http://en.wikipedia.org/wiki/Delta_One Events trading or event-driven traders. They are called a variety of different things at different firms/banks. Events Desk, Special Circumstances Desk, Special Situations Team, some banks deny they exist. They trade on events - Usually disguised as a regular "news & events" (normally scheduled like oil & gas or econ numbers) but they really look to exploit prices due to events, natural disasters, geo-political, etc. As I said earlier, seems like most in this thread don't really know what HFT is. Also, with equities there is a huge difference between those that get paid to provide liquidity and those that get paid to take liquidity. Night & day.
A lot of their work is generally around corporate actions: mergers, divestitures, bankruptcy (in and out of), spinoff's, etc.
Sorry, I missed that.....Now I've reviewed it finally. Interesting stuff...especially the "hedged part". So if a bank was long GE common, a delta one strategy would be in-the-money puts with the nearest expiration. In that manner, if the strat trade went bad, effectively the bank loses nothing overall. If it wins, they are "up something" compared to "up nothing" by doing nothing.
http://www.businessweek.com/news/20...iracle-as-delta-one-loss-leads-to-arrest.html it seems the rogue trader from ubs was part of their delta one desk...
âDelta One desks are not necessarily known as risky areas,â said Terry Smith, CEO of the interdealer broker Tullett Prebon Plc and of the asset management firm Fundsmith LLP. âBut they are known as complex areas.â Well, that just says it all.....and indicates these trades were NOT HEDGED as they were supposed to be. Poor internal controls, and likely poor software support (outsourcing strikes again !).