Last week, Jefferies' chairman and CEO promised to release its current detailed exposure data after the close of business Friday.
This promise was a severe problem for Wall Street's Opacity Protection Team as it destroyed several myths about banks making detailed disclosure. The myths destroyed include:
- Market participants wouldn't be able to analyze the data - clearly, they can;
- This data cannot be made available at the end of every business day - clearly it can as it comes from the firm's electronic information systems; and
- Wall Street could not be market makers if everyone knew each firm's exposures - clearly it can, but it does reduce the profitability of proprietary trading trying to disguise itself as market making.
JEFFERIES REDUCES GROSS HOLDINGS OF SOVEREIGN DEBT
NEW YORK and LONDON, November 7, 2011 – Jefferies announced today that its trading positions in the sovereign securities of the nations of Portugal, Italy, Ireland, Greece, and Spain have been reduced by an aggregate of approximately $1.1 billion long and $1.1 billion short. This represents a 49.5% reduction in Jefferies’ gross holdings of these securities since the close of business Friday and resulted in no meaningful profit or loss on today’s trading activity or our remaining positions, which continue to be substantially matched by country and maturity. Jefferies’ current net exposure to these sovereign securities is currently $59 million, or 1.7% of shareholder equity, with negligible market or credit risk.
“We undertook this reduction in our holdings solely to demonstrate the liquid nature of this market-making trading book,” said Richard Handler, Chairman and CEO, and Brian Friedman, Chairman of the Executive Committee of Jefferies, in a joint statement. “We will now resume our normal market-making activities and serve our clients around the world.”