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At 02:39 PM 9/29/98 -0400, you wrote:
>Robert,
>The real people who have to be watched about taking advantage of LTCMs
>positions are the dealer/lenders. They now know the positions, have the
>capital and the facilities to abuse the knowledge. They also feel cheated
>and that they are "owed" something.
>Motive and Opportunity.
>
>Jim
Hi Jim,
The individuals in the banks delaing with the LTCM fiasco would be the
"credit limit" or "liquidatuion" boys/girls. These people are totally
different from the bond traders in each of these banks. All the relevant
banks would have "Chinese walls" between the individuals dealing with the
LTCM fiasco and the bond traders in their respective organisations.
Therefore, the dealers who trade bonds in each respective bank would not be
able to get access to this information.
If these banks DID know the position, then they would all put the opposite
spread trade on, all of these banks would push the spread out further and
LTCM would just fold and all the banks would lose nearly all of their
money. Each of the banks would have to place a HUGE opposite position each
in order to get their money back. Risk limits in each organisation would
prevent them from placing such a large spread trade.
If you see LTCM go belly up in the next 2 weeks then rest assured the bond
traders in the banks DID FIND OUT the spread position and each bank
probably placed opposite spread trades. If LTCM continues to trade in the
next few months, then the traders in the banks DID NOT know the position.
Only time will tell........
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