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stock and upward pressure on the selling company’s stockTuesday October 29th NotesThreshold level for disclosure is 5%, any more than that and shareholders are notified of someone purchasing large amounts of shares(look at slides) Equity Swaps were a way of avoiding of ownership disclosure for a hedge fundoMultiple investment banks purchased stocks as a hedge and receive a small spread, but hedge funds could secretly gain leverage on firmsoDoesn’t follow spirit of the law, but doesn’t violate any lawsCollar TransactionsoEquity Collar on Yahoo Stock (in slides)oHedge using puts and calls at same time to reduce risk while avoiding disclosure SALES AND TRADINGTraders thrive on the day to day challengeAn hour from dog to wolf (?) book on trading and neuroscienceClient Related TradingoBuy and sell to make profits, but client-related traders also have the additional objective of helping investing clients trade profitablyoIf a client can’t trade profitably with an investment bank, the client may eventually stop trading with that bankoDoDivie focus int o two areasSupporting primary market transactions, involes purchasing securities directly from a corporate or govt issuer, reselling a a profit, and standing ready to repurchase at any timeParticipating in the secondary marketoIn order to provide “market making” service, a bank keeps an inventory ofsecurities and makes “bid” and “offer” prices on these securities based on their risk and liquidity Narrow bid offer spread with high volume is most attractive to institutional investorsSales
oCover individual and institutional investingo( more in slides)Equity Sales and TradingPrime BrokerageoHoused in trading division and focuses principally on hedge funds and other clients who borrow securities and cash to support their investment businessProvide leverage for hedge fundsAlso borrow shares to hedge funds to support short tradesRebate: rental income received by lenders of sharesoIn addition to lending, other services provided to investing clients include trade clearing, custody and settlement, real estate and computer assistance,performance measurement and performance reportingoThese products and services bring in fees that can be several billion dollarsSecurities LendingoMany large institutional investors own large blocs of stock for long periods of timeoWilling to lend shares to banks who re-lend to others for a feeoLenders receive cash collateral, adjusted based on mark-to market accountingo