Is SAC using " Gating " as a way to deal with its unwinding of leveraged positions ? Will be find if liquidity is fine or whether liquidity is always there until you really need liquidity ? And what about the zaniness in the Shanghai market last night ???

Here we go with SAC.....

http://www.zerohedge.com/news/2013-08-16/sac-gating

SAC Gating?

Submitted by Tyler Durden on 08/16/2013 07:56 -0400

• Cohen
 
• SAC

Think the market is liquid? Think again, especially if you are one of the unlucky ones who bought into the SAC get rich quick dream and now just want to get your money out of the world's most notorious hedge fund. According to Bloomberg, the CT firm that has been branded by the government as a "veritable magnet for market cheaters," has "refused clients’ requests that the firm speed up payouts on the billions of dollars earmarked for withdrawals, according to three people familiar with the discussions."

SAC, which faces a midnight deadline for redemption requests from investors who want to pull money from the firm, has told clients that final payments will be made at the end of the year. Some investors have pushed Cohen to give clients their money back before then, fearing that the government could freeze the funds’ assets, said the people, who asked not to be identified because Stamford, Connecticut-based SAC is private. The government has said it doesn’t plan on restraining assets.

SAC started the year with $15 billion of assets, about $6 billion of which belonged to outsiders. As insider-trading probe against the firm intensified, clients redeemed more than $3 billion in the first half of 2013, which is being returned over the course of this year. SAC’s executives have said they expect the firm to start 2014 with about $9 billion in assets and that virtually all outside investors will be gone by then, according to people familiar with the firm.

“People want to get out of the fund and be done with the headline risk,” said Larry Chiarello, a partner at SkyView Investment Advisors LLC in Shrewsbury, New Jersey, which invests in hedge funds.

Now while one can see why the future family office may enforce contractual lock up rights on the exodus of external clients, it doesn't explain it. Especially if, as conventional wisdom says, SAC is invested purely in liquid securities, for a total of somewhere around $10 billion. Should be one week of VWAP programs at most right? Well, not if as we previously observed when accounting for leverage, SAC's true gross up may be somewhere around $40 billion. That would take many more selling VWAP programs. And once the block-sniffing algos figure out what is going on, watch out below.

All of which goes to the fundamental thesis: the market which over the past 4 years has been levitating on virtually no volume, is massively illiquid and very much unprepared for any size selling. SAC's implicit "gating" just confirmed that.

Yes, one may buy puts to hedge downside, but when liquidation events take place and the only left option is to sell, then things go bump in the night. At that point all those who have bet their careers on the fact that levitation to the upside is irrelevant, will certainly want to polish their resumes.

Finally, it goes without saying that in the liquidity prisoner's dilemma, he who sells first, sells best.

China has a flash smash  moment ????

http://www.zerohedge.com/news/2013-08-16/1-billion-fat-finger-burnt-head-rotten-brow-firm-sent-china-market-6

$1 Billion Fat Finger At "Burnt Head Rotten Brow" Firm Sent Chinese Stock Market Up 6%

Submitted by Tyler Durden on 08/16/2013 07:13 -0400

• China
 
• Nikkei
 
• Reuters
 
• Trading Systems
 
• Volatility
• Yuan

For those who missed it, this is what China (and global) traders saw early this morning:

As it turns out, just as we had suspected, this 6% move in the Chinese A-shares index, was nothing more than a CNY7 billion (just over $1 billion) fat finger in the "arbitrage system" of Everbright securities. And just what system is that - if the market is about to sell off do a smash-the-open to kill all downward momentum, and as for the losses from the trade, well there is a PBOC to foot the costs? Also, if all it takes to move a multi-trillion stock market is just a $1 billion "fat finger", imagine what $85 billion per month would do...

As Marketwatch reports, multiple traders and media accounts cited an unintended “fat finger” execution of a 7 billion yuan ($1.13 billion) order at a local brokerage as the cause for the sudden spike in Shanghai stocks. The Shanghai Stock Exchange Friday afternoon confirmed that the investment strategy department at Everbright Securities Co. had encountered a problem in its arbitrage system, according to a Xinhua news report.

The FT adds:

A Chinese brokerage has launched an internal investigation of its trading systems, just hours after a suspected fat finger trade caused a spike in the country’s main stock market.

Everbright Securities said in a statement to the Shanghai stock exchange on Friday afternoon that it had experienced some problems with its internal trading systems earlier in the day and was looking into the cause.

Shares in the company were suspended in Shanghai, while those of China Everbright International, a Hong Kong-listed entity owned by the same parent, dropped as much as 8.5 per cent.

China’s stock regulator said on Friday that it was also investigating the reason for the volatility, Reuters reported.

A spokesman for China Everbright Bank, another subsidiary of Everbright Securities’ parent company China Everbright Group, said he had no information on the situation at the brokerage.

“You may not be able to reach them over there since they must be ‘burnt head rotten brow’ [a Chinese phrase meaning bruised and battered] right now,” the spokesman said.

“Chinese markets turned on a dime and went crazy, which was interesting just as everyone was settling into a quiet afternoon. ... The rumor and intrigue that centered on the move was huge, with dealers phoning around the houses trying to work out exactly what occurred,” said IG Markets chief markets strategist Chris Weston.

“Whatever the outcome, these sorts of moves do not help confidence,” he said.

Actually that is completely incorrect: since there is no confidence in markets any more, what it does to market confidence is irrelevant. However, since market levels are the only policy vehicle left for central-planners, it does not matter how the [S&P/Nikkei/FTSE/EuroSTOXX/SHCOMP] closes higher, as long as it closes higher. Period.

Because if one really wants to see panic, then wait until "confidence" in central planning is shaken. That's when the chips really fall.

Chinese Stocks Flash-Smash +6%; Exchange Says "Operations Normal"

Submitted by Tyler Durden on 08/16/2013 - 00:07

Update: The entire spike has been fully retraced by the close of China

In the new normal where broad-based equity indices that represent the corporate health of entire nations in one bit-sized propaganda-plagued number, the fact that China's Shanghai Composite spiked instantaneously by 6.2% this evening will come as no surprise...Some large stocks (PetroChina and AgBank jumped as much as 10% before plunging back instantly to reality). While the Exchange is "investigating" the spike, their PR is currently saying that it is "operating normally" - 'new normally' we presume. Between today's gold and silver spikes, FX market volatility, and now Chinese stocks gapping wildly, it would appear something is afoot in the leveraged world of carry-trades (and instant illiquidity).