Daily Archives: August 6, 2014

Trading

How One Whistleblower Turned the Tables on High-Frequency Traders

A once esoteric corner of the stock market —- “order types” —- has taken center stage the past few years in the debate about the health of the market, the role of high-speed traders in it and how stock exchanges interact with clients.

A big reason for the scrutiny: Order types in many ways stand at the boundary between exchanges and their trading clients. As such, they play a crucial role in how buy and sell orders are handled and can determine whether an order is successful or not.

But few realized how complicated, and how problematic, they had become until a former high-speed trader, Haim Bodek, decided to blow the whistle to regulators in 2011.

First, a quick primer. Order types are instructions traders use to tell an exchange how a buy or sell order should be handled by the exchange, such as whether the order should be executed immediately or wait until a stock reaches a certain price level. There are hundreds of variations of order types, and many have proliferated in recent years, adding to the market’s complexity.

http://blogs.wsj.com/

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Trading

Hedge Funds Run by Women Outperform Those Run by Men

This morning, the Wall Street Journal reported on funds that choose to tie their fates to the performance of companies led by women. Barclays’ Women in Leadership Total Return Index, which consists of American companies with a female CEO or whose proportion of female board members is at least 25 percent, is one of number of new funds that aims to capitalize on the finding that companies with female leaders tend to outperform those where women are relatively absent. (Amusingly and depressingly, even if Barclays were based in the U.S., it wouldn’t qualify for its own fund, due to its lack of female leaders.)

The female-favoring trend the Journal identified stems from research suggesting that companies run by women simply do better. For example, a 2011 reportfrom Catalyst, a nonprofit promoting women in business, found that over the course of five years, companies with women on their boards had average returns on equity of 15.3 percent, while those of companies without any female board members were 10.5 percent. (Return on equity is a figure that gives a sense of a company’s ability to generate profit from shareholders’ investments.)

But the benefits of investing in female-led financial endeavors go even further than the Journal has it: Hedge funds run by women tend to outperform other hedge funds. A report put out in early 2013 by the accounting firm Rothstein Kass indicated that between January 2012 and September 2012, an index of 67 hedge funds owned or managed by women had a return of 8.95 percent—significantly more than the 2.69 percent return generated by an index “designed to be representative of the overall composition of the hedge fund universe.” (The 67 funds were chosen because they reported their monthly performance to HedgeFund.net or the Hedge Fund Research Database.) The impacts of these outsized gains, however, largely remain to be felt, as there are only about 125 female-run hedge funds in the world, according to Reuters.

http://www.theatlantic.com/business/archive/2014/08/hedge-funds-run-by-women-outperform-other-hedge-funds/375542/

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