Anti-HFT Revulsion Grows: IEX Ties For Fourth In Dark Pool Trading Thanks To World's Largest Wealth FundSubmitted by Tyler Durden on 11/17/2014 - 14:56
While Wall Street is certainly free to broken record that Michael Lewis' hugely popular story about HFT and market rigging did not impact the natural course of events, the reality is it did: the collapse in Barclays' dark pool LX (shown in the bolded red line on the chart below), in the aftermath of the NY AG case against the British bank, has been documented in the past, and is just one example. An even more vivid case study comes from the surge in popularity of upstart dark pool IEX (green dotted line below), the protagonist of Lewis' Flash Boys book, and which out of nowhere, has just tied with Lavaflow's dark pool for fourth spot in ATS trading with just over 200 million shares in the week ended October 27. The catalyst? Norway's sovereign wealth fund just said not to HFT parasites.
"The market has been dodging boomerangs, not bullets, and they are likely to come back harder for it." Importantly, rich valuations here cannot be “justified” by appeals to current interest rates or profit margins unless that justification carries with it the assumption that both zero interest rate policy and cyclically-elevated profit margins will be sustained for decades, coupled with the assumption that economic growth will proceed at historically normal rates.
The Dow and S&P have shrugged off any belief that yet another Japanese recession will impact the invincible American economy... but Small Caps, Nasdaq, and Trannies are a little more concerned. However, if everything is so awesome in the US, then why are credit and equity market professionals buying protection hand over fist?
Words, numbers, earnings and more at one time had a believable meaning. But that was a very long time ago. So long – even the news media seems to have forgotten what the meaning of words like business, free markets, capitalism and others once meant. Now it's nothing but a televised version of crony styled capitalism cheerleaders rolled out one after another in such procession P.T.Barnum would be proud. The problem is the more they talk – the more people tune out. For no amount of words stated matter any longer. Nor do the myriad of “charts” “reports” or so-called “facts” they hold up as evidence. No one is listening or watching. And what’s worse? Nobody now cares.
As the generational war heats up, we should all remember the source of all the bubbles and all the policies that could only result in generational poverty: the Federal Reserve.
JPMorgan Cazenove's global equity strategy group has decided enough is enough - the underperformance of the Eurozone is getting stretched (they note), and are upgrading Euro equity allocations to Overweight at the expense of an Underweight in US stocks. Here are the fives reasons why they made the shift...
Plummeting oil prices are a symptom of terrible mounting instabilities in the world. After years of stagnation, complacency, and official pretense, the linked matrix of systems we depend on for running our techno-industrial society is shaking itself to pieces. American officials either don’t understand what they’re seeing, or don’t want you to know what they see. The tensions between energy, money, and economy have entered a new phase of destructive unwind. The global economy has caught the equivalent of financial Ebola: deflation, which is the recognition that debts can’t be repaid, obligations can’t be met, and contracts won’t be honored. Financial Ebola means that the connective tissues of trade start to dissolve, and pretty soon blood starts dribbling out of national economies.
Moments ago, Bloomberg released a stunning update that Europe's largest bank is exiting the single-name, both IG and HY, CDS product line, which for years was one of its biggest revenue generators and a product in which DB was for a long time one of the best and deepest CDS trade axes. As Bloomberg reports, Deutsche Bank AG will stop trading investment-grade and high-yield credit default swaps on single credits and will instead focus on trading corporate bonds, according to a spokeswoman.
The NYSE 'broke' from 930 to 950ET (levitating stocks after the plunge) and now it appears the exchange is having issues again as BATS declares self-help against NYSE...
*BATS: ROUTING TO NYSE HAS BEEN SUSPENDED AS OF 10:38:43 ET
The market has been open 73 minutes and been broken for half that time!
As stocks opened significantly lower in the US day session, the NYSE 'broke'. Instantly, stocks levitated back to almost green on the day... and NYSE 'unbroke' - after which stocks tumbled again (only to be rescued by Draghi)....
Seriously!! Draghi utters a few words - all of which we have seen and heard a thousand times before:
*DRAGHI SAYS ECB WILL DO WHATEVER IT TAKES, WITHIN ITS MANDATE
*DRAGHI SAYS EXPANDED PURCHASE PROGRAM COULD INCLUDE GOVT BONDS
and EURUSD, European stocks and bonds get uber-excited... which is odd because as Draghi himself noted in Dec 2011, the "Treaty prohibits monetray financing."
After 6 weeks of the ECB's (3rd) Covered Bond Purchase Program, the cumulative buys amount to a mere EUR 10.485 billion. It appears they are limited (by collateral availability and market liquidity.. and dealers unwillingness to sell) to around EUR3 billion per week - around the same amount The Fed's QE3 would suck up in 1-2 days of POMO. At this rate, it's a long way to go to reach the $1 trillion goal. Is it any wonder that Mario Draghi once again used the 'w' word - uttering ECB will do "whatever it takes" (cough within its mandate).
Dumb and Dumber To, the sequel after 20 years, was released recently. However, when it comes to real humor, the Dumber slapstick was easily upstaged over the past few days by the G20 summit in Brisbane. The lunatics are guiding us off the cliff. We know most people feel there’s nothing they can do to change the course their countries and governments have taken, but we also think that perhaps all these people need to realize they don’t have much of a choice anymore. If getting up from your couch for your own sake isn’t enough of a incentive, how about doing it for your kids and grandkids? The dumber-ass approach is the same one they use for their economic, what shall we call it, ‘policies’(?), it’s the exact same thing. It’s the surface that counts, not what’s underneath it. It’s the storyline, not the veracity of it.
This may not quite be the blow-off top in the merger bubble as companies rush to frontrun the ECB and buy whatever still isn't nailed, but it is getting close. Because while earlier today Baker Hughes announced it would accept the Halliburton offer to buy it unchallenged in a $35 billion transaction leading many to wonder just how much lower the price of oil is still set to drop, moments ago the Allergan "White Knight" swooped from up on high, and as had also been leaked in recent weeks, Actavis agreed to buy the botox- maker which Ackman and Valeant had been so eagerly chasing for months in order to let the roll-up pharma pad its non-GAAP books with another 2-3 years of pro forma "synergies" add backs. This means that between Halliburton and Actavis, today we have had the first $100 billion "Merger Monday" in over a decade.
Driven by a combination of Mining (-0.9% - biggest drop in a year), Utilities (-0.7% led by a 3.2% plunge in Natural Gas) and most of all motor vehicle manufacturing (-1.2%), US Industrial Production slid 0.1% in October (notably missing expectations of a 0.2% rise). This is the 3rd monthly drop in motor vehicle & parts production - the worst consecutive run since Jan 2009. It seems the government-free-credit inspired subprime auto boom that provided just enough impetus to a fragilee conomy to enable the Fed narrative of "things are better" to play out... has ended... abruptly.