Geoge Soros on the difference between broking and market making

Recently, I had an opportunity to deal with Over The Counter (OTC) securities.Since they are not listed, prices are quoted in a large band with riders such as minimum ticket size etc.More often than not, prices are unreliable and vanish when you actually place the order.

In such a scenario, the role of the broker/intermediary becomes critical.But how much should he paid?I find this anecdote from George Soros’s life instructive:

My friend’s father asked me to change some dollars and being conscientious I went to the pain of visiting both of the two markets for this sort of thing,the old Stock Exchange and an orthodox synagogue in another part of town.It turned out that there was a significant difference in the exchange rate, and I was able to get some 20 percent more at the synagogue than at the the Stock Market, which was the only rate that my friend’s father knew about.So I brought him the larger amount and said that I deserved a higher cut, but he refused.

“He said,’You are a broker and it’s your job to get the best rate, that is what you are getting paid for.’ I remembered that years later when I became a market maker in over-the-counter securities.,” George Soros observed.”Because if you are a market maker and can make someone an extra 20 percent and raise your own cut by half a percent that’s different and better than being just a broker.So in the end by his refusal to raise my compensation he encouraged me to be a market maker rather than a broker, which turned out to be quite useful and I suppose I was paid for that experience.”

-from the book Soros by Michael Kaufman



Linkfest:Jan 18, 2013

Some stuff that I am reading today morning:

Reliance Industries yet to finalise action plan on 4G (ET)

UPA’s bet on good economics (Mint)

Taj’s lease woes continue (BS)

Sujata Patil Vs Cowards (MediaCrooks)

If you can’t get into a top 5 MBA program, don’t even bother (Quartz)

Mohnish Pabrai on checklist investing (Marketfolly)

Why Germany wants its 674 tons of gold back (Wonkblog)

The hottest currency trade in the world (BI)

The six biggest investing lessons of 2012 (TRB)

5 reasons to remain cyclically bullish (PragmaticCapitalism)


Portfolio of Credit Suisee in India

This post is in continuation of my coat tailing series (see here)

Credit Suisee is a well known financial institution.It invests in India via Credit Suisee (Singapore) Ltd.It is believed that some Singapore based funds invest in India via this entity as well.

Its portfolio as per stock exchange’s web sites as on Sept 2012 is given below:

Company Name # of Shares %
Aegis Logistics 1035000 3.1
Escorts 1362228 1.29
Balkrishna Inds. 1160000 1.2
Arshiya Internatl. 923403 1.57
Alok Inds 12540000 1.52
Welspun Corp 2805663 1.23
Shree Renuka Sugar 7070666 1.05
Gitanjali Gems 1995032 2.17
Hinduja Global Soln. 1894810 9.2
HDIL 11223746 2.68
SKS Microfinance 1596836 1.48
Nava Bharat Ventures 1161600 1.3
Praj Industries 2918362 1.64
United Spirits 1449760 1.11
DiviS Lab 3400105 2.56
Indiabulls Fin Serv. 3552963 1.14
Yes Bank 3904275 1.09
Mcleod Russel 2204383 2.01
Dish TV India 16965887 1.59
Nitin Fire Protectn 3992500 1.81
Gujarat Pipavav Port 17947574 3.71

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