Buffet to expire before his options?

Interesting and amusing article written by John Gapper of the FT, on how Warren Buffet at Berkshire Hathaway has written $35bn of put options and is currently suffering from a mark-to-market loss of $5bn on the deal.

Buffet has basically received $4.5bn of premium for taking on the risk (placing the bet?) that four equity indices will not fall below their current levels during 2019 to 2027. Seems a strange investment for the man who called derivatives "weapons of mass destruction", and also very reminiscent of the long-dated options strategy for hedge funds (see earlier post). Gapper expresses confidence in Buffet as a risk taker, but points out that the real risk is whether Buffet will still be around to manage Berkshire Hathaway in 2027.

MiFID Market Data Deterioration

Members of the Investment Management Association (IMA) are not happy about the quality of market data following from the first year of MiFID being with us. According to an article in the FT this morning, a survery of IMA members has voiced concern over the fragmentation of trading venues leading to a deterioration in the quality of market data available.

Most institutions seem positive about the benefits of competition that multiple trading venues such as Chi-X, Turquoise and BATS bring, but IMA members would like to see a centralised venue where prices are consolidated and made available to the market (for free?), similar to the "consolidated tape" available for US markets.

Sounds like the institutional need for centralised data management across different departments and systems is also becoming apparent at a market and exchange level following MiFID. Multiple trading venues and decentralisation is necessary to bring the benefits of competition, but these benefits unsurprisingly do not come without costs or issues (see earlier post).