Ed’s Daily Notes for Friday the 13th   Leave a comment

Friday the 13th(hat tip to Cheezburger.com for the pic)

Bloomberg: Dark Pools Take Larger Share of Trades Amid SEC Scrutiny

What better topic is there to discuss on a Friday the 13th than “dark pools”?

The rise of off-exchange trading in the U.S. stock market continues unabated even as regulators question the wisdom of allowing the shift to continue.

Shares changing hands in private venues such as dark pools accounted for 40.4 percent of total share volume on June 10, according to data compiled by Bloomberg. That’s the most since 41.7 percent took place off-exchange on June 22, 2012. The three biggest exchange companies each matched about 20 percent of trading on June 10.

The high came after Securities and Exchange Chair Mary Jo White last week voiced concerns about the level of trading taking place on venues where bids and offers are kept private, masking the true depth of demand for shares. The rise in off-exchange trading came as calmness pervaded markets, with the Chicago Board Options Exchange Volatility Index, also known as the VIX, sliding to a seven-year low last week.

“Its been clearly demonstrated that the less volatile markets are, the more people trade away from exchanges,” Justin Schack, partner and managing director for market structure analysis at Rosenblatt Securities Inc., said in a phone interview. “Brokers also have an incentive to avoid exchanges and their fees, and with overall volumes low, the pressure to avoid costs is quite high.”

The total number of shares traded on June 10 was 5.19 billion, according to data compiled by Bloomberg, compared with this year’s daily average of about 6.5 billion.

There is no reason to allow the dark pools. It’s an excuse to allow wealthy people to sell and buy large amounts of stock without causing any price changes on the markets.

Business Week: Why Elon Musk Just Opened Tesla’s Patents to His Biggest Rivals

Annoyed, frustrated and exasperated, Elon Musk has decided to give Tesla Motors’ (TSLA) patents away.

Well, “give away” might be too dramatic. But on Thursday, Musk did announce that Tesla will let other companies use its inventions under an open-source-inspired agenda at the company. Here’s how Musk put it in a blog post: ”Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology.”

This move looks drastic at first blush. Tesla has hundreds of approved patents—and many additional ones pending—for all manner of spectacular inventions tied to electric-vehicle technology. Tesla pioneered innovations that lowered the cost and increased the safety of battery packs. Its cars recharge much faster than others on the market, thanks to connector, software, and power-management advances. Now this public company will offer these smarts up to its rivals and ask nothing but goodwill in return.

According to Musk, Tesla made this gesture to—once again—try to nudge the rest of the automotive market along. Tesla’s Model S has proved that there’s massive interest in a well-made, fun-to-drive electric car. Still, Tesla is barely making a dent in the massive auto market. Musk wants to promote a more dramatic shift toward electric cars, so he will do what he can to accelerate things. “I don’t think people quite appreciate the gravity of what is going on [with regard to global warming] or just how much inertia the climate has,” Musk said during a conference call. “We really need to do something. It would be shortsighted if we try to hold these things close to our vest.”

I’m not buying it. Musk didn’t get rich by falling prey to climate change alarmists, even if he does drink the koolaid. He is much smarter than that.

One thing that has to be remembered about Tesla’s business model is that it has two parts: First, there is the car itself, with all it’s charging-based technology; and second, there are the charging stations. Any competitors can’t take one technology without the other one.

This begs the question of what Musk means by “in good faith”? My guess is that he wants a deal with other companies, either to get more charging stations which Tesla drivers can use, or to get more cars which use the Tesla charging stations, or both. Musk will happily let other companies use the patents, as long as they are willing to play ball with him. Even if they just take the patents and build their own cars and their own charging stations, what happens when one of their cars pulls into a Tesla charging station? Tesla can happily recharge the competitor’s car, for a price. Cha-ching!

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Posted June 13, 2014 by edmcgon in News, Stocks, Technology

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