Hedge Fund Seeks Up To US$8 Billion From Deutsche Bank (Finalternatives)
A US$8 billion dispute between a hedge fund manager and Deutsche Bank AG (NYSE:DB) has made its way to the courts. Sebastian Holdings and Deutsche Bank are set to duke it out in a London courtroom over the next 12 weeks, the latter seeking payment of a US$250 million margin call, and the former demanding as much as US$8 billion in damages. Sebastian, led by Norwegian billionaire Alexander Vik, suffered “very significant” losses on options trades made by trader Klaus Said when Deutsche Bank AG (NYSE:DB), Sebastian’s prime broker, demanded US$530 million in collateral and, when it didn’t receive it, began liquidating the hedge fund’s positions. The latter, Sebastian said, cost it some potentially profitable positions, leading to losses and lost profits of US$2.5 billion.
CBOE dark for much of day due to software glitch (Reuters)
A software glitch shut down the Chicago Board Options Exchange for half the day on Thursday, preventing trading in options on two of the U.S. stock market’s most closely watched indexes and delivering the latest blow to confidence in the way U.S. financial markets operate. …The contracts are used by institutional and retail investors to bet on and hedge against swings in the overall U.S. stock market. “This is a big damage to the options industry because the SPX is such a significant product,” said J.J. Kinahan, chief strategist for TD Ameritrade, speaking at an options industry conference in Las Vegas attended by CBOE’s Brodsky and hundreds of other market participants. CBOE’s shutdown was the talk of the meeting.
No, HP Will Not Dance Its Way to a Corporate Turnaround (AllThingsD)
From the department of things you can’t make up, and so must leave to someone else to make up for you, here’s the most bizarre denial statement ever probably ever issued by the corporate public relations department at technology giant Hewlett-Packard Company (NYSE:HPQ). …Penned by Cheryl Strauss Einhorn, a freelance contributor to CNNMoney who also happens to be the wife of hedge fund manager David Einhorn, the story portrayed HP as a “lumbering tech giant that desperately needs new ideas.” It went on to detail how Von Hansen, a general manager for “future technologies,” based at HP’s campus in Boise, Idaho had since 2008 been working on a quarterly basis with The Trey McIntyre Project a local dance troupe. Its mission at Hewlett-Packard Company (NYSE:HPQ), according to a quote by Hansen in the story: “… Pull our staff out of the same way we do things so that we can better design solutions and solve problems.”
Aurelius, Alyeska Inspire Next Stage of Litigation Finance (InstitutionalInvestorsAlpha)
The biggest leveraged buyout in U.S. history was a “spectacular failure,” according to one New York hedge fund. The $43 billion deal, inked in 2007, was “hemorrhaging cash” within a year. It was also showing signs of an “untenable capital structure,” as company directors began to green-light loans worth billions of dollars from a subsidiary to the parent company in what the hedge fund calls a “continuing fraud” consisting of “classic fraudulent transfers.” Yet the hedge fund making each of these accusations, Aurelius Capital Management, went on to green-light investments of its own in the company, Dallas-based Energy Future Holdings (formerly TXU Corp.), becoming a creditor in January 2011. All of this can be seen in the fund’s lawsuit filed against the company last month. The concept of a hedge…
KKR Profit Drops (Finalternatives)
Kohlberg Kravis Roberts’ first-quarter earnings took a hit as its funds trailed the broader markets. The New York-based private equity giant said that economic net income fell 10.9% in the first quarter to $647.7 million. Under generally-accepted accounting principles, KKR’s profit actually rose by $3 million year-on-year to $193.4 million. KKR’s private-equity portfolio gained 5.9% on the quarter—better than most hedge funds, but a far cry from the more than 10% the Standard & Poor’s 500 Index advanced by during the year’s first three months. Assets under management rose almost 4% to $78.3 billion.
Millionaires Clash Over Socialite’s Child Support Claims (NYTimes)
As an accomplished mountaineer who has scaled many of the world’s highest peaks, including Mount Everest, Annabelle Bond has found herself in some dicey situations. Now she finds herself in a very different sort of predicament — a nasty legal fight between a former lover and her current one. Her boyfriend, Andrew Cader, a former Goldman Sachs Group, Inc. (NYSE:GS) executive and part owner of the Tampa Bay Rays baseball franchise, is accused of conspiring with Ms. Bond to hide her true financial condition so that she could secure more than $50,000 a month in child support payments last December from the Wall Street financier Warren G. Lichtenstein, who has a 5-year-old daughter with the British socialite.
How Many HFT Firms Actually Use Twitter to Trade? (BusinessWeek)
Tuesday’s fake tweet from the Associated Press’s hacked Twitter account, reporting explosions at the White House that injured President Obama, has sparked renewed criticism of high frequency trading, specifically how some computer traders use social media as an input into their trading strategies. Though it’ll be months before we know exactly what happened, the consensus is that a handful of trading algorithms responded to the fake tweet by selling a broad range of stocks, bonds, and commodities. As message traffic spiked and prices started declining, HFT firms started backing out of the market, just as they did during the May 2010 Flash Crash. As a result, liquidity dried up, as you can see here in this chart from Nanex. Since there were suddenly relatively few buy orders to match against all those sell orders flooding the market, the dip picked up speed.
