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It’s here! BlackRock launched the much-discussed fixed income crossing network.
BlackRock Solutions will operate the network for the benefit of it’s own managers and a network of forty-six external clients. BlackRock, alone, manages $3.5t in assets across ten thousand portfolios, but the Aladdin Trading Network –the network’s working title– will also include sovereign-wealth funds, insurance companies and other money managers. For a small fee, participants can cross trades for corporate bonds, mortgage securities and other assets through the platform.
Fixed income trading has been a profitable mainstay of investment banks. The prospect of electronic trading through a crossing network is simultaneously laughable and terrifying. Given the vast investable universe of fixed income instruments, trading these instruments presents a far more complex problem than equities. GE has only one ticker, but it may have a dozen or more credit instruments associated with it, each with its own maturities, rates, claims, etc. Nonetheless, BlackRock is not moving forward on the basis of charity. They want to cut costs, and that means cutting into investment banking profits.
BlackRock’s magical, mystery service has many miles to go before we see the disruption people have predicted. They currently cross 3% of trades internally, and they hope to raise that number to 6-8% with Aladdin. What’s exciting is that they’re bringing forty-six external clients along for the ride.
Ted’s growing up.
What is most curious about this doctrine is that neither the decisions that have applied it for nearly 300 years, nor its eventual statutory formulation, undertook to define or explain its contours or objectives….Curiously, judges generally have neither complained of the absence of guidance, nor made substantial efforts to fill the void.
–Pierre Leval, noting the obvious lack of specific standards for fair use in the Copyright Act of 1976 – § 107 · Limitations on exclusive rights: Fair use.
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(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
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The insider trading scandal began with shock and awe. Each week brought a raft of indictments. Well-stationed members of society were exposed as frauds and criminals. With insider trading its most visible focus, the legal violence against the finance industry continues. And like so many TV-addled teenagers, the public may now have lost the ability to respond.
An apathetic public, however, is no a reason to stop. Just because insider trading is no longer shocking doesn’t mean we shouldn’t prosecute it to the full extent of the law. But the failure to shock is also not a reason to search for a response by expanding the definition of insider trading.
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in order for me to gain a competitive advantage, I try to slow it down. I simply stuff data into the market and because my machine originates this data, I simply ignore it and gain a computational advantage.
–Yan Ohayon, speaking from the perspective of the high frequency trading (HFT) industry
The SEC doesn’t give formal guidance as to what is insider trading and what isn’t, but the fact is they said expert networks are not inherently improper and OCIE director Carlo di Florio and others have given guidance on policies and procedure to use them properly. There’s no specific insider trading statute and there’s not likely to be any time soon, because they’re trying to get at a wide range of conduct.
–Marc Elovitz, partner at Schulte Roth & Zabel: via Reuters
