: Tagged 'derivatives'

Explaining Southern California's economy

The best blogger take on the $8.2 billion NYSE-IntercontinentalExchange merger

Matthew DeBord |
Tourists pose for photographs in front o

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Tourists pose for photographs in front of the New York Stock Exchange. The NYSE and ICE announced an $8.2 billion merger on December 20.

A busy day on Wall Street

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Traders work on the floor of the New York Stock Exchange.

Markets React To Results Of Fed Policy Meeting

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More traders work on the floor of the New York Stock Exchange.

Stocks Trade Drop On Employment Data

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Yet more traders work on the floor of the New York Stock Exchange.

NYSE trading floor

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Traders. Working. On the floor of the New York Stock Exchange.

Dow Jones Industrial Average Closes Slightly Down

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The NYSE has merged with a company no one has ever heard of, based in Atlanta, trading stuff no one understands.

Marvel Studios Celebrates Release Of "Marvel's The Avengers" At The New York Stock Exchange

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The NYSE: It's a movie set.

U.S. Markets Open Under Uncertain Economic Conditions

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And back to the traders. Working.

Dow Plunges 500 Points On Grim Global Economic Outlook

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He's working, too, although it looks like he's just thinking hard. On the floor of the NYSE.

Mercer 20355

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An American flag hangs in front of the New York Stock Exchange, symbol of America and American capitalism.


At Reuters, Felix Salmon has, predictably, the best take on the just-announced $8.2 deal for IntercontinentalExchange Inc. (ICE) to buy the New York Stock Exchange. Yes, that New York Stock Exchange, itself combined these days with another exchange called Euronext.

Felix's basic point — and this may require a bit of gray-cell exertion to get — is that there are basically two distinct worlds in which trading happens: the old school world of stocks, with which we're at least passingly familiar; and a new school world of trades in products that are based on  some other product or asset — derivatives. 

The derivatives market is vast. But the vast majority of people probably hadn't even heard of derivatives until the financial crisis, when "collateralized debt obligation" and "credit default swap" lurched into the popular vocabulary.

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Quote of the Week: Greek debt crisis edition

Matthew DeBord |
Greece Faces Economic Collapse As Parties Dispute EU Finance Package

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He might not be worried about Greece's recent default and payout of credit default swaps. But some other people are.

I just discovered Tony Alfidi's blog and have been enjoying his uncensored views on a variety of tech and finance subjects. I agreed with him on Apple's mastery of planned obsolescence and now I'm tempted to agree with his verdict on credit default swaps (CDS) — a number of which just kicked in as Greece "defaulted" on some of its privately held sovereign dealt. 

Some people think that CDS, despite their role in the financial crisis (they brought down AIG), remain useful, as a means of hedging risk and as a relatively recent example of financial innovation that was sadly misused. 

Alfidi says un-uh:

I've always believed that credit default swaps are meaningless and even dangerous. [There's your Quote of the Week!] Banks and hedge funds use them to place directional bets with no regard for a counterparty's solvency. The European versions of AIG, whoever they are, can now breathe easier for a few weeks knowing they can get away with more uncapitalized CDS writing.

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