), and its trading desk at times placed bets that their value would fall, the Journal said, citing traders.
Federal investigators are examining whether Morgan Stanley made proper representations about its roles in the mortgage derivative deals, the newspaper said.
Two particular deals — named after U.S. Presidents James Buchanan and Andrew Jackson — were scanned by the investigators, the paper said, citing a person familiar with the matter.
Morgan Stanley helped design the deals and bet against them, but did not market them to clients, according to the paper.
Traders called them the “Dead Presidents” deals, the Journal said. The firm made money on those deals, but any profit was far overshadowed by the $9 billion the firm lost on bullish mortgage bets in 2007, the paper said
citing a person familiar with the matter.
Morgan Stanley helped design the deals and bet against them, but did not market them to clients, according to the paper.
Traders called them the “Dead Presidents” deals, the Journal said. The firm made money on those deals, but any profit was far overshadowed by the $9 billion the firm lost on bullish mortgage bets in 2007, the paper said.
“We have not been contacted by the Justice Department about the transactions being raised by The Wall Street Journal and we have no knowledge of a Justice Department investigation into these transactions,” Morgan Stanley spokesman Mark Lake told Reuters by telephone.
Spokespeople for the Manhattan Attorney’s office and the U.S. Securities and Exchange Commission (SEC) declined to comment to the Journal.
Updated at 11:17/12th May/Baroda/India
So why is Soros buying gold? Though he believes gold is the ultimate bubble, he had said before that he likes to ride bubbles. But unlike most investors, Soros usually knows when to get out.
From the WSJ:
LONDON—Investor George Soros doubled his bet on gold at the end of 2009 amid rising prices, a filing with the U.S. Securities and Exchange Commission showed.
The filing, made late Tuesday for the financial period ended Dec. 31, comes after Mr. Soros made comments during the World Economic Forum in Davos, Switzerland, in late January calling gold an asset bubble. He told media at the time that the low-interest-rate environment creates a condition for bubbles to develop and that gold is the ultimate bubble…..
The Securities and Exchange Commission accused a French medical doctor with illegally tipping off a hedge-fund manager about the results of a clinical trial conducted by Human Genome Sciences Inc., prompting the manager to dump roughly six million shares of the drug maker. The SEC alleged in the civil complaint Tuesday that Dr. Yves M. Benhamou gave the hedge-fund manager nonpublic information about negative developments in the trial of the drug Albuferon, used to treat Hepatitis C, including that one trial participant had died…Over a period of weeks prior to the announcement, the hedge-fund manager ordered the sale of all Human Genome Sciences stock held by six hedge funds he co-managed, a stake of roughly six million shares, the SEC said. [WSJ]
