Ok, thanks for that Madharry.
I'm 100% with you with regards to the role and responsibility of a Market Maker (MM). As I see it, the MM provides a buyer for a seller or a seller for a buyer, and if he can't find either for a Market Price Order (and not for a Limit Order) then he's obligated to fill the required role himself. He also sets the bid and offer. And, in addition, he's not required to divulge the details of either party. And also, in addition, he can take a position on that trade without divulging his action.
Based on what I saw of several of the Senator's comments I'm not sure how well aware some of them are of the true role of a MM.
The only aspect of this case that I believe may be related to a conflict of interest is if GS used their good reputation and relationship with their clients to persuade or influence them that the ABACUS instruments were items that they should go long on. While they, themselves, were going short because they had the expertise, know-how and inside knowledge to know that those self-same instruments were doomed to fail, especially due to their apparent relationship with Paulson, who was advising ACA as to what instruments to put into ABACUS, while he, himself, was heavily shorting those instruments via GS.
In addition, it appears that GS also persuaded ACA to take on Paulson, as their adviser, as to what they should put into ABACUS.
Anyway, it will be interesting to see how this all finally pans out and where GS find themselves in the world of investment and investors.
My guess it will be business as usual ... with maybe some additional Regulations that the likes of GS will no doubt find their way around. They have sufficient very smart guys to do just that. |
