May 6, 2010 Stock Market Crash
Hedge Funds Escape Thursday's Crash Unharmed
Continuing with the
stock market chaos of last Thursday, it appears that hedge funds have escaped suffering little losses. The Dow Jones Industrial Average shot down about 1,000 points and then bounced back before close, and few hedge funds were among the big losers that day, according to prime brokers and hedge fund investors.
Two investors with client money in dozens of hedge funds told The Wall Street Journal that they expected one-day losses of no worse than 5%. Prime brokers told the newspapers that smaller hedge funds could have lost as much as 20% on the day, but losses of that magnitude were few and far between.
Major U.S. exchanges decided to cancel any trades made between 2:40 p.m. and 3 p.m. on Thursday at 60% above or below a stock’s price at 2:40 p.m.
Meanwhile, regulators continue to try to figure out why the market took its unprecedented dive. The Securities and Exchange Commission and Commodity Futures Trading Commission are gathering data from exchanges, and have taken anecdotal reports from hedge funds and other market participants.
The failure of electronic exchanges to slow down in tandem with the New York Stock Exchange is currently considered the leading possible culprit. The NYSE imposes a controlled slowdown in such situation to boost stability on the markets. Source
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