Commentaries

Citadel’s E*Trade Bonanza

Citadel Investment Group’s move to aggressively sell off its substantial stake in E*Trade Financial looks like hedge fund magnate Ken Griffin is throwing in the towel on his big gamble on the online broker.

But Citadel isn’t bailing on E*Trade. In fact, if Griffin gets his way, the Chicago hedge fund will have its fingers dug deeper into E*Trade, getting daily access to virtually all of the online broker’s stock and option trades.

With little fanfare, Citadel and E*Trade struck a tentative deal in June that would require the online broker to begin routing 97.5 percent of its customers’ Nasdaq stock and stock option trades to the hedge fund’s market-making operation.

Right now, E*Trade sends about 40 percent of its customer trades to Citadel’s market-maker division under a nearly two-year-old agreement that dates back to the hedge fund’s initial $2.5 billion investment in the broker.

This new exclusive six-year arrangement would mean even bigger bucks for Citadel’s already highly-profitable high-frequency trading business, given that E*Trade customers make more than 4 million trades a month.

Indeed, the deal is so potentially lucrative for Citadel that the hedge fund is willing to make an upfront $100 million cash payment to the financially-strapped online broker.

E*Trade’s regulator, the Office of Thrift Supervision, must approve the deal before it can take effect. And there are indications the OTS is about ready to give the deal the green light — possibly as soon as today.

Porsche’s VW options not for the faint-hearted

Porsche may own a lot of options on Volkswagen - around 20 percent of the larger carmaker’s shares – but the sports car maker is running out of alternatives to solve the financing problems it built up by acquiring a 51 percent stake in VW.

Despite a recent report of other investors being interested in relieving it of the options, Porsche insists that talks with Qatar remain exclusive.

It’s no wonder that others are tempted by what is clearly one of the world’s best recognised marques — but with net debt of 9 billion euros and a family feud to resolve, any involvement with Porsche is not for the faint-hearted.

Then again, with a top speed of 329 kilometres per hour for the Porsche 911 GT2, neither are its cars.