Morgan Stanley

  • 31 May 2013 at 5:47 PM

CBOT Fines Trader For Losing Money

Umm so maybe someone wants to explain to me what happened to Glenn Hadden? He’s the head of rates at Morgan Stanley, formerly at Goldman, and he was just banned from all CME trading floors for ten days, which is a little funny because, like, what, was he going to walk around on an exchange floor? Like in a tour group? But actually he can’t use computers either,1 so basically, no Treasury futures for ten days. That starts in mid-July and, god, I’d like to be banned from a computer for ten days in July, but I guess the perks of being a successful rates trader include punishments like that.

Anyway the thing he did was … well here is the Notice of Disciplinary Action, which says that the thing he did was violate CBOT Rule 560, which requires that big “positions must be initiated and liquidated in an orderly manner.” So his offense was to trade in a disorderly way when he was at Goldman five years ago. Specifically:

December 19, 2008, during the final minute prior to expiration of the December 2008 10-Year Treasury futures contract, in order to cover the tail (a standard form of risk management activity associated with holding a Treasury futures position at expiry) for the position held by Goldman, Sachs & Co.’s Treasury Desk, Hadden, then a Treasury trader for Goldman Sachs & Co., executed a 100-lot market order, and then submitted a 50-lot limit order, which was only partially filled as a result of illiquidity in the market. During the course of these orders and subsequent fills, the market traded up 27+ ticks resulting in the final price of the December 2008 10-year Treasury futures contract settling above what was indicated by the December – March calendar spread.

So: he tried to buy a lot of Treasury futures real fast, and as a result of that he ended up paying too high a price for them. I guess that’s a little “disorderly” but also sort of underwhelming.2

What is going on? Obviously there are two possibilities: Read more »

  • 29 May 2013 at 5:29 PM

Emma Lasry’s Got Competition

Mr. Gorman sent an e-mail on Wednesday promoting the music career of his daughter, whose band, Madness and the Film, released an EP, four songs on iTunes, over the weekend. “She recorded the music with a British musician over the past six months,” Mr. Gorman wrote in the e-mail. “They co-wrote lyrics, music and play and sing the songs. He is lead vocals and she sings back-up and plays numerous instruments.” In an interview, Mr. Gorman said Caroline, 17, has always had a passion for music and plays piano in her school’s orchestra. When she was 15, Ms. Gorman was playing in bars and had booked studio space in Chelsea. She spent every Friday night for months recording her first CD. “She plays everything,” he said. Last year, while in upstate New York, Ms. Gorman met David Breeze, a British musician, and the two of them joined together to form Madness and the Film. The songs released on iTunes have a melodic, indie pop rock feel to them. [Dealbook, related, related, related]

If you’re a Morgan Stanley shareholder on the fence about whether to give the bank your non-binding vote in favor of its executive-compensation plan this year, and would like a proxy firm to make your non-decision for you, you are out of luck. Read more »

So Morgan Stanley announced earnings today and people are sad because FICC trading wasn’t so hot. Asset management and wealth management are okay though? Anyway here’s a guy:

“The fixed-income rebuild hasn’t worked as well as they had hoped,” David Trone, an analyst with JMP Securities LLC in New York, said in a Bloomberg Radio interview. “They want to be more of an asset-gathering institution that also does investment banking and a little bit of trading. They’re not yet really to the point where they’ve convinced all of us what they are yet.”

One way to think about Morgan Stanley is that it’s a big room full of people who invest (or, trade with) other people’s money.1 That money finds its way into Morgan Stanley’s hands in different ways, and those ways change (slowly) over time. Some of it comes from individual investors whose wealth Morgan Stanley Global Wealth Management manages, globally. Some of it is from mutual funds and institutional assets managed by Morgan Stanley Asset Management. Some of it is from shareholders. Some of it is bank deposits. Quite a bit of it is repo and whatnot.

Here’s the mix of where it comes from over the past few years:2

This is pretty unscientific, and Morgan Stanley’s ability and desire to do stuff with its repo funding differs from its ability and desire to do stuff with non-fee-earning client cash. Still you can see some trends there I guess? Read more »

  • 16 Apr 2013 at 2:44 PM

Wily 22 Year-Olds Force Morgan Stanley’s Hand

For the last number of years, private equity firms and hedge funds slowly moved up the time at which they recruit that gotta-have-it talent, junior banking analysts, until it got to the point that they were making offers of employment to people who had graduated college and started working on Wall Street but months earlier, and still had a year and half of servitude left at their respective banks. While employers were used to having second years check out vis-à-vis doing any kind of productive work a couple months before moving on, they finally decided enough was enough. Feet were put down, expectations (that people would stop interviewing shortly after their first day on the job) communicated.

Knowing it’s one thing to smile, nod, and then tell Apollo HR that you look forward to seeing them on Monday and another to put your name on a contract promising you’ll do no such thing or risk getting canned, Morgan Stanley sought to get a little extra assurance its worker-bees would fall in line, requiring them last summer to put it in writing or beat it.

And while the fear of god was successfully put into some, the craftier ones were having none of it. Read more »

One might think that being terminated by Goldman Sachs for taking “inappropriately large proprietary futures positions in a firm trading account” and “violating investment-related statutes, regulations, rules or industry standards of conduct” might make it hard to get another job on Wall Street.

Not at all. It might make it hard, however, to get your deferred compensation after you plead guilty to fraud, re: said inappropriately large futures position. Read more »

Every once in a while I almost write “I don’t envy big bank CEOs,” and then I consider my own finances and the mood passes. But it does seem hard, no? The job is basically that you run around all day looking at horrible messes – even in good times, there are some horrible messes somewhere, and what is a CEO for if not to look at them and make decisive noises? – and then you get on earnings calls, or go on CNBC, or sign 10Ks under penalty of perjury, and say “everything is great.” I mean: you can say that some things aren’t great, if it’s really obvious that they’re not. If you lost money, GAAPwise, go ahead and say that; everyone already knows. But for the most part, you are in the business of inspiring enough confidence in people that they continue to fund you, and if you don’t persuade them that, on a forward-looking basis, things will be pretty good, then they won’t be.

Also, when you’re not in the business of convincing people to fund you, you’re in the business of convincing people to buy what you’re selling and sell what you’re buying, which further constrains you from saying “what we’re selling is dogshit.”1

Anyway I found a certain poignancy in Citi’s correspondence with the SEC over Morgan Stanley Smith Barney, which was released on Friday. Citi and Morgan Stanley had a joint venture in MSSB, and MS valued it at around $9bn, and Citi valued it at around $22bn, and at most one of them was right and, while the answer turned out to be “neither,” it was much closer to MS than C. Citi was quite wrong, and since this was eventually resolved by a willing seller (Citi) selling to a willing buyer (MS) at a valuation of $13.5bn, Citi had to admit its wrongness in the form of a $4.7 billion write-down, and the stock did this: Read more »