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Bond Traders Lament Possible Demise of Early Closes

This story was published by Bloomberg News on January 30, 2009. Molly interned for Bloomberg News from June to August in 2008 and from January to April in 2009. She covered the commodity markets, livestock derivatives, government bonds and foreign exchange. Molly was hired to the speed desk in March 2009. This is one of her favorite stories. It appeared on TOPWW, Bloomberg’s worldwide front page.

Bond Traders Lament Possible Demise of Early Closes
2009-01-30 19:58:11.180 GMT

Jan. 30 (Bloomberg) — Bond traders, facing the threat of
abrupt firings, vanishing bonuses and volatile markets as the
U.S. economy weakens, are lamenting the possible demise of the
tradition of leaving early the day before holidays.

About 1,400 people have signed an online petition
protesting the cancellation of so-called early closes on Dec.
26. and Jan. 2. More than 30 people signed last week, even
though the petition was for the recent Christmas holidays. An
introduction says, “During 2008, there were only two words to
look forward to in fixed income. They were ‘early close.’ The
emotional damage incurred by this late change won’t have a
financial match. Change it back. Make us feel like somebody
cares about us.”

The Treasury Department asked the Securities Industry and
Financial Market Association, the main trade group for bond
dealers and investors, to reduce the number of days traders
leave at 2 p.m. instead of 4 p.m., according to Reuters. SIFMA
has 12 early closes scheduled for 2009. Stock and derivative
traders do not officially leave early before holidays.

“We’ve had this for so long, I don’t see the benefit in
changing it now,” said Frank Randazza, vice president of sales
at Stifel Nicolaus & Co. in Pittsburgh. “Go on a non-holiday
weekend at two o’clock and tell me how much activity you’re
seeing anyway.”

Bonus Backlash

SIFMA will announce any changes to the calendar “in due
course,” said Washington-based spokesman Travis Larson. SIFMA
dropped its early close recommendations for Dec. 26 and Jan. 2
to be in harmony with the futures market.

Jenni Engebretsen, a spokeswoman for the Treasury in
Washington, declined to comment.

The possible ending of the tradition comes as Wall Street
suffers from a backlash over compensation as governments
worldwide bail out financial institutions. Banks handed out
$18.4 billion in bonuses in 2008, the sixth-largest pool at New
York City financial companies, State Comptroller Thomas DiNapoli
said yesterday. President Barack Obama called the bonuses
“shameful,” while Senator Banking Committee Chairman
Christopher Dodd of Connecticut vowed to use “every possible
legal means to get the money back.”

“Wall Street is reeling right now,” said Bruce Foerster,
president of South Beach Capital Markets in Miami. “Congress is
in the early stages of remaking the industry, and these morons
are whining about two hours a couple times a year? They’re out
of touch with reality.”

‘Making a Statement’

Treasury raised the issue because of the additional amount
of debt needed to be auctioned to fund the deficit, traders
said. The government will announce on Feb. 4 how much it will
sell in 3-, 10-, and 30-year Treasuries the following week.
Goldman Sachs Group Inc., one of the 17 primary dealers that are
required to bid at the auctions, estimates the U.S. will likely
borrow a record $2.5 trillion this fiscal year ending Sept. 30,
almost triple the $892 billion in notes and bonds sold in fiscal

“They’re talking about auctions being the reason,”
Randazza said, who has worked in the bond market for 20 years.
“We never have auctions on Fridays. The early close is usually
a Friday. It doesn’t make sense. The Treasury is saying they’re
going to monitor the markets more than they ever did, and that’s
what this is about. It’s about making a statement after all the
disasters in the fixed-income market.”

Job Losses

Banks and financial firms have fired 265,000 people since
the collapse of the subprime mortgage market triggered the
financial crisis. Bear Stearns Cos. and Lehman Brothers Holdings
Inc. failed, while Merrill Lynch & Co. was taken over by Bank of
America Corp. Goldman Sachs and Morgan Stanley converted into
bank holding companies. Employment in New York City’s securities
industry fell to 168,600 in December 2008 from 187,800 in
October 2007, a decline of 19,200 jobs, or 10.2 percent,
DiNapoli’s report found.

The potential change in the holiday schedule will not
affect most traders’ hours, according to Raymond Remy, head of
fixed income at primary dealer Daiwa Securities America Inc. in
New York and a 26-year trader. He said his staff will probably
finish working when the futures markets in Chicago close.

“Our take here is ‘whatever,” he said.

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