Fidelity Brokerage Used Madoff's Firm as a Market-maker
According to the last 606 filing by Fidelity, the brokerage used Madoff Investment Securities L.L.C. as a market maker. For the September 2008 quarter, Madoff executed 10.9% of NYSE, 5.88% of Nasdaq, and 20.12% of AMEX trades for Fidelity brokerage.
To be clear, this is Madoff’s market-making business not the Ponzi scheme fraud of the investment advisory business. However given that the government has seized the whole Madoff company including the market-making unit and froze all its assets, the statements and records are now known to be a total mess, and that the SIPC is liquidating Madoff Investment Securities L.L.C according to the Wall Street Journal today, one is right to be concerned if Fidelity has any loss exposure due to the nature of the relationship. What about the trades executed by Madoff for Fidelity that haven’t settled yet when the firm was seized? Are all the trading records reliable? There are a lot of questions that need to be answered.
I contacted Fidelity and they said they have no information at this time and executives are working on an official statement to address customer concerns. It would behoove them to get a best estimate of the company’s exposure out as soon as possible.
UPDATE: I have now been told by Fidelity there may be no plans for an official statement. I will now go with Schwab for 2009.