Friday, 25 July 2014
Last updated 3 hours ago
Jan 14 2013 | 2:05am ET
In his latest missive from prison, Bernard Madoff takes aim at one of the most popular strategies in the hedge fund industry.
"Merger arbitrage could only be executed successfully by having the inside information as to whether there was going to be board of director approval of the pending merger," the infamous Ponzi schemer wrote to CNBC's Scott Cohn. "As well as having access to the anti-trust rulings."
Madoff, who pleaded guilty to fraud and who is serving a 150-year sentence, said he never engaged in merger arbitrage because of the need for insider information.
As with his previous letters to journalists, Madoff's latest is a wide-ranging affair, touching on signing bonuses, high-frequency trading, his allegedly legitimate market-making business, insider-trading and the Securities and Exchange Commission. He's no fan of the former two, for one.
"The real problem with signing bonuses is that pressure that the new firms put on their bonus babies to generate large commissions by promoting special products of the new firm to pay off those bonus costs," he wrote. He added, in his typically humble way, that he "tried to stop this practice" when he served on the Securities Industry Association, but "we never could."
He also said he found "fault" with Knight Trading CEO Tom Joyce's recent letter in The Wall Street Journal defending high-frequency trading. He compared—unfavorably—the "strict obligations as registered market makers" both he and Knight formerly offered to the "FLICKERING quotes that are provided by the high frequency trading firms."
Reiterating his Christmas Eve message to Cohn, Madoff reminded that "insider trading is nothing new." The only thing that has changed since his arrest, he said, is "the decision of the SEC to prosecute Wall Street's worst kept secrets."
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…