why virtually no one’s at work on Wall Street today

Three reasons:

–what’s the point?  2013 has been the best year for US equities in almost two decades (to the surprise of everyone except the S&P strategy people).  Trading on the final day of the year won’t move the performance needle one way or the other.

–tax-selling of positions with losses has long since been done.  Analogous selling of positions with gains won’t begin in earnest until the new tax year opens on Thursday.  That’s because for taxes the trade is considered done on the date it’s agreed to, not the date it’s settled.

–normal trade settlement takes time.  The length of time varies by market but T+3 is typical.  In the old days, this would mean that on the third day after the trade is agreed to by buyer and seller, representatives of both sides would meet, usually at a custodian bank.  The buyer’s representative would bring a check, the seller’s the stock certificate.  An exchange would take place.  The trade would be finalized and recorded by the bank.  Same thing today, except that everything is done by computers.

Occasionally a trade will fail.  In the old days, the check might be for the wrong amount, or the seller would have the wrong number of shares (or couldn’t get shares out on loan back), or one or the other representative would go to the wrong place.  For bargains struck on December 31st, the issue is that all possible mishaps will occur in 2014, the new year.  It will be harder, more time-consuming, less tidy and costlier to close the 2013 books.  For most firms, the administrative hassle this entails isn’t worth dealing with.  So they encourage their PMs not to make trades near yearend if at all possible.


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