Wall Street Has A Lot To Lose If SAC Capital Goes Down

Getty ImagesYesterday was the deadline for investors to redeem their money from embattled Stamford, Connecticut-based hedge fund SAC Capital as the government’s insider trading investigation intensifies.  

According to Bloomberg News, the fund could now be left with less than $1 billion in outsider money.

It was estimated investors would request to pull out $3.5 billion in addition to the $1.7 billion that was marked in the first quarter for redemptions.  

SAC manages about $15 billion.  Of that, $9 billion belongs to founder Steve Cohen and employees and the rest is outsider money.  

Those outside investor redemptions are a big deal and not just to SAC.  

The New York Times’ Peter Lattman explains why Wall Street would be freaking out: 

But a major reason for the intense interest on Wall Street, senior brokerage firm officials say, is a commercial one: SAC has generated billions of dollars in revenues for brokerage firms over the years. Several executives — all citing client confidentiality — said that the prospect of a severely diminished SAC would hurt their bottom line, which has created fear and anxiety on trading desks across Wall Street.

“This is going to have a significant impact to the Street, full stop,” said a senior executive at a brokerage firm that counts SAC as one of its largest clients… 

The brokerage business relies on trading volume. Brokers earn commission for each share traded.  For example, a broker could make anywhere from half a penny per share or five cents a share.  

A hedge fund behemoth like SAC Capital is a huge player.  Back in 2006, the Wall Street Journal reported that SAC’s trading accounted for 2% of all of the stock market activity.

It’s easy to see how they would be a desired client on the Street.  

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