tag:blogger.com,1999:blog-4815867514277794362.post9059544599351326549..comments2024-03-08T06:18:28.125+11:00Comments on Bronte Capital: Explaining the brokers – Part IIIJohn Hemptonhttp://www.blogger.com/profile/03766274392122783128noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-4815867514277794362.post-86910191461284550112008-09-03T02:24:00.000+10:002008-09-03T02:24:00.000+10:00Fascinating conceptualisation of the process JH. M...Fascinating conceptualisation of the process JH. My own thinking would probably overcomplicate the process somewhat and look for losses at smaller institutions who end up holding the structured bags that the big guys can pass on from their mkt-making/sell side desks, rather than prop. My own very limited knowledge is that the market making desks tend to do most of the arb/intermediary work you point out, and the prop guys tend to take more directional punts. Macro Man would no doubt have something to add to this. What happened to the less frequent posting? Cheers, JLAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-52363377792699059532008-09-02T02:38:00.000+10:002008-09-02T02:38:00.000+10:00There is basically one position in banking whether...There is basically one position in banking whether it be old fashioned retail and commerical banking or broker/dealer style investment banking - and that's positive carry. The 'customer business' is just a smokescreen (albeit a reasonably profitable smokescreen when volumes are high). What b/d prop traders do (and all traders at a b/d are to some extent prop traders) is buy high yielding assets and, err, hold them. Yes, there's lots of 'arb' trading around to provide more smoke - vol arb, credit arb, and so on. Yes the b/ds do need to carry inventory in order to have something to sell when they get a call. But basically they are an enormous positive carry position. What is of course interesting about this is now their funding cost has gone to the moon what used to be positive carry isn't any more...Anonymousnoreply@blogger.com