‘BAD LEMON’ AID
What to do, now that
email is a basic part of
discovery in legal cases.
MONDAy MONITOR
Only on securitiesindustry.com
HOW WALL STREET OPERATES
volume 22 number 9 • May 3, 2010
UPTICK p. 3
Putting Markets Back Together
TRADING p. 6
Co-Location and More Co-Location
RULES p. 14
Paving Way for Another Madoff?
RISK p. 16
The Lesson From Morgan Keegan
Goldman CDO: The Loan Data
Was There for All to See
By John Hintze
The SecuriTieS and exchange commission’s suit
against Goldman Sachs centers
on the allegation that the Wall
Street firm failed to disclose
to investors the role an opportunistic hedge fund, Paulson
& co., played in choosing the
assets underlying a collater-alized debt obligation (cdO),
before betting against it.
But detailed and updated
data about these assets—
mortgage loans populating 90 mortgage-backed securities that
made up the $2 billion cdO
Barometer of Wall Street’s Health
Fin5oindex
1099.52
40.21
3.5%
-
April 15 - April 29, 2010
See Page 22
called aBacuS 2007-aci—
was there for all to analyze,
providing they paid for it.
“What’s strange about the
idea that institutional investors
would need to be protected
from each other is that there
was enormous amount of information available to institutions, even those with modest
budgets,” says Kenneth Posner,
an analyst at Morgan Stanley,
who until 2008 covered specialty finance companies including lenders such as subprime
mortgage broker countrywide
Financial corp.
if a Securities and exchange proposal to require
more detailed information on
asset-back securities comes to
pass, that loan-level data and
more will actually be provided
by the issuer on a regular basis
— and be downloadable from
the Web for electronic analysis. This would make claims
against Wall Street firms that
they provide inadequate disclosure about a deal’s contents
all but obsolete.
That data, about the types
of loans and their status rela-
CONTINUED ON PAGE 12
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OPERATIONSREPORT
Capitalizing,
Instantly, on
Relationships
Between Firms
TURNING OFF
FEE ‘LEAKAGE’
Providers and sponsors
of managed accounts
should ditch paper
records.
FULL STORy ON PAGE 9
By John Dodge
a POSiTive earninGS
story breaks about apple,
prompting traders to bid up
its share price. Positive, negative or flat, it’s a scenario that
plays out thousands of times
amid crowds of traders every
quarter.
But apple’s good fortune
is also important to its many
suppliers and partners, which
might represent more profitable trading opportunities.
Just go to the data. dow
Jones & company and revere
data LLc struck a deal in February that promises to help
traders capitalize on those sec-
CONTINUED ON PAGE 8
Hitting a Lightning Bolt for Trading Ideas
By John Hintze
SOMeTiMeS SucceSS
doesn’t require creating the
latest and greatest gizmo. instead, it can just mean uncovering the obvious
before the competition does.
Optionsxpress
launched a service for investors on its website in July last
year that gave its customers
ready and automated access
to sophisticated tools that
generate trading ideas. all
they had to do was hit a light-
CASE
STudy
ning bolt sitting next to the
summary of a particular investment position. The company named the functionality
ideaS.
The innovation
came after optionsxpress itself came
up with the idea
for ideaS—and introduced it
three months later.
“We don’t take a year to
study a problem, hire a bunch
consultants and build nine pro-
totypes. We tend to do things
intuitively,” says david Fisher,
who replaced david Kalt, a co-
founder of the firm, as ceO in
august 2007.
