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Donald Thompson wrote:
>
> THE DOCTOR wrote:
> >
> ........................
> > He {VIC } was most likely a big factor in the poor market quality many people
> > found in S & P derivatives on Monday's halt and Tuesday's opening. If
> > you look at B/A spreads in S & P 500 products at Tuesday's opening they
> > were very (IMHO)extreme..even for the conditions that existed.
>
> Dr,, I need an education. Why was his position a factor at the halt and
> the open?
> Because people knew that something was up and didn't want to step in
> front of a train?? or is is something more esoteric??? How does a
> clearing house handle such huge risk?
> Wouldn't someone get on the phone and raise margin??? or is it the
> charisma/chutzpah/macho
> clearing house thing to stay out of it??
No, the whole point is, HE HAD NO MONEY TO PAY MARGIN. They can't just
get on the phone and raise margin in a fast market. I have seen so many
posts (here and elsewhere) seemingly implying that clearing houses are
heavy handed in these situations. Look at the risk they carry. Granted
that is the business they have chosen, but they have the right to cut
their losses short just as traders do. Refco did not "stay out of it",
they forced Vic's hand in closing the trades and they probably forced
his hand in declaring bankruptcy )if that is true. And it sounds like
they will pay for it....but they had to do it.
Eric
>
> Respectfully,
>
> Don Thompson
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