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Jay Berkman

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  • Ivy And Commission Free Portfolios - October Update [View article]
    a compelling tool, for sure...albeit the notion of "commission free" is merely a ploy on the part of certain brokerage firms who, instead of getting a commission from the customer, are selling the customer order flow to 'preferred liquidity providers'...who have a different view re: meaning of best execution..instead of "commission free", a more apt marketing slogan might be "no-commissions, just bend-over."
    Oct 1, 2013. 12:39 PM | 2 Likes Like |Link to Comment
  • Hedging Market Sector Bets With ETF Options [View article]
    Happy to have added some more color to your thinking. I figured out straight away that your article was written from (and for) retail customer perspective. As such, and re: liquidity for hedging relatively small position of1000 shares via options with BBO that is more than 5 cents wide seems wide..that said..back in the day when I was a floor specialist, options were quoted in fractions, with the lowest increment being 1/16 ("teenies")--which applied to contracts trading under $2.00, and above $2, spreads could be as wide as 1/4 (or $.25). "..We've come a long way, baby!"One could argue that 3 or 4 cents on a 1000 or 2000 share holding is truly incremental in the overall scheme (yes, 3 cents adds up if you are an active trader and trading lots of 1000 or 2000 share pieces..) as my pal and head ETF trader at WallachBeth Capital would say "it is what it is.."
    Nov 14, 2012. 09:46 AM | Likes Like |Link to Comment
  • Hedging Market Sector Bets With ETF Options [View article]
    Strong observations..but..per... the biggest misconception with respect to "liquidity" is drawing too-quick conclusions from pricing displayed on the ubiquitous screen markets, and presuming what you see is what you get when executing an order. Two basic facts that too often fall between the cracks: 1. The most competitive bids/offers typically come from liquidity providers aka trading professionals (think big bank trading/facilitation desks and market makers) whose business model is to arbitrage pricing discrepancies (perceived or otherwise) between underlying cash and related options, or between one, two, or more products that correlate to the ETF in question. 2. For material aka block trades Professional traders will NEVER display their most aggressive actionable bids or offers on a screen (ok, I'm reminded never to use the phrase 'never'..) simply because they don't want to be gamed by competing professionals--whether those other professionals are HF "robots" or actual humans.
    In the institutional trading world, fund managers using ETFs--and the growing number who are using options on ETFs to smooth volatility, reduce downside exposure, or simply to generate more Alpha by capturing premium are best served by i. formulating a strategy with respect to pricing and desired returns (or a cap on how much to spend on 'insurance') ii. canvassing the market for competing bids/offers. ii. The only way to canvass properly is to poll liquidity providers and solicit best two-sided market for the ETF or the ETF option(s) in question. iii. Yes, proper canvassing requires the service of a 3rd party who is fluent in the market, maintains connectivity to all market centers, INCLUDING old-fashioned connectivity to universe of liquidity providers who provide better prices on the phone or via point-to-point messaging systems. Sounds complicated? Not for the select number of brokers who do this every day. Sounds like you're adding another cost (commission) in the equation that otherwise makes the exercise moot? Actually, the right broker can end up saving you money. I am a former options market maker (CBOE and AMEX) and former exchange specialist (NYSE, NYSE Options and AMEX)--when it comes to what's on screens, suffice to say, there's plenty that's hidden...Disclaimer, I currently advise one of the leading ETF intermarket brokers (WallachBeth Capital), whose initial business model started with and necessarily still includes institutional options broking. Retail investors whose orders might not meet minimum thresholds for institutional brokers need to ask their custodian exactly how their orders are executed..and whether their custody is receiving any payments from liquidity providers in consideration for routing orders to said liquidity providers.
    Nov 13, 2012. 08:59 AM | Likes Like |Link to Comment
  • The Truth About Low Volume ETFs [View article]
    reasonably good narrative, even though the topic of ETF liquidity is perhaps the most discussed issue on the industry education conference. That said, given that many fiduciaries who use ETFs to manage client funds still don't "get it" i.e. nuances of ETFs and specifically, making uninformed product choices based on "presumed" liquidity. The most objective (and plain-speaking) thought-leaders and experts on this topic is ETF execution trader Chris Hempstead at WallachBeth Capital. Easy enough for qualified fund managers to reach out to Chris via email (chempstead [at] wallachbeth [dotcom] to solicit his thoughts.
    Oct 15, 2012. 09:31 AM | Likes Like |Link to Comment
  • Burned By The Last Bear Market? Consider This Active Tactical Allocation ETF [View article]
    for those with a 'tactical' perspective, one could easily argue that ETNs created by Dennis Gartman/Mark Fisher's ("ONN" and "OFF") accomplish even more than the product described herein--and the 'fees' are actually less..(I do not own either of these products, so this should not be mistaken for a recommendation--merely an observation).
    Jul 10, 2012. 12:37 PM | 1 Like Like |Link to Comment
  • 25 Things Every Financial Advisor Needs To Know About ETFs [View article]
    SUPERB observations!
    Nov 12, 2011. 11:07 AM | Likes Like |Link to Comment
  • 25 Things Every Financial Advisor Needs To Know About ETFs [View article]
    Superb observations!
    Nov 12, 2011. 11:06 AM | Likes Like |Link to Comment
  • Leveraged ETFs Get 'Bad Rap,' CEO Says [View article]
    And, before the misinformed ETF bad-rapping extends to today's headline story re: rogue UBS trader that [purportedly] incurred a $2bil loss trading ETFs, this incident has NOTHING to do with the construct, trade comparison, clearing or settlement of ETF products. While the precise details of how Kweku Adoboli managed to pull off "a Nick Leeson" will likely unfold in the coming days/weeks, any idiot that wants to believe that this incident is an indictment of the ETF product, as opposed to an indictment of poor risk controls, need only appreciate that there isn't a bank on this planet that can claim it has systems in place to prevent an internal trader from "going off the reservation." No more than any bank can prevent an outside hacker from siphoning off millions of dollars through phishing or man-in-the-middle attacks, events that happen on a regular, if not reported basis.
    The fact is that exchange-traded funds present no more structural risk than any other exchange-traded financial instrument. Exchanges are, by purposeful design, the absolute safest venues by which to transact financial products of any type, whether single stocks, options, or commodities. When other parts of financial industry "get it", derivative products will have to be traded on regulated Exchanges. If only the big banks used their algorithmic muscles to continuously improve internal risk management systems, as opposed to dedicating all of their resources to wage Transformer-type HFT wars, and to have human (not artificial) intelligence processes in place to truly prevent rogue trading, the Adoboli story would have merely been a draft for a fictional screenplay.
    Sep 15, 2011. 06:41 PM | Likes Like |Link to Comment
  • High Touch Trading Remains High Value [View instapost]
    thanks, Candyce!!
    Aug 11, 2011. 08:18 AM | Likes Like |Link to Comment
  • High Touch Trading Remains High Value [View instapost]
    Prescient points made by Candyce! Most recent week's activity (and no doubt, the days/weeks ahead) provide a perfect illustration for any reasonably active trader or fund manager re" the value-add provided by high-touch brokers (e.g. firms such as WallachBeth Capital, or others). The role of objective broker who knows how to decipher volatile activity and efficiently canvass the full spectrum of liquidity providers--traders that will never show their full hand on a screen--is ever-more pertinent.

    Yes, in volatile trading, managers' ability to see the trees through the forest is often cloudy, and most merely want immediate gratification when entering/exiting a trading position--but the approach to depend on a fast market bid/offer reflected by a favored principal trading desk can, in hindsight, prove to be particularly costly. For those that have traded their own accounts for more than 15 minutes, taking a deep breadth and deferring to a professional that knows how to create a pricing competition among an assortment of liquidity providers will deliver the right price/
    Aug 8, 2011. 09:52 AM | Likes Like |Link to Comment
  • Apple's Mini 'Flash Crash' Today [View article]
    in due respect, Andy's attributing the seemingly disorderly decline to a purported "a failure on the part of exchange specialist to keep things afloat" illustrates (i) he needs to trade his law degree for an MBA, where maybe they'll teach him that AAPL is a NASDAQ-listed stock which is devoid of a specialist system (and in fact, the NYSE abandoned that traditional function years ago)--or, if that's too time consuming, perhaps he should spend 5 minutes researching the structure of exchange markets. That said, his underlying thesis (along with supporting comments made by other posters) is accurate. The electronification, and hence fragmentation of exchange-listed products is a topic that has caused spirited debate for the past several years, but from the perspective of this grey-beard former exchange specialist, that debate has failed to produce any constructive solutions. The regulators would seem to be clueless, but the fact is, the regulators (as well as the elected-officials they are supposed to answer to) are subservient to the major banks and brokers that actually control those exchanges, along with the OTC markets. While working as a parking valet in high school and college, we used to say "money talks, bullsh*t walks.."...This adage is what drives today's markets..the institutions that some think are supposed to protect investors.
    Feb 11, 2011. 08:51 AM | 8 Likes Like |Link to Comment
  • Demystifying Best Ex in a World of Fragmented Markets and Dark Pools [View instapost]
    After attending an industry conference that profiled 'best execution', I heard a big fund manager challenge the speaker by saying, "I trade to make at least a point or two on every trade, saving a few pennies on execution is meaningless.."

    Another manager turned and asked, "How many shares do you trade in any given month?"
    He said, "I don't know, a couple of million, at least."

    Then I asked him if he knows what 2 cents on 2 million shares adds up to. "Sure, its $40k!"

    Prompting silly me to ask "And, if you're trading 2 million shares a month, what's $40k x12?"

    Then he walked away from me and caught the arm of the guy from WallachBeth that was hosting the session. Duh...

    Dec 10, 2010. 01:37 PM | Likes Like |Link to Comment