Investigating The Obvious

We all knew this was coming.  I wonder which obscure firm will take the fall?

From the WSJ:

Securities regulators have sent subpoenas to hedge funds, specialized trading shops and other firms as they probe possible insider trading before the U.S. government’s long-term credit rating was cut last month, people familiar with the matter said.

Securities and Exchange Commission officials demanded more information about specific trades made shortly before Standard & Poor’s Corp. downgraded the U.S. to double-A-plus from triple-A on Aug. 5, these people said. SEC officials are zeroing in on firms that bet the stock market would tumble.

Those trades could have reaped huge profits when the Dow Jones Industrial Average sank 5.5% on Aug. 8, a 634.76-point decline in the first day of trading after S&P announced it yanked the government’s top-tier credit rating.

It isn’t clear which investment firms have received subpoenas, and an SEC spokesman declined to comment Monday. But the subpoenas are unusually broad, seeking information about why certain trades were made, according to a person familiar with the matter.

There’s no way that this news didn’t leak out.  The 80 handle range after the news, I get.  The 50 handle range that traded before the news was released didn’t just appear out of thin air.

Source: U.S. Probes Rating-Cut Trades (Wall Street Journal)


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