Simulating HFT for Low-Latency Investors - The Investor’s View (Robert Almgren)
Data Explorers Presentation, Bloomberg London Offices 15th September 2009
1. Nothing in this document constitutes an offer or a solicitation of an offer to buy or sell any security or other financial instrument or constitutes any investment advice or recommendation of any security or other financial instrument. BLOOMBERG TRADEBOOK believes that the information herein was obtained from reliable sources but does not guarantee its accuracy.
11. Expected rights issue candidates Company Catalyst % stock on loan (change on week) Bilfinger Berger (NR) To fund acquisitions 2.15% (-2.19%) Immofinanz Awaiting AGM results- first step towards merger with ImmoEast 8.57% (+9.0%) RSA Insurance Targeting AIG LatAM assets – leading shareholder expecting EUR 1bn deal 0.71 (+156%) Barratts EUR 500m deal expected- second wave of UK housebuilders exp end September- advisers appointed 5.30% (+18.5% ) Alstria Pitched - planning to cut debt without rights issue, could use proceeds for acquisitions. Not short term 0.47% (+3.2%)
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15. Investors’ risk appetite looking ahead Source: Data Explorers; FactSet The SPX is up 12% YTD and fund managers will be looking to lock-in profits. One of the best proxies for investor sentiment is the borrow level in the SPDR ETF (Ticker: SPY ). Since September 7 th , short interest in the SPDR as measured by the quantity of shares on loan has risen by 24% from 60.8m shares to 80.0m shares. The USSI data which will be published later this week will back this up. Big new borrows in the SPY since 7 th Sept.
16. Appendix 1 The DNS indicator is based on the normalized sum of the moving average of utilization (a DX measure of supply vs. demand in the securities lending market) and the change in utilization. This indicator is based on a relative scale (normalized) from 0 to 100. A relatively high DNS generally reflects negative sentiment (an increasing amount of shorts relative to longs) while a low number shows relatively less negative sentiment. This measure is best viewed over a time series. A rising DNS signifies an increase in negative sentiment for the security which represents a potential risk for long positions and may indicate a signal for going short or underweight. A falling DNS signifies decreasing negative sentiment and may signal a move to close shorts or to go overweight. DNS (Data Explorers Negative Sentiment) Calculation DNS = a1 *(Previous 8 working day moving average of Utilisation) + a2*(Absolute Change in Utilisation over previous 7 working days) Where a1 = 1 a2 = 1 Example Utilization for previous 8 days = 25, 26, 27, 29, 30, 32, 33, 35 8 day Moving average = (25+26+27+29+30+32+33+35)/8 = 29.6 Current Utilisation = 36 Absolute Change = 36 – 26 = +10 Indicator = 1* 29.6 + 1*(+10) = 39.6 This is then normalized with the other indicators in the sample so that it lies in the range between 0 and 100. Calculation of the DNS Indicator
17. Appendix 2 List of companies which show signs of pre-borrowing We analysed DealReporters’ universe of 121 announced or potential rights issues candidates and compared cash equity volumes 1 month before the announcement date and 1 day before announcement. If the cash equity volumes had not risen, but the quantity of stock on loan had risen, there was potentially pre-borrowing in these names.
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