Toomre Capital Markets LLC

Real-Time Capital Markets -- Analytics, Visualization, Event Processing, and Intelligence

Reminder of the Value of Writing a Company Blog

During the past few weeks, Lars Toomre has been working from a client site (a top-ten hedge fund by size located in Manhattan) together with some members of the great team from G2 Systems, LLC. As a result of the long hours completing this particular project and the additional hours commuting, there has been little time left for writing and then updating this website on a regular basis.

In the financial markets, the week that includes July 4th normally is relatively quiet with many people away for at least some portion of the time. That hardly was the case this year at Toomre Capital Markets. This past week three incoming contacts reminded Lars why it is so important to somehow create time for sharing his thoughts and observations, despite all else that may be going on.

One call was from a large news organization that wanted some information for a news story that they were writing on the subject of insider trading. They had noticed Toomre Capital Markets LLC ("TCM") post from last October 29th entitled Possible Insider Trading Using Credit-Default Swaps?? and thought that it tied in well with some other information that they were developing.

An astute reader might recall that S.E.C. Chairman Christopher Cox testified on June 15th that the SEC has been monitoring the credit default swap ("CDS") market and is likely to bring forward some cases about insider trading using CDS. If such a suit is pursued by the SEC, it will be ground-breaking. TCM is not aware that the Securities and Exchange Commission ("SEC") ever has pursued insider trading charges against an organization or individuals that have used CDS for illegal gains. The CDS market is not transparent and generally involves privately negotiated transactions between two parties, such as an asset manager (or a hedge fund) and a financial institution. The vast majority of these trades are settled using International Swap and Derivative Association ("ISDA") documentation, and it is not clear whether such private CDS contracts are regulated by the Securities and Exchange Commission ("SEC") or the Commodity Futures Trading Commission ("CFTC").

TCM had highlighted the abnormal CDS trading theme last October. In the months since, the run-up in CDS prices before corporate actions has grown more pronounced. When even the Fed Chairman Ben S. Bernanke is worried about such run-ups eroding institutional investor confidence, expect enforcement action to come shortly.

TCM also expects to see other insider trading enforcement action to be brought soon. Interested readers might want to review the TCM post from February 7th 2007 entitled SEC Boosts Probe for Wall Street Leaks. It was unprecedented for the SEC to ask the large prime brokerage firms for their customer lists and all trades executed during twelve trading days in September 2006 at the end of the third quarter. This is a tremendous amount of data, but in it should be information about various CDS trades. And some of those CDS trades no doubt concerned credits on which corporate actions either had or were about to occur.

The second contact this week was from a technology vendor that has done considerable work protecting the infrastructure and reliability of United States government IT systems. They are interested in further expanding their business in the financial services sector and picked up on a TCM posting entitled Can the Market's Systems Keep Up With Electronic Trading?. Apparently some large alternative asset manager had contacted them about a possible implementation that would similarly protect that hedge fund's electronic trading infrastructure.

Searching for further information on algorithmic trading (and high-frequency trading in general), and Complex Event Processing ("CEP") in particular, led this vendor to Toomre Capital Markets LLC. Time will tell whether a consulting engagement results. However, this vendor (and their ultimate client) certainly would not have found TCM if this blog had not highlighted key infrastructure issues and some of the work performed by TCM for Streambase Systems ("Streambase") and Advanced Micro Devices ("AMD"). It was a kind way of reminding TCM that a high quality blog which is updated on a somewhat frequent basis can be a very effective method of indirect marketing.

The third contact this week came from an executive recruiter who was looking for a structured finance professional to fill a more junior position at an insurance company. She had noticed the TCM post from December 2005 entitled More on Insurance-Linked Securities Issuance and knew some about of Lars' experience. In particular, she was interested in Lars' work at what now is known as Munich American Capital Markets (Munich Re/American Re) where he was involved in Enterprise Risk Management underwriting, weather derivative contracts and the issuance of Insurance-Linked Securities ("ILS"). She was wondering what more junior personnel Lars might know that had some experience with ILS and could recommend for her opportunity.

In the midst of the discussion, though, details emerged about two other institutions which were looking for help in the ILS specialty. One life insurer is apparently looking to transfer a larger block of insured lives for XXX reasons and the second is a property and casualty company that has apparently decided that its New Madrid earthquake exposure is too concentrated. Had TCM not posted those entries about ILS, the Munich Re and Hanover Re ILS deals and reinsurance in general, it is unlikely that two very promising prospects would now be on the TCM project list.

All of the above is a long winded way of acknowledging that TCM has been amiss in not posting here more frequently. One never knows what connections will be made from the various thoughts and themes that attract either the reader's or TCM's attention. As Aldon Hynes is fond of saying, one of the things that he is most amazed by is what associations pop up when a proverbial thread begins to be pulled from the tangle of subjects and random information that TCM is involved with. Sometimes he will ask, "Just how did we get from Subject A to Subject Z with the odd stops at B, C, D, etc. in between?" Associations around the leading areas of structured finance, financial engineering, derivatives, technology and enterprise risk management always are quite interesting.

This past week's varied contacts are a perfect reminder of why writing for this website can be so valuable. TCM pledges in turn to try to update here more frequently than has been the case over the last few months. Your comments and thoughts are most welcome. The TCM contact information is listed at the bottom of this web page.