Sean Quinn and CFDs in Anglo

Another factor is that while the broker is holding the shares to match the bet, they have no interest in the rise/fall of the stock, as long as SQ is a good credit risk. While holding the shares they can make them available for short selling, increasing their return and reducing the lease rate for those short the stock. This makes it cheaper to hold a short position and lowers the risk of a short squeeze.
 
Ian Kehoe's comments were interesting after the documentary. Potentially it was SQ's plan to make a play for the bank. Almost a natural progression from the insurance business and plays in to the narrative of him craving to be respected by the big boys 'up in Dublin'.
 
CFD's are OTC so in theory they can all be different between different providers and customers. SQ could have had a bespoke contract with various clauses or options that could have impacted the intrinsic value of his contract(s) beyond the divergence of the price of the underlying. The terms of the contracts were never publicised.
 
Itchy said:
Ian Kehoe's comments were interesting after the documentary. Potentially it was SQ's plan to make a play for the bank. Almost a natural progression from the insurance business and plays in to the narrative of him craving to be respected by the big boys 'up in Dublin'.
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To be fair to Anglo, up to a point(!), their business model was good. Strong relationships with their customers, quick decisions, lean, etc. They just went nuts. It’s often said that AIB were arguably the more guilty party in that their reaction to Anglo’s growth kind of triggered the war which led everyone to madness.

SQ probably saw that, dealt with them, and thought it was a good outfit.

His mistake was thinking that regulated and unregulated businesses are the same (nobody cares if you suck working capital out of your glass factory) and thinking that he was smarter than the folks at places like Anchorage Capital etc.
 
No fan of SQ but claims that he has cost the taxpayer €2bn seem a bit wayward. I think Anglo cost €30bn. Do we blame those who helped themselves to the unsound lending, those that did the lending, those that regulated the lenders or the Government for deciding to bail them out?
 
Duke of Marmalade said:
Do we blame those who helped themselves to the unsound lending, those that did the lending, those that regulated the lenders or the Government for deciding to bail them out?
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Probably all of the above.

But did he bring the house down through his own actions (with consequences for all the parties mentioned above) or was Anglo doomed to fail at some stage anyway?
 
Duke of Marmalade said:
No fan of SQ but claims that he has cost the taxpayer €2bn seem a bit wayward. I think Anglo cost €30bn. Do we blame those who helped themselves to the unsound lending, those that did the lending, those that regulated the lenders or the Government for deciding to bail them out?
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All of the above.
And I think the Quinns would have faded into that hazy mist of culprits had it not been for their outrageous machinations afterwards to put several hundred of millions (or billions) worth of assets beyond reach, much of which has disappeared - whether still in their ultimate control or pilfered from them by some of the ultra-shady wheeler-dealers they asociated with in far-flung lands. Not to mention the campaigns afterwards against administrators, potential investors in their former businesses, or current managers - whether they were directly responsible for initiating and overseeing the intimidation and violence or not.
 
Salvadore said:
Probably all of the above.

But did he bring the house down through his own actions (with consequences for all the parties mentioned above) or was Anglo doomed to fail at some stage anyway?
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Good question. The real cause of the crash was the housing bubble, fuelled by very cheap lending, as Irish banks were now able to borrow at almost ECB rates from the likes of German banks. We were therefore particularly vulnerable to the credit crunch. No way did SQ's stupidity cause our crash, though he undoubtedly made the bail out of Anglo more expensive. In a way SQ was no more guilty than ordinary Josephine Soap paying way over the odds for a house in Dublin 212 because she got a 100% Tracker mortgage. We all partied :)
 
Itchy said:
I think it was mentioned that he had in the order of 25% exposure to the Bank, shares and CFD's, so not strictly all CFDs. As BB mentioned, due to the size of the position the broker likely purchased shares in the market to match SQ's bet. So SQ didn't hold the shares directly, but they were effectively removed from the float. In the Anglo situation, the share price was falling. The broker would be holding the shares, however, the broker would also make the shares available for short selling, exacerbating the fall in the share price by lowering the cost to short the stock. SQ's position was underwater, so for the bank, they recognized that there was a high chance that SQ would close his positions, with the broker consequently dumping the shares they were holding, causing a further significant drop in the Share price. This what the market also suspected so traders kept up the pressure on the stock price.
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I think you deserve a prize for the best knowledgeable and understandable explanation of the Quinn - Anglo CFD debacle.
 
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What date was the meeting with Drumm and Fitzpatrick in Mullingar when after disclosing he had 25% holding ,they told Sean Quinn to stop buying and reduce his position .This was a fatal error of judgement by SQ when he continued buying more shares after this meeting . .
imo Sean Quinn was treated badly by irbc and should have being given chance to trade out of his debt by selling assets abroad and some form of writing down of debt
 

Early Riser said:
And I think the Quinns would have faded into that hazy mist of culprits had it not been for their outrageous machinations afterwards to put several hundred of millions (or billions) worth of assets beyond reach, much of which has disappeared
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Even apart from the CFDs in Anglo, if that had not happened he still would have been in trouble with the war in Ukraine and the confiscation of western assets in Russia by the Kremlin. Also I think that shopping mall in Ukraine looks like the one that was hit by a Russian missile back in April. So Putin would have been in his cross hairs now.
 
I have moved the argument over what CFDs are to :

CFDs, Junk Bonds and Derivatives

Moderator's note: I have moved these posts from the Seán Quinn thread a) They facilitated anonymity - It wasn’t obvious that he was buying the shares. He wasn't buying shares. Had he bought shares, the catastrophe might have been avoided. He was trading in derivatives, better known as junk...
www.askaboutmoney.com
 
Brendan Burgess said:
Hi Ceist

While buying CFDs is similar to betting on a horse, it is very different. If I back a winning horse, the bookie loses. The horse is not affected.

My understanding is that "buyers" and "sellers" of CFDs is that they are matched. So if I bet on CRH going up, the issuer of the CFD has bettors on the price going down or they actually buy the shares. Unlike the bookie, they are not taking any risk other than the risk of me not paying.

Brendan
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The problem for Quinn was his cfd's in Anglo were used for shorting,my understanding he left the shares with brokers who could make them available to short sellers.Once the market got wind that a substantional holding was held in cfd's ,it made it attractive for shoert sellers as they knew the holder of the cfd's would have to pay up as the share value droped which would normally force the sale of these shares driving down price more so it created the perfect storm .I'd say he had not a clue and he left him self wide open to short selling hedge funds.Quinn was in control of everything he ever got involved in but he could not control the finincal markets,if a hedge fund in New york or London decided to move hard on Anglo he could not control and of course 2008 went from bad to worse,
 
wheeler dealer said:
Once the market got wind that a substantional holding was held in cfd's ,it made it attractive for shoert sellers as they knew the holder of the cfd's would have to pay up as the share value droped which would normally force the sale of these shares driving down price more so it created the perfect storm
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That might have sped up the decline.

But he was going to lose the money anyway. I don't think that the short sellers caused Anglo to fail.

Brendan
 
SQ wasn't the only one to make a haims of it in the property bust. But he is a bit unique in that his insurance company also went down. And now he is into betting with QuinnBet.
 
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