Naive! Morgan Stanley CEO James Gorman has no sympathy for Facebook investors who expected to profit from a first-day spike in share prices. “People who thought they were buying this stock so they could get an enormous pop were both naive and ordered under the wrong pretenses,” Mr. Gorman said yesterday in an interview with CNBC. To which he might have added: “Didn’t they read Devitt’s research?” Mr. Gorman, of course, had this to say in January to investment bankers upset over Morgan Stanley pay cuts: “You’re naive, read the newspaper.”
When they say ‘Whale': Bruno Iksil, the JPMorgan trader nicknamed the London Whale and Voldemort for taking outsized derivatives positions, would sometimes run a VaR (value-at-risk, or a measure of how much a trade can lose in one day) exceeding $60 million—about the same VaR as the entire investment bank. The formula used to calculate Iksil’s VaR was changed early this year, cutting reported risk in half.
The Commodity and Futures Trading Commission is using new powers gained in Dodd-Frank to subpoena e-mails and other internal documents in its inquiry into JPMorgan’s chief investment office trading losses. The CFTC, which regulates derivatives trading, can take “take civil enforcement action in relation to deceptive statements, including misleading information given by traders to their in-house supervisors,” according to the Wall Street Journal. Before Dodd-Frank, the CFTC lacked jurisdiction over fraud in the market for credit default swaps.
The hedge funds on the other side of the London Whale’s trades aren’t necessarily laughing to the bank. Take Boaz Weinstein, the hedge fund manager said to have “profited wildly” from the trade: Weinstein’s Saba Capital is only up 2 percent for the year, according to Reuters, as plummeting stock markets likely offset gains.
Sorry, but…Nasdaq may have apologized publicly for the delays in trading on the day of Facebook’s IPO, but it has done little to atone for $115 million in losses suffered by the offering’s top four market makers (UBS, Citigroup, Knight Capital and Citadel Securities). The exchange is failing crisis management 101, says Reuters.
Only optional: Not all U.S. lenders took to heart an SEC memo sent in January requesting that banks clarify disclosures on exposure to troubled European countries, making it difficult for outsiders to guess the affects of sovereign defaults, eurozone exits and the like. The SEC memo merely offered “guidance,” and didn’t compel new disclosures. With Europe teetering, Peter Eavis suggests it’s time that the SEC send a new memo.
Pit stop: Formula One Group, the London-based auto racing group that has been pre-marketing an initial public offering on the Singapore stock market, may join companies to postpone IPOs amid down markets. Kayak, the online travel company, and Graff Diamonds, the high-end jeweler, have delayed offerings in recent days.
Long wait: The Consumer Financial Protection Bureau, the new federal agency championed by Elizabeth Warren, is delaying new rules that would set standards in the mortgage industry until the end of the year. Uncertainty over the rules has contributed to a tight market for mortgage-backed securities.
Moves: Ian Lowitt, the last chief financial officer of Lehman Brothers, is joining Marex Group, a London-based private company that specializes as a commodities broker.