CreditTrader

When Hedgies Attack: Morgan Stanley Drops 40% on Rumors

Just for all those conspiracy theorists, CDS markets in MS were pretty much frozen this afternoon. There was no rush to buy protection, there was no massive entrant(s) into the market ahead or after the rumor, there was simply no trading (some indicative levels) but no major trading. Noone is willing to sell protection and thopse that are are not good enough quality to encourage buyers to act...sorry guys, this one is simple, who would want to own a highly leveraged, low quality balance sheet entity whose business model faces significant (understatement) headwinds...and on a day when the CDS market begins to look seriously at a buy-side driven trading and clearing platform. Dealers in general can expect margins to drop significantly (that is why they have been so vociferous over defending the opacity of OTC markets - coz they get the flows and the margins). Sorry to go on - but this whining/blaming CDS for the current situation just shows the level of general ignorance among both retail and professional investors when it comes to financials and credit markets.