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Non-Tech : Banks--- Betting on the recovery -- Ignore unavailable to you. Want to Upgrade?

To: tejek who wrote (914)	5/14/2010 11:03:59 PM
From: Asymmetric	Read Replies (2) \| Respond to of 1428

Quattrone Makes Comeback, Flings Expletives in CSFB Saga: Books . Review by Susan Antilla / Bloomberg / May 5, 2010 Frank Quattrone, the “it” banker of the 1990s high-tech boom, is back in the headlines -- as a player, not a defendant. His merchant-banking boutique, Qatalyst Group, worked with Goldman Sachs Group Inc. as an advisor on the sale of smartphone maker Palm Inc. to Hewlett-Packard Co. for $1.2 billion. Quattrone would presumably like to forget his successful courtroom battles against charges that he obstructed justice during probes into the initial-public offering practices of his former employer, Credit Suisse First Boston. Yet here comes Randall Smith with “The Prince of Silicon Valley,” a book recounting Quattrone’s fight to clear his name of a 2004 conviction, which an appeals court overturned. Smith, a senior Wall Street Journal staffer whose reporting raised so many questions about the banker, describes two Quattrones. One is a powerful micromanager who once demanded, and got, everything from a personal publicist to the power to fire research analysts. This is the man who put together some of the era’s hottest deals, including offerings of Cisco Systems Inc. and Amazon.com Inc. The other Quattrone is a self-professed innocent bystander who during the CSFB inquiries initially asserted that he didn’t decide who got IPO shares. It’s the first Quattrone who comes across most indelibly in this detailed -- sometimes too detailed -- account. What emerges is a portrait of a man who threw his weight around with a surfeit of arrogance even by Wall Street’s standards. Mr. Franchise During a conference call in 2001, for example, some CSFB officials were grappling with the implications of the IPO probe. One staffer said they should consider risks to the firm’s franchise, only to hear Quattrone bark back that he WAS the -- expletive deleted -- franchise, says Smith, arguing that Quattrone’s clout became a liability. “Quattrone became so confident, and had such economic power within his organization, that he became exempt from some of the routine checks and balances, rickety as they might have been at CSFB, that had been designed to promote compliance with the rules,” Smith writes. At the heart of the investigations by securities regulators and federal prosecutors was “spinning,” a practice usually defined as doling out coveted IPO shares to executives to win their investment-banking business. Smith expands on the definition, presenting evidence that spinning also involved brokers demanding paybacks for their customers’ IPO gains. Conviction Overturned Quattrone faced two trials on charges of obstructing justice in the probes into CSFB’s share allocations in IPOs. Smith gives us much information about the infamous e-mail in which Quattrone forwarded a colleague’s instructions to “clean up those files” even as company lawyers were getting document requests from the Securities and Exchange Commission and other authorities. At the top of the message, he wrote, “i strongly advise you to follow these procedures.” The first trial ended with a hung jury in 2003; the second resulted in a conviction in 2004 for obstruction of justice and witness tampering. He was sentenced to 18 months in prison before a federal appeals court overturned the conviction, saying the jury had received flawed instructions. His lifetime ban from the securities industry was reversed. Quattrone declined to be interviewed by Smith for the book. His spokesman, Robert Chlopak, told this reviewer in an e-mail that the only wrongdoing evident in the book “is that Mr. Smith’s own coverage of Mr. Quattrone in the Wall Street Journal, on which the book is based, has been slanted and inaccurate for the past 10 years.” Missed Opportunity Smith’s editor at St. Martin’s Press, Phil Revzin, said in an e-mail that the publisher has “full confidence in Mr. Smith’s reporting in the book.” Unfortunately, Smith fails to paint the big picture and draw broad conclusions. He includes too many players, shares too many verbatim e-mails, and sometimes left me wishing for a cheat sheet to keep tabs on names and dates. Quattrone comes across here as a mixture of P.T. Barnum and TV game-show host Monty Hall. In making a pitch for the banking business of Latitude Communications Inc., he exclaimed that his team had “an attitude” about Latitude. A year later, as prosecutors were gathering evidence against his group, Quattrone held court at his annual conference at the Phoenician luxury resort in Scottsdale, Arizona, offering the crowd appearances by Lance Armstrong and Sheryl Crow. A Barron’s reporter at the event asked Quattrone what kept him getting up each morning to work so hard. His answer: a desire to stick it to Morgan Stanley. Another Wall Street biography, another shining moment for U.S. financiers. “The Prince of Silicon Valley: Frank Quattrone and the Dot-Com Bubble” is from St. Martin’s Press (368 pages, $30). >>>>> Quattrone Reunites With Credit Suisse Investment Banker Boutros By Michael J. Moore and Zachary R. Mider April 22 (Bloomberg) -- Frank Quattrone, one of the top investment bankers to technology companies during the Internet boom, hired his former deputy George Boutros from Credit Suisse Group AG to join his two-year-old advisory boutique. He also hired Jason DiLullo, a managing director from Credit Suisse and one of Boutros’s colleagues in San Francisco. Boutros, 49, will be a senior partner at Qatalyst Group, the San Francisco-based firm said in a statement yesterday. Quattrone, 54, and Boutros led a group of tech bankers for more than 10 years as they jumped from Morgan Stanley to Deutsche Bank AG to Credit Suisse. Boutros remained at Credit Suisse after Quattrone left under pressure in 2003. DiLullo, 38, who has been at Credit Suisse since 1998, will be a senior partner as well, the firm said. Quattrone, who managed more Internet share sales in the 1990s than anyone, founded Qatalyst in 2008 and quickly signed up technology companies including Google Inc. as clients. The firm advised Google on Microsoft Corp.’s $44 billion bid for Yahoo! Inc., Data Domain on its sale to EMC Corp. and QuinStreet Inc. on its initial public offering in February. “I am thrilled to be reunited with George, who was among my closest partners,” Quattrone said in the statement. “He is one of the most experienced advisers in the technology industry, and has participated in many of the most significant and industry-defining transactions of the last twenty years.” In 2003, the National Association of Securities Dealers filed a complaint accusing Quattrone of giving out IPO shares to favored executives to win investment banking business. A month later, federal prosecutors charged him with obstructing justice. Legal Appeal He was convicted in the obstruction case in 2004 and sentenced to 18 months in prison. Two years later, he won his appeal, authorities dropped both cases and he avoided jail. He started Qatalyst in March 2008. Boutros is one of Credit Suisse’s top dealmakers, based in San Francisco with clients in the technology and health-care sectors. He has advised on more than 300 transactions, including Sun Microsystems Inc.’s sale to Oracle Corp., Google Inc.’s purchase of Youtube, and Pixar’s sale to Walt Disney Co., according to the statement.

To: tejek who wrote (914)	5/14/2010 11:22:59 PM
From: Asymmetric	Read Replies (2) \| Respond to of 1428

Exclusive: Waddell is mystery trader in market plunge . By Herbert Lash and Jonathan Spicer Herbert Lash And Jonathan Spicer Reuters / May 14, 2010 news.yahoo.com A big mystery seller of futures contracts during the market meltdown last week was not a hedge fund or a high-frequency trader as many have suspected, but money manager Waddell & Reed Financial Inc, according to a document obtained by Reuters. Waddell on May 6 sold a large order of e-mini contracts during a 20-minute span in which U.S. equities markets plunged, briefly wiping out nearly $1 trillion in market capital, the internal document from Chicago Mercantile Exchange parent CME Group Inc said. The e-minis are one of the most liquid futures contracts in the world, providing holders exposure to the benchmark Standard & Poor's 500 Index. The contracts can act as a directional indicator for the underlying stock index. Regulators and exchange officials quickly focused on Waddell's sale of 75,000 e-mini contracts, which the document said "superficially appeared to be anomalous activity." More than a week after the incident, it was still not clear what impact the unusual trading in the futures contracts had on the broader meltdown in the stock market. Waddell manages the $22.1 billion Ivy Asset Strategy fund, which is well-known for hedging with equity index futures when manager Mike Avery, who is also chief investment officer at the company, feels uneasy about the market. The Asset Strategy fund has dropped 2.76 percent this quarter, compared with a 0.80 percent decline in the S&P 500, data from Lipper Inc, a unit of Thomson Reuters Corp show. Gary Gensler, chairman of the U.S. Commodity Futures Trading Commission, said in congressional testimony on Tuesday that it had found one sale that was responsible for about 9 percent of the volume in e-minis during the sell-off in the U.S. markets. Gensler said there was no suggestion that the trader, whom he did not identify, did anything wrong in only entering orders to sell. Gensler said data showed that the trades appeared to be part of a bona fide hedging strategy. WADDELL SAYS WAS HURT TOO It is unclear what impact the trading in the e-minis had on stock prices during the plunge, but regulators have scrutinized futures trading because the sharp decline in that market preceded the dive in the broader U.S. equities market. The document said that during the sell-off and subsequent rally, other active traders in e-minis included Jump Trading, Goldman Sachs Group Inc, Interactive Brokers Group Inc, JPMorgan Chase & Co and Citadel Group. During the 20-minute period, 842,514 contracts in e-minis were traded. The CME document did not provide a break-out of Waddell's trading during that crucial time, but said from 2 p.m. EDT (1800 GMT) to 3 p.m. it traded 75,000 contracts. Overland Park, Kansas-based Waddell declined to return calls seeking comment. But in a statement, the company said: "Like many market participants, Waddell & Reed was affected negatively by the market activity of May 6." Waddell said in its statement that it often uses futures trading to "protect fund investors from downside risk," and on May 6 it executed several trading strategies including the use of index futures contracts as part of normal operations. The notional value of the contracts sold by Waddell was $4.2 billion, according to document. How much Waddell paid for the contracts was not stated, but typically the cost would be far less than their notional value. The company, which advises and distributes the Ivy Funds, has made a name with good results from its family of mutual funds. Waddell's shares fell after the Reuters report, and closed down 5.3 percent at $32.25. Volume was 1.28 million shares, more than triple the daily average this year. Analyst Jason Weyeneth of New York brokerage Sterne Agee said he had not learned anything on Friday to lead him to change his "neutral" rating on Waddell stock. The CFTC declined to comment. A CME spokesman, who declined to comment on the document, said the Chicago-based futures exchange operator never discusses customer activity. "We found no evidence of improper trading activity or erroneous trades by CME Globex customers," said CME spokesman Allan Schoenberg. Trading in e-minis takes place entirely on the CME's Globex exchange. Hedge funds and high-speed trading firms often use the e-mini in an arbitrage strategy that seeks to capture the change in prices between the futures contract and the S&P 500. Waddell's contracts were executed at Barclays Plc'sBarclays Capital and later given up to Morgan Stanley, according to the document. CME said it spoke to representatives from both banks on May 6 and planned to speak to Waddell representatives the following day. The firm oversaw $74.2 billion in assets as of March 31. Morgan Stanley told CME that it did not have concerns regarding Waddell's activity because it "would typically use equity index futures to hedge macro market risk associated with the substantial long exposure of its clients," the document said. 'QUITE A SHOCK TO THE MARKET' Gensler said the contracts were sold between 2:32 p.m. and 2:51 p.m., the height of the meltdown. The market for e-minis on May 6 fell more than 5 percent in a little more than 5 minutes starting at 2:40 p.m. -- the height of the crash, the document said. The e-minis began to recover before stock prices turned higher. An order the size of the Waddell contract would be a big trade to execute on a normal day, said a trader whose firm is active in the S&P 500 futures market. About 50,000 contracts are typically traded in an hour, the trader said. "To get rid of 75,000 contracts, that's a lot of trading even if the market is healthy," the trader said. "But when suddenly the market changes and there's not as many bids there to trade with, 75,000 is going to cause quite a shock to the market. "That's an enormous position for anybody, whether it's a hedge or whether it's a trade. It's a big position, no doubt about it," the trader said. >>>> Waddell & Reed: Didn’t mean to play in last week’s market plunge Kansas City Business Journal Friday, May 14, 2010, 2:15pm CDT Waddell & Reed Financial Inc. stands in the center of a firestorm Friday, after Reuters discovered documents showing Waddell & Reed was involved in trades that contributed to the market crash on May 6. The Dow Jones Industrial Average lost nearly 1,000 points — almost 10 percent of its total value — in a 20-minute span on May 6, eliminating about $1 trillion in market capital. The plunge left companies such as Lenexa-based BATS Exchange, the nation’s third-largest securities exchange, trying to figure out what went wrong. During a Congressional hearing about the matter Tuesday, Gary Gensler, chairman of the Commodity Futures Trading Commission, said an undisclosed futures trader accounted for about 9 percent of the trading volume in e-mini contracts, some of the most actively traded stock-index future contracts. He said all of this particular trader’s activities involved sell orders. Most of the other 250 traders who were active during that period were buying and selling. Reuters reporters Herbert Lash and Jonathan Spicer discovered an internal document from CME Group Inc. showing that Overland Park-based Waddell & Reed sold 75,000 e-mini contracts during that span. That’s about 11 percent of the 842,514 e-mini contracts traded during the 20-minute crash. Waddell said Friday that it had no intent to cause disruptions in the market and that the trades were part of the normal operation of its flexible portfolio funds. “Such trades often are executed in response to market activity, and are undertaken to protect fund investors from downside risk,” Waddell said in a written statement. “We use futures trading as part of this strategy, broadly known as hedging. This is a long-standing and well-monitored practice in certain of our investment portfolios.” Waddell & Reed said that it had executed trades of this size previously and that executives at CME Group have been quoted describing Waddell as a “bona fide hedger” and not someone intending to disrupt the markets. “Further, CME noted that they identified no trading activity that contributed to the break in the equity market during this period,” Waddell said. “Like many market participants, Waddell & Reed was affected negatively by the market activity of May 6.” Read more: Kansas City Business Journal: Waddell & Reed: Didn’t mean to play in last week’s market plunge