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Curatia Analysis for Thu, May 16

News Dirt: Infrastructure, The Law, and Trading Bedlam

Yesterday we promised you rogue traders, investigators, monkeys, and psychopaths. If we’re going to make good on all of that bad, there’s no time to lose. So let’s get right down to non-business with another wild and woolly Thursday edition of News Dirt.

Infrastructure

In a story so popular it was carried by eagles to Tibetan monasteries, Citigroup shuttered its CitiCross dark pool on April 30 (100 popularity). CitiCross ranked 23rd of 32 active ATSs by volume during the week of April 15.

The move reflects a broader review by Citi of its equities business, which logged a 24% drop in trading revenue in Q1, following a reshuffling of its senior ranks that shifted the bank’s balance of power in favor of FICC.

And in a story that pigeons ported to Vegas wedding chapels, HFT infrastructure fireworks fizzled out after CyrusOne and Scientel, rival owners of microwave towers outside CME’s data center, settled their differences through mediation (90 popularity).

In a hilariously incongruous headline, the New York Post trumpeted that Nasdaq seized the high ground in its turf war with NYSE by building a 2,100 square-foot terrace with “spectacular views of Times Square” (56 popularity). Nasdaq has yet to decide whether it will outfit its war terrace with catapults.

The Law

But we digress. On to the juicy stuff.

Institutional Investor did some meta-investigative reporting earlier this month when it detailed the “ruthless, secretive, and sometimes seedy” exploits of hedge fund private investigators, whose ranks include “ex-cops...and onetime spies from the CIA, Mossad, and MI5” (48 popularity).

“We’re not trying to find the chairman [with] hookers,” one hedge fund short seller said in defense of the practice. “This is not a revenge business. I’m trying to figure out what’s going on.”

Traders seemed to figure out what was going on even before the cops did when hackers used inside information to front-run earnings announcements (97 popularity).

Researchers found that when hackers traded ahead of earnings releases, “post-release moves were about 15% smaller when the information had been stolen” — a sign traders may have detected something amiss in pre-announcement market movements.

Elsewhere at the intersection of trading and the law, ex-Cantor junk bond saleswoman Lee Stowell is determined to bring her former firm to court over an alleged pattern of abuse she says included groping and a colleague defecating in her Bernie Sanders coffee mug (98 popularity).

Trading Bedlam

While the veracity of those appalling allegations may be disputed, the details of a spectacularly failed futures bet by Norwegian trader Einar Aas, which sent a shudder through the world financial system last September, are not (97 popularity).

Sour bets on energy prices by the reclusive Mr. Aas triggered a daylong crisis at Nasdaq Clearing in Stockholm and raised questions about whether central counterparties constitute a weak point in the financial system.

Unlike Mr. Aas, Horseman Capital’s Russell Clark is counting on a market meltdown (43 popularity). Mr. Clark’s contrarian short-selling strategies have “made him a star” in the hedge fund world, and while his fund’s wild swings have turned off some investors, he’s made money over the last seven years.

That’s more than experts at last year’s Sohn Conference can say for their collective stock picks, which returned an average of -4.4% in the year following the conference even as the S&P 500 returned 11.1%. In fact, a team of journalists throwing darts at stocks made “monkeys out of the Sohn investing gurus,” returning an average of 17.3% over the same period (13 popularity).

Those bold and, at times, reckless endeavors have earned traders a reputation as chainsaw-wielding psychopaths, which eFinancialCareers continues to promote with gusto, arguing despite shaky evidence that students aiming to work in finance possess some psychopathic traits (38 popularity).

Last week, the UK-based publication also noted that “more people escaped from Goldman Sachs' U.S. electronic equities team” as if it were a prison or an insane asylum (99 popularity).

Those characterizations may make for good news dirt, but they won’t be making their way to Tibetan monasteries anytime soon.

Administrative note: There will be no Curatia Analysis tomorrow as we toil away on product enhancements. We’ll be back in the swing of things on Monday.