Chillin' out till it needs to be funded
Bruno Iksil trades Credit Derivatives Indices for JP Morgan. With him at the helm the product’s volumes have increased as investors and banks stay wary of the Credit Default swaps per se and look for the final mark on what regulation will apply, and what residual risk and margins they have to bear as they continue netting their credits and credit derivatives with Credit Derivatives Indices to hedge and to bet on the likelihood of company defaults, indices replacing industry segments.
Hedge fund traders deduce from their being counterparty to Bruno Iksil, that his positions make him eligible to be known as the London Whale. Whether he is Moby Dick or the Mask himself, the hedge funds or the Goliath in the transactions have bet knowingly hoping that the price discrepancies created by JP Morgan buying the indices to lets say 100 bps ( the mark for Investment grade debt default indices (IBOXUMAE series 18) according to Business Week . Simpler strategies at hedge funds revolve around waiting for the London whale to exhale. Also since Bruno is in the Bank’s treasury he is definitely hoping to create these indices positions to net JP Morgan’s exposure or trade without cross Prop trading limits.
JPMorgan had $4.14 billion of combined revenue last year from the chief investment office, treasury and private-equity investments, according to the annual report. The treasury and chief investment office held a combined $355.6 billion of investment securities as of December 2011, up 14 percent from a year earlier, according to a year-end earnings statement.
Chief Investment Officer Ina Drew, who runs the unit, was among JPMorgan’s highest-paid executives in 2011, earning $14 million, a 6.8 percent pay cut from 2010, the bank said in a regulatory filing this week. Drew referred a request for comment to Evangelisti.
All that proves is that the biggest bank on the street is taking some big possitions and likely they would not have created raw exposures in such trading, creating hedges from other bank exposure, all being available to Treasury. And the so called unitary discrepancies still show a lack of trading liquidity in the product, in which case going against a big wall can’t do the waves much good!
Also see the debate on Volcker here from our current day Insight reviews..