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Tim Quast - EzineArticles.com Expert Author

Tim Quast is a fifteen-year Investor Relations veteran and founder and managing director of ModernIR.com, which parses and categorizes over a half-billion shares per week with its trading intelligence system, Equity Analysis.

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To Odey, Or Not to Odey
[News-and-Society:Economics] Speaking of deviation, UK hedge fund manager Crispin Odey has received plentiful British ink for declaring current opportunities in equities to be "astounding." Odey banked returns last year for his billion-dollar Odey European Fund, shorting UK financials like Northern Rock, where his wife, who is also sister to Barclays CEO John Varley, was an independent director. Whatever the cost to family ties, it profited Odey investors.

Equity Markets and the Emperor's Clothes
[Finance] There's been a remarkable surge in speculative trading for equities. We've never observed such a big swing in such a short time. The losers? The big Prime brokers. This may partially explain why Goldman Sachs has resumed its hedge-fund tactics, basically leveraging free money from the government to drive principal-trading profits from fixed-income, currency and commodity instruments.

The Truth About Algorithmic Trading
[Investing:Day-Trading] The most frequently flouted law in modern American society is Murphy's Law. As a result, unintended consequences buffer the amber waves of the fruited plain daily, and the winds blow well beyond Yankee shores too. In essence, we foster frameworks of behavior that fail to consider side effects.

Will April 2009 Be Quantitative Or Qualitative?
[Finance] With little left to invest in and most things having been taken over by the US government, back in January two analysts from the quantitative group at ING Investment Management in New York combined research and modeling expertise to hatch a diabolical plan: hit every Manhattan subway station in under 24 hours. Hedge fund analyst Matt Ferrisi and quant analyst Chris Solarz gathered notoriously faulty MTA schedule information, ran regression analysis, considered trillions of combinations and possibilities with sophisticated software, and ultimately plotted a route that would cover all 468 stops in 22 hours 45 minutes. ...

Markets Weigh Options
[Finance] Studying trading data last week had us remembering a story about two cowboys who were watching a herd of cattle that stampeded by. One says to the other, "What do you make of them critters, Vern?" Vern says, "Appears we're too late to stop them. May hap we should join them."

IROs - Think Buyside Styles, Not Names
[Business:PR] With the markets steady as a loose guy-wire in a gale, we've seen considerable IRO hand-wringing lately. The lament: Who's behind this knee-jerk selling?

Investor Relations and Short-Term Trading
[Finance] Some things to consider. Three of Goldman's trading desks made our Top 25 list of total issues traded, including its crossing platform and wholesale desk. Also Millennium Capital and other big derivatives desks made our Top 25 volume list. Wholesalers had nearly 9% of volume and liquidity providers had only about 15% of the total.

Market Structure - What is it and Why Should I Care? An Overview For Investor Relations Departments
[Business:PR] In today's global, Reg NMS electronic equity markets, traders and investors alike react to market structure. In general terms, Market Structure means the number, size, kind and distribution of participants in a market.

What is a Quant Bounce?
[Investing] We wrote last Tuesday that a 1,000-point bounce might be on the way. We're up 800 points since. Yes, it's a lucky guess, but our rationale reflected what we saw in the data: institutional trading wanting to act with more aggression and less prudence.

Program Trading is Different in March
[Investing] Moving to trading, programs generally sort of reset within the first three days of trading in a new month. Program trading is principally the domain of primary dealers, the big prime brokers allied with the US Federal Reserve. We saw something different in the detail beneath volume last week. Big money downgraded long and short positions ahead of March trading. What would cause them to move both bunker and bivouac, IR folks?

What to Do When Cheap Shares Keep Getting Cheaper
[Business:PR] Joking aside, we don't want to drone on about investment theory: we want you to do look cool in your investor relations or executive chair. But looking good has gotten a lot more difficult... and lost some of its allure, too. It's not easy to watch the red on your screen show downward trends in your share price, particularly when you have to figure out how to explain it to your CEO or an angry major investor.

Index Options Expiration and Your IR Strategy
[Investing] New volume records were set for derivatives trading in January on European markets. Life European options and futures business reported a 61% increase compared to January 2007. In the same period, the NYSE also said its ETF volumes were up 144%.

Investor Relations and Global Statistical Arbitrage
[Investing] What a wild week in the markets. Exchange volumes boggled the mind on Wednesday January 24th - and they weren't driven by fundamental investors executing buys and sells. So let's talk briefly about global statistical arbitrage and what it means from (or to) the comfort of your IR chair.

How Equity Swaps Affect IR
[Business:PR] IR folks, you've heard "swap" is a four-letter word. Though the syntactical accuracy of that claim is hardly under dispute, swaps are just agreements to exchange values. Equity swaps give investors a way to participate in markets without the trouble of buying and selling actual shares, meeting complicated custodial or regulatory requirements in different jurisdictions, addressing tax implications (since swaps are derivatives), or, of course, disclosing ownership.

Why Your Stock is Down
[Business:PR] We've mentioned here that both your good and bad stuff will get more attention now. Markets are inefficient, risk-management is expensive, and rational money is staying out. If your debt becomes a bigger weight because of the decline in your equity's value, you'll pay for it. If you're making transactions that press you against lending ratios, you'll suffer. If there are any reasons at all that your neighbor in the peer group offers better safety - maybe your efficiency measures are weaker, your market is more susceptible to competition, etc. - your rational money may flee.

What is High-Frequency Trading?
[Investing] Moving with a shake of the collective head to our topic this week, what is this thing called "high frequency trading," IROs and execs? Well, it would be a good name for a rock band, but high frequency trading is an indication of the behavior of money and a measure of market risk. It is responsible for 20-30% or more of volume currently. Practically speaking, it's continual, tick-by-tick, high-turnover buying and selling with real-time data to control risk while generating returns from minute change. It's coming from all sorts of capital sources, but don't blame hedge funds alone.

Follow Order Flow to Plot Your Sellside Outreach
[Investing] We are coming up to the last spate of sellside conferences before summer in Nantucket. When weighing where and how you spend sellside time, don't forget to measure order flow.

How Month-End Portfolio Transitions Work
[Business:Productivity] Now, about month-end transitions. Window-dressing at the ends of months is not something new. Funds have long measured and been measured in monthly increments. Persons and computer programs responsible for performance size up risks, rewards, and costs and try to do what maximizes the good things and minimizes the bad things. If stocks have gained, there's likely to be profit-taking. In strong markets, they might allocate more money to bargains, or to issues with relative strength. In bad markets, they will isolate for least risk and best transaction cost.

Russell Rebalance and Retreating International Money
[Investing:Stocks] On June 20, we observed a tectonic shift of international money away from US equity markets. How do we know? We don't absolutely...but the evidence in the data was overwhelming. The symmetry and function of order-flow execution bespoke massive asset-allocated money and churned out through Deutsche Bank and Goldman Sachs in particular, firms that have made solid inroads with sovereign wealth funds. Deutsche Bank took eighteen floors in China's Kowloon district (Hong Kong) for its capital-markets outreach to China, and Dubai's wealth fund is a serious Deutsche Bank shareholder. Goldman Sachs has been in China for two decades, represents with its Gao Hua relationship the largest international investment banking operation in China, and opened a Dubai office in March 2007 to support what it called "a major client base across the entire Middle East region."

News And The Practices of Program Traders
[Investing] The first full month of 2008 has passed and with it, the initial performance benchmark for traders and portfolio managers. There is a lesson here for investor relations departments regarding month-end portfolio lock-ins and a point to consider if you have news to announce, IROs.

Primes Again Behind Fed Intervention?
[Investing] For the first time that we ever recall, Archipelago's volume (in our sample group) topped the Nasdaq Alternative Display Facility's displayed and reported volume (drop a note and I'll explain what it does). We believe it indicated that risk management systems could find no firm footing ahead of options expirations on 1/18.

The Primes Step Up to Help
[Investing:Stocks] We've said before that sellside firms, particularly what we call the big Prime brokers, have evolved into purveyors of services rather than providers of information to buyside clients. Order flow indicated that Primes went the extra mile, putting capital at risk to help important institutional clients manage risk in the present uncertain equity-markets environment. Short interest, a function of risk management more than specific shorting, is up. Wholesale order flow is up (brokers transacting with brokers). Electronic volume is down (the buyside is asking the sellside for its commitment and assistance).

January Trading Trends - Whole Lotta Shakin Goin On
[Investing:Stocks] We'll talk 2008 Trends next (if you're a NIRI member, see my column on key '08 IR trends in the January IR Update), but, for now, let's look at January trading. We think institutional value investors, catalyzed by a small but influential active set on December 31, prompted the current equity retreat. Their tiptoes in the market catalyzed widespread changes to automated trading systems, and it's now obvious in the data that asset-allocation models have moved away from equities, too, particularly January 4th.

Investor Relations - The Year In Review and a Glance At 2008
[Investing] We'll be taking a break from the Market Structure Map for the Christmas holiday, which means you get the 2007 retrospective by quarter today.

Is Investor Relations Becoming Transient Like Trading?
[Investing:Stocks] First, let's take a look at the markets for the initial week of December 2007. From our analysis it appeared that fundamental investors were most active December 4th, while trading lightened considerably by the 7th and carried the telltale signs of massive risk-management and hedging. For investor relations, this means real investors finally followed traders into the maw - we've not seen much of that in the past couple months - prompting everybody else to take out insurance on their equity positions. No fund manager wishes to be caught out in the open on a Friday nowadays.

Investor Relations Lessons on Month-End Trading - Technical Corrections
[Investing:Stocks] With Thanksgiving leftovers gone (hopefully) and the holiday season upon us, let's pick up a couple investor relations tips to help us finish out the year the best we can. If technical corrections coincide with catalysts, reach out aggressively to the buyside.

Nasdaq Liquidity Providers Quiet, NYSE Specialists Gone
[News-and-Society:Economics] Firms making money by supplying market centers with liquidity went dark last week, down by half from averages, despite a 27% increase in total comparable volume in our statistical set. We also saw order flow double at wholesale desks, which assist other broker-dealers find liquidity to meet demand.

Investor Relations, Optional Chaos And Institutional Selling
[Investing:Stocks] Today, we'll concentrate on what happened last week when the markets were shelled by broad-based institutional selling. Our sample data showed anonymous electronic order flow accounted for 42% of all trading Nov 5-9 and an astonishing 69% of volume on Nov 8.

What's Lurking in the (Wed) Bushes? Investor Relations and High Frequency Trading
[Investing] Have you looked at your list of market participants lately? If you're a large, liquid issue,regardless of whether you are listed on NYSE or Nasdaq, Wedbush probably ranks high. In September 2007, Wedbush topped all liquidity providers at the Nasdaq, surpassing Morgan Stanley, Citadel Derivatives, Instinet and Lime Brokerage.

Determining Your Stock's Downside Risk in Rugged Markets
[Investing:Stocks] Do you try to measure downside risk in your stock resulting from either marketwide technical shifts or specific Street disappointment? We are not saying soaring oil futures, gilded gold prices and the sudden cachet of commodities traders should fill you with nameless dread. Nor or we saying they shouldn't.

Investor Relations, Reg NMS, Options And Global Markets
[Investing:Stocks] We are constantly refraining the three reasons why market structure matters to IROs - right answers to questions, right places for IR time and effort, right IR measurements. Now, let's apply options expirations to these hooks.

Electronic Trading, Prime Brokers and Investor Relations
[Investing:Stocks] If your stock behaved schizophrenically on Thursday October 11th, you were not alone. As a refresher, ModernIR categorizes trading volume (execution), which is the opposite of stock surveillance (settlement data). We use the execution data to identify the forces at work in equity trading. If the equity markets don't regain early October highs, we think the source of the rupture can be traced to trading.

Know Your Quarter End Market Structure
[Investing] Third-quarter trading ended inconclusively. In the sample group, we saw slight increases in structured products, prime brokerage order flow indicating modest hedge-fund month-end shuffling and a tight balance between what we call Prime and Electronic order flow. Structured products are sellside solutions designed to manage risk and achieve mostly short-term returns for buyside clients. The Prime and Electronic order flow is more proof that the buyside is cost-focused and using direct-market-access trading whenever possible.

Electronic Trading And IR - Separating Illusion From Reality
[Investing] Trading models now reflect revisions to mathematics and perceptions arising from the Fed's cut on 9/18. This was to be expected, but what matters is separating investing behavior from trading activity. (By the way, we saw bets in both directions setting up on 9/14 and 9/17 - and how those bets have shaped behavior in the wake of the rate cut.)

Quants Confident as FOMC, Quad-Witching, Mark Mid-September
[Investing] Quants. We've wondered whether quantitative investors like the Global Alpha Fund at Goldman Sachs, down 22.5% in August, would suffer a buyside crisis of confidence. They may still, but if trading measures temerity, Goldman remains bold. For Sep 10-14, Goldman had both its agency and crossing-platform desks in ModernIR's Volume Top 25 report and tallied 4.6% of total order flow. Impressive. We also today tuned to an NYSE-Arca IR conference call that included Goldman exec Jay Knopf from that firm's derivatives unit. Addressing concerns about quant models, Knopf noted that correlation shortcomings in quant models stemmed from a tiny proportion of code in black-box strategies, things that programmers can and do correct, real-time. Whatever the case, Speculative volume is up by a couple percentage points thus far in September - supporting our belief that real-time traders have won some business.

Investors Taking Somber View of Sellside Season?
[Investing] Last week we noted that diminished program trading and increased short-term volatility might be products of fear that could leave as the "A" team rode back onto Wall Street. Or not.

Watch ADF for "Broker-Neutral" Algorithms
[News-and-Society:Economics] There has been a steady rise of order flow on the Nasdaq's Alternative Display Facility (ADF), an avenue for electronic trading systems. Why should an investor relations department take notice? Because ADF is a broad proxy for risk-managed algorithmic trading in your stock.

The Herd Skitters Out of Summer
[News-and-Society:Politics] Two conclusions from the last week in the summer season, IROs. Who was in control? Short-term traders.

Volatility - Why Market Structure Matters
[Investing] IROs, you probably get a twinge now and again when people whine about your stock price, especially in volatile markets. It's a reminder why market structure - understanding the nature, kind, size and distribution of participants - matters, particularly in times of volatility.

Real Investors Back But Not in Charge
[News-and-Society] We'd love to say that trading data tell us the equity world is well again. Alas, summer sneezes persist, albeit with fewer Kleenexes piled around the refuse bin.

Fed Resets Rates But Not Reality
[Investing] We know the Fed changed its discount rate (the cost of borrowing capital from the Fed) and in effect opened all the teller windows. We also know from the Wall Street Journal and other news outlets that several big Prime brokers met with Fed folks and helped form a plan for the liquidity crisis that began filleting real investor flesh and gristle on August 13 (not just the flotsam and jetsam of subprime excess).