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The Future Of Flashed Options
With the ban of Flash orders in equity markets now practically a done deal, politicians, and hopefully regulators, will start focusing their attention on Flash derivative products which facilitate not only a two tiered market but potential market abuse by the privileged few who have access to advance looks in assorted securities classes.
While dark pools will ultimately be the critical focal point of tiered market differentiation, it seems the next immediate area of focus will be flash orders in option trades. As before, a major opponent of Flash, NYSE Euronext, provides a few on why flashed options afford club" members the opportunity to sniff out larger market moves. From Traders Magazine:
[Ed Boyle, who runs NYSE Euronext's U.S. option business] argues notes that flashed orders can enable participants receiving the flashes to trade ahead of customers whose orders are flashed, either in the stock market or in options. "When an order is flashed, there's often not a lot of contracts available at the best price," he said. "It's when the market is moving fast that a customer is likely to be disadvantaged [by flash orders]." He added that flash orders proliferated in 2007 when the penny pilot began. Arca has price-time priority and maker-taker pricing for penny-quoted options.
On the other hand, conflcited defenders of option flash include the International Securities Exchange, which is a 32% owner of the Flash trading ECN Direct Edge.
The International Securities Exchange and the Chicago Board Options Exchange argue that flash orders benefit customers. "Customers like this functionality," said Boris Ilyevsky, managing director of the ISE Options Exchange. "They see a direct economic benefit."
He notes that flash order types in options are technically similar to those in equities, although the benefits are different. "Our market makers and members can match the away price through a flash auction," Ilyevsky said. "That gives the customer the away price without paying a take fee that could, on some markets, be 45 cents per contract. The customer fee on the ISE is zero." If there's no response, the ISE's primary market maker in that symbol seeks the best price through a linkage order.
Other defenders appear in the form of the CBOE, whose flash order type will make fans of Isaac Azimov and insane computer everywhere rejoice.
The Chicago Board Options Exchange makes the same argument. Its flash order type is called HAL, for Hybrid Agency Liaison. "Prior to outbound routing, orders are flashed to market participants at the CBOE with the opportunity to match the NBBO and keep the order at the exchange," said Edward Tilly, executive vice chairman of the CBOE.
And the oddest defense of option flashing comes from Will Easley, the vice chairman of the Boston Options Exchange.
Easley suggests that concerns about being traded ahead in options as a result of the information being flashed are minimal for a couple of reasons. First, he said, the other firm would have to take out all the volume at the best price in away markets, which could be costly. And second, orders that are flashed are typically for small size. Easley also notes that options prices do not move as quickly as the underlying price and are less sensitive to those movements in some cases. Even in penny names, it's not a 1:1 move, he said.
The second argument is laughable. The take home message however, is the acknowledgement of the optionality to trade on an exchange away from the host flashing exchange with the gleaned information (in other words, it happens all the time). Whether it is costly is debatable - once a firm has set up the relevant infrastructure via collocation and other front-end loaded costs, the marginal expenditures are negligible. However, it goes to show how deep two-tiered information flow across the markets truly goes: over the past 10-15 years as a result of escalating IT efficiencies, the complicity of exchanges and broker/dealers as well as market neutral funds to operate in a higher plane of faster, advance-looking (and potentially abusive) information, on exponentially increasing stock volume, has been taken to an artform, and the net results have been such market aberrations as flash trades, dark pools, collocation, and ultimately a market, in which trading and liquidity provisioning are dominated by algorithms and other computer controlled processes.
What politicans and regulators need to, and are gradually starting to figure out, is that Flash is not a separate issue - it is analogous to the loose strand in the proverbial sweater: once you start unravelling it, eventually the entire thing collapses. And this is what is notable of Schumer's campaign - the initial focus on Flash will gradually develop into the biggest two-tiered market discovery process, a process which is long overdue. And speaking of long overdue things, the SEC's eventual acknowledgement of Flash (and many more topological concepts to come) as being a detriment to investors, will likely set off a sequence of legal actions, which if nothing else will try to identify who, if anyone, has benefited over the years since Flash (in both equities, options and other products) has been active. Quite a few relevant names come to mind.
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TD, what does the ban mean for individual investors/traders that use platforms such as Etrade? Is this a matter of declining volumes and decreasing security prices or is this more about taking the edge away from the big boys and individuals are still stuck with the shitty platforms?
always submit limit orders
Tyler,
Your last comment really says it all about how badly you misunderstand this issue. The only orders which can be flashed are aggressively priced limit orders, so called "marketable limit orders", which cross the spread defined by the current NBBO. If you send a market order it can never be flashed to anyone, it will execute at the best price available on your venue of choice.
Its really amazing and distressing that after so many months of reading and writing on this topic that you still don't have the slightest idea of what a flash order is.
Boo.
Its funny, I don't like boats, so I dont read any magazines for boat fanatics. I am not a big fashion guy and don't read on fashion magazines, LET ALONE spend my weekend commenting on their collumists. People reading on ZH to try and combat the man who started this thing are swimming upstream....Go with the flow my fishies!!
did you even read his question - the biggest potential concern for retail accounts is being taken for a proverbial spin via market orders. flash is completely irrelevant at the 100 share block level.
your desire to be heard on the matter, is as always, appreciated.
While placing limit orders may in general be good advice (certainly there are times when a market order is called for), it seems to me off the mark from the thread viz-a-viz flash orders.
As was previously pointed out - market orders are never flashed... and to the extent people need to place market orders, HF trading has reduced the risk of being taken to the cleaners, because bid/ask spreads are tighter than they otherwise would be.
Additionally, the much maligned SEC did a good job with Reg-NMS, and a retail market order from the likes of E*Trade will clear at the NBBO regardless of which ECN/Exchange it is sent to (i.e. you have to know what you are doing to NOT get execution on a market order at NBBO, since you need to change the order strategy to explicitly prevent route-out).
It is quite refreshing however for you (having now played quite an instrumental role in stirring up the masses on a topic neither they nor the press by and large understand) to acknowledge that "flash is completely irrelevant at the 100 share block level". I wish more of the readers of this blog who are doing retail trading in small blocks would take that sentence to heart, and further understand that it is not an issue at all if there are no further orders to come... regardless of the size (i.e. a retail limit order for 1000 shares flashed is equally irreleant).
Flash is an issue for institutions who are too dumb to route their big orders properly.
So if someone daytrades limit orders for 1000 shares as a retail investor multiple times a day... is flashing completely irrelevant to them... will they suffer no financial harm because of flashing... just a question... just would like an answer from people who clearly know more than I... Thanks!
Unless there is a computer out there that can predict which trades you are going to make before your brain does, the answer is no... you suffer no harm.
Computers can spot a pattern, so if a large fund is selling 1M shares in 2000 blocks of 500 shares, it is easy to pickup... because it is a simple piece of predictable logic that is placing the orders, and it is then easy to get ahead of (and even if the pattern is more convoluted).
There is no such predicatability with any single human's orders, so if the machines tried to get ahead of your order, mistaking it for a small piece of an institutional order, they'd likely end up taking a loss on the trade, since they were accumulating (or selling) a position with the sole intent on selling (or buying back) from you... but your were a "one and done" trader.
If you tried to mimic a machine and you somehow did something highly repetitious (like selling the same equities in the same order every day at the same time in the same share count), then you would have to worry about the machines... but then again, you'd have much bigger things to worry about.
Thanks for taking the time to respond... very insightful and easy to understand.
You might however benefit from flash orders, if someone responds to the flash at an improved price (better than the nbbo). This was of course the whole point of introducing flash orders to begin with. If there was no price improvement to be realized using flash orders, its hard to see how direct edge could have so drastically increased thier market share in the course of a few short months. How could they attract so much flow if all of the orders were being taken advantage of by high frequency traders? It makes no sense.
I am pretty sure I would never be lucky enough to benefit from an improved price due to a flash order... I think it would be like buying a car... I conceptually want to believe that I could and actually might have gotten a great deal... but logically know that I was just f&*%ed as a drive my car off the lot. But thanks for the response :-)
Hooker and Gondorff play a sting in an off-track late betting scam during the 30s. Today GS has transformed capital marktes into an elaborate and very sophisticated high tech off-track betting scam!
wiki: Late betting or past posting is making a bet after the time when no more bets are to be taken. It is considered cheating because information may have become available, including the outcome of the event, that was not available to those making earlier bets.
...awaiting a response from the venerable Mr. Durden
is this comment supposed to be funny?
The crooks make everything so complex and then claim no-one understands how we are stealing so therefore leave us alone. We understand enough asshat.
http://www.huffingtonpost.com/nathan-lewis/do-we-need-goldman-sachs_b_237806.html
Their attitude is "you got nuthin' on me", like if you can't prosecute me f. off. The thing has no conscience.
transaction methodology is basically "controlling" prices unless the situation is overpowered with news etc. . I've observed too many time where a stock trades lower while on balance volume
hat tip to good finance articles..
You're absolutely right to shine the light on the flash opportunities in other asset classes/markets. Its a much more complex task to wrap your head around correlated impacts between the markets, but you've laid the groundwork for people to understand that "flash" is code for unequal access and privelege, regardless of the form it takes.
Re "always use limit orders", I think it should be modified to read Always use limit orders, unless you'r a buy side institution, since flash, linked to predator algos are trying to peek into your limit order book.
No - they should likely use limit orders as well, but should send their orders to a venue where the orders will not be flashed. It is not hard. Literally a 4 character change to the order.
The flash is a signal to the predator algos. Eliminating the flash is good in that it eliminates one signal.
The bigger issue: the predator algos want to see the limit orders. Traders placing the limit orders don't want their orders seen.
Flash is just one of the threats to the secrecy of the limit orders. Indications of interest (effectively- false liquidity) need to be targeted next.
> Traders placing the limit orders don't want their orders seen.
You have absolutely no idea what you are talking about.
Limit orders are usually meant to be seen when they post to an order book... as you are looking for someone else to match the other side of the trade. Trading with oneself is not much fun after all.
While you can place a limit order that is not "displayed", that is the exception rather than the rule, and it is not a terrific way of attracting someone else on the other side of the trade.
The most effective way to place an order that is not seen is to use a dark pool - sadly, something else poorly understood and coming under pressure due to a general mis-understanding of how and why they work and exists.
Please explain why you are such fan of dark pools and non-dispalyed interest.
I'm not a fan in the sense of using them myself, nor do I profit in any way from their existence (to the contrary, I think I would make more money if I got to see all order flow).
However, if 2 people want to choose to transact in the dark, why should I think I have a right to shine a light on their transaction?
I'm far from a Libertarian (left leaning Democrat), but I just don't see why anyone has the right to see pricing information on a transaction where both parties intend to keep that information hidden from the public.
Sometimes, legistlation is needed to protect parties who are unable to take care of themselves... but in the case of dark pools, the parties who are electing to utilize them are sophisticated enough to make rational decisions, weighing the benefits and costs.
Turning the question around, why do you believe that you have an inherent right to know the price of each bid and ask that parties wish to keep private?
Either market data is public and disseminated or it isn't. You can't have multiple standards . These are public companies that are trading and as such we all have an inherent right to accurate information.
I meant to say Traders placing the limit orders don't want their LIMITs seen. Sorry for the sloppiness.
If I understand the
Limit Order Display Rule
Limit orders are orders to buy or sell securities at a specified price. The Limit Order Display Rule requires that specialists and market makers publicly display certain limit orders they receive from customers. If the limit order is for a price that is better than the specialist's or market maker's quote, the specialist or market maker must publicly display it. The rule benefits investors because the publication of trading interest at prices that improve specialists' and market makers' quotes present investors with improved pricing opportunities.
http://www.sec.gov/answers/trdexbd.htm
then If my order is to buy 1000 shares at prices up to a limit of 100 and the price is currently 50, the bid should be displayed at 50.01 and I'd get filled at that level, and the bidding wpuld continue up till it reached 100 or until my order is filled.
His message was being spread and gaining even more support...therefore he needed
to be censored.
Until we have guys like Black back as regulators nothing will
change. We just can not compete with the vast amounts of money being used to
influence decisions. The Rich article says"
p to
href="http://www.iamned.com" target="_blank">recommended website..
So, let me see if I have this right, having read this exact same comment a dozen times now:
Someone needs to be censored, and you have a site you're spamming us with?
Noted.
The bigger issue: the predator algos want to see the limit orders. Traders placing the limit orders don't want their orders seen. ..good point We just can not compete with the vast amounts of money being used to influence decisions. The Rich article says"
recommended; one of my favorite new finance sites http://www...
Always do, do you get flashed when we post comments or are you just that quick? Also, whats your take on the CRE market bringing us back to March #'s or even lower? Can the madness go on forever or will there be a debaucle.
hello Commissionable
my 2 cents about CRE are that the collapse like we have seen in 08 has no chance of happening ...The FED and the Treasury will find a way to mild it, maybe even stop it.
Hello Cheeky, I tend to agree with you, no matter how bad things get (and I am in the CRE biz, ITS BAD), I dont think the Fed and Treasury will let the fall come the way it did. As long as there are printers with Green and Black Ink we can print our way out *at least until we are gone, then the generations to come will as how the F*ck they got deal the shitty hand they did.
I'm, lets say young enough, and i think i will see the day when some new generation of thinkers and business man will look back at this period as " The Dark Years " of the early 21st century. And i don't think they will go easy on us who are living in this period of great economical disturbance. They will look back on the insanity of this current system and will be appalled by the level of corruption, lack of common sense, and the level of social indifference. I just hope that they will be able to do a better job than we are doing now. Oh and about the CRE; I'm sure they will think of something that will cost a trillion or two of the taxpayers money; and they will come up with some lame explanation ( a la Paulson and his Destruction of the World ) to justify the cost.
i don't think its quite that simple - the CRE problems are not the same as what blew up in 2008 which were toxic securities, derivatives and counter party risk - the CRE market is facing refi and default risk with collateral that is worth .50c/$... while there are a lot of CMBS in trouble the vast majority of this debt is carried by commercial banks which already teeter on the brink of insolvency.. so the 2008 blow up was a money center/ibank problem that could be mitigated via market ops (printing money) - the CRE pending disaster is a small regional bank problem that will have to be resolved loan by loan and bank by bank - many banks who are already on the brink will not survive the hit to loan loss and capital ratios - that said i don't think it will be a market event (unless stocks have to be liquidated to make up the deficiency), it will be a local main street event, stocks will only care to the extent it affects economic growth which may be already discounted...
at least that's my 2 cents on the dollar
If what you say is true, then the big banks will have won again. The taxpayers are already wary of any further bailouts, and the regionals are not "too big to fail", so fail they will, leaving a vacuum from which guess who will benefit?
It pays to lobby.
I absolutely agree with your assessment of the situation... I am in CRE also but also own the businesses that reside in our CRE model... we are due to re-fi less than 2 1/2 years... and the regional bank who generally handles our loans is one sick puppy... their stock continues to be down over 80% and caught none of the tailwind that the large TARP recipients caught... I also think this will have to be resolved loan by loan and bank by bank... and CRE owners whose original loan was based on assumptions which significantly changed to the downside, are going to be 'the ones without a chair when the music stops'... no one this time is going to turn a blind eye to questionable loan-to-value ratios like they did in 2004-2008.
pretend, amend, and extend.
or debt>equity.
the band plays on.
Much of the CRE will end up in the hands of the Bankers. They will not know what to do with it, the commercial managers will make out. Eventually the Banks will sell it for another loss due to mismanagement. Commercial brokers will due well again.
Since most of banks will have stinky loans, what they'll do is 'sell' one stinky loan for full value in exchange for another stinky loan at full value.
Really bad rain just started that means I'm right in my suspicion :)
His message was being spread and gaining even more support...therefore he needed to be censored.
Until we have guys like Black back as regulators nothing will change. We just can not compete with the vast amounts of money being used to influence decisions. The Rich article says"
recommended website..good content
Benny... don't you have another website which you could take your spam comments to... and play with some other nice people.
pretend, amend, and extend.
I like it.
Don't think It'll work to much longer.
Doesn't work to well with older people. Japan example.
I get a sick pleasure watching the Obama administration bots go to bat serving the party and their union overlords at the townhalls while their pensions and 401ks are still in the hands of managers being raped by the cronies of said administration.
I really hope HFT becomes a story people can understand.
If not at least we have cool shouting clips on youtube :D
Healthcare for serfs!
I for one am so glad to be out of public sector work. Ever since Obama (rather than my friend John McCain) got elected, things have taken a turn for the worse. The banning of flash trades is ridiculous. They help the stock market operate more efficiently. It seems like you people think we should be trading stocks by using paper and pencil. If that were the case the true value of the markets could be off by 50% (which it is anyways because of all the doom and gloom scare tactics which have brought down the markets).
I have known my friends at Goldman for many years. It is a travesty that software code being stolen has sparked this debate. Goldman Sachs is an asset to this country rather than an evil. If all our banks were local credit unions, our economy would be non-functional. Goldman Sachs is a key player in making our banking and investment systems more forward, not backward.
What a bunch of whiners!
ben dover, are you hiding in there?
Mr. Durden, I suggest that you respect the opinion of a former US Congressman, US Senator, Ph.D. of Economics, and UBS Vice Chairman of the Investment Banking. I was the co-sponsor of the Financial Services Modernization Act of 1999 which opened up the markets between the banking, securities, and insurance companies. I will say that I am very proud of the work that I have done in trying to modernize investment banking. Deregulation will prove to be critical in our economy's recovery as free market enterprise is the only way growth is going to happen in our new world economy. The gov't regulation and mandates in the mortgage industry caused the housing crisis we see today. We don't need to compound the problem with more regulation based on outdated economic theories, such as the Glass-Steagall Act of 1933. What is the point?
You do you realize that Summers, Rubin and Clinton were major backers of the repeal of Glass-Steagall? Also, with control of the White House, sixty senators, and a massive majority in the House of Representatives, why don't the Democrats bring back Glass-Steagall? If it's the cause of all our problems, what's stopping them? Until they do, I call BS on their claims.
They got rid of Glass Steagall easy enough, why can't they tear down any other regulatory monstrosities.? This is all about bipartisan hostile takeovers of entire industries to dislodge state and local influence in order to centralize, nationalize, and then globalize. Who is really calling the shots? Who knows, but they are n.g.(no good)
Glass Steagall is unnecessary to accomplish the proper prevention of conflicts of interest and anti-competitive practices inherent in the merging of these various mega institutions. Global efficiencies my ass. What we have here is a grand plan to steal everything. That's right the International is a big fat stinking Pig.
Glass Steagall is over-rated.
It was CRA that got this party started. People have settled on G-S to deflect attention from that fact.
The Glass Steagall Act was never repealed per se. Sections of the act, that created firewalls in investment banking were modified, but the GSA was not explicitly repealed.
The practice of commercial/investment banking coordination has been going on since the 70's ASAIK regulators for 20 years prior to Gramm-Leach had already been ignoring Glass Steagall. So its not like, there was a flip of the switch, and all of a sudden bankers and investors started meeting in smoky rooms. The collapse of the housing bubble, and the subsequent zombification of banks was a result of depreciating housing values, a recession, and various other unfolding factors due to avarice and debased policy's which has lead to foreclosures and defaults. Not a result of deregulation but when your bones are rested you will be unbraided in terms this generation has to repair. Even that is in question to wit.
Ah uber troll. Nice.
The point is always, Control.
Planet recorded as "Unsuitable"
Sen Gramm,
On the off-chance this really is you, then I'd like to use this opportunity to tell you to go fuck yourself. If this isn't you, damn!
FB
Dude, seriously, something really needs to be done about the troll invasion .... close the comments for all who are not registered ...
you may be right
thank you; and if its needed have a more rigorous version of CAPTCHA; some retards slipped trough last couple of days ...
more rigorous?
so adding and subtracting is rigorous?
that's it, your banned.
and to respond to you...
that's it, i'm banned.
Tyler,
I'm a gold member at Market Ticker, and I think that system works very well.
Charge for Gold Member status on the boards, and either:
1) Require Gold Member status to post.
2) Have "Gold Member Only" posting areas.
This tends to keep out the riff-raff..
Alternatively, the moderation system used on Slashdot.org works very well. Allow other registered users to mark comments as "Interesting", "Insightful", "Flamebait", "Troll", "Funny", etc. (Comments with 3+ "Troll" votes are hidden from view).
At this point, it's still not too bad... but with the growing success of 0H, these steps might come in handy at some point.
Keep up the great work
Popo
if you want to keep out all dissenting opinions, this is the way to go... i think that's a horrendous model.
that is too cool, you really a gold member?
That is the worst, most fascist system I have ever witnessed.
Do you also propose that ZH deletes comments that disagree with him as well as booting commentators with an alternative opinion, as that is part and parcel of Denninger's model.
The fact that you folks actually PAY to discourse with Denninger is frightening. But I guess he has the best echo chamber around, eh?
Denninger is a wannabe politician who loves to hear himself speak, preferably on TeeVee, and you all are paying to further his own narcissim. Hilarious!
a couple of years ago when he started that blog, I used to see him really use the most foul language you can possibly imagine talking to people who dared to disagree with him. now he seems to have tempered a bit.
Yeah, he still uses plenty of obscenities with his ad hominem attacks, but now when he loses an argument, he just deletes the thread. I guess it is better for his blood pressure and ego to have it up and POOF, disappear. And after all, if his political ambitions gain any traction, he will certainly need to be hitting that delete function. In fact he will probably delete every comment he as ever written, saving of course his blog entries, which are tame by comparison.
I remember when some woman who called herself "nothing", used to clean his clock. he kicked her off the blog finally. ha ha I used to enjoy reading what she said. Her analysis of what the FED was and is doing was cutting edge. If I am not mistaken, she was the first one I ever saw say something , the financial system going into what she termed at the time...."reset" . It was scarey stuff. It made me want to go buy food and water and guns and stuff...:)
my worst, most fascist system includes getting woken up at night, getting dragged outside, and being shot in the head.
bow the knee and kiss the feet of the all knowing , all seeing maha denniger......
riff-raff?
as opposed to whom?
i like your style kid. fuck the riff-raff. take they're money too, like goldman does.
Forget that. It's not like he's trolling 1000 posts. He's expressing his rhetoric which is easily defeated so let it be is my vote.
Maybe the Captcha should be solving some differential equations... rather than addition/subtraction of negative numbers... I think they have that negative number bit all figured out now :-)
I knew that was coming...ha ha :)
what do you have in common with the riff-raff?
that you both know that gov and wall street are run by gangsters.
what are you both doing about it?
nothing.
so far, the same.
let me make it more clear. self-consciousness of a problem and ignorance of a problem are the same with respect to action.
I could say I told ya so.
This Phil Gramm, however, seems to be a satiricist . . .
cb...i think phil is ultra tongue in cheek, though what he is saying is exactly phil grammish.
enjoy it. maybe it's marla, or one of td's buds.
Ditto. Should I pass a test on isomorphism in non-associative rings to post my in depth analysis?
It's obvious he is tongue in cheek. That's funny stuff.
The real Phil Gramm isn't aware how funny he is, only the establishment drones can't laugh at that.
I totally agree with you deadhead--in fact, wouldn't it be awesome if Tyler asked "Phil" and ALL of his deregulation buddies to do an "let's take America for all it's worth" reenactment (you know, like the Civil War reenactments, in a way).
It would be awesome, if the REENACTMENT, showed conversations where they revealed their masters, and what was REALLY behind all of the work.
I'm reading A Collossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers by Lawrence G. McDonald and he gives a very nice narrative of the moves that the IB houses took, that led to so much trouble.
It is amazing that the public allowed Glass-Steagall to go down to begin with, and even now, these guys are only demonized by those of us, trying to stop the scams. The public still doesn't realize the mass heist that Phil and his affiliates accomplished...i say it is time for a reenactment---
hey dude, maybe the troll invastion is coming from the balkans, ever thought of that oh wise cheeky? :)
ok flame suit in place, fire away....ha ha
just yanking your chain CB, relax...
should read " Goldman Sachs is a key player in making our banking" and nothing else...........the rest is rubbish
Basically sir, what you are asserting is that we in the country better not kill the goose that lays the golden egg.... So this is at the heart of the problem. Disparity and control, as we of the lower class small retail investor get taken penny by penny because of these machines, which at the end of the day concentrate great wealth in the hands of a few. Is this what USA is suppose to be about?
I thought equal opportunity for all was above the sheer idea of profiting... that's more of a parasitical view of your own country than anything else!
You must be kidding right if not you must rather insane to defend GS when they rig every market they are in. It is unbeliveable whats happening today and the last line of defense is now to build investor confidence(sp they build there balance sheets) and consumer confidence(70% of economy depends on this). Which this time around does seem to be happening as expected so they are taking up all markets up with the help of GS. One of these days all the 'lucky' not smart investors will loose all the hope that is built in sand now.
Rather then fixing the economy the right way you are trying to inflate you way out of this and help all the same people who screwed, not sure what msg we are sending to the future genration and people who do the right things like saving.
With regard to the GS Q2 trading success, i always thought trading was a game of probabilities not a game of certainty. With 2 negative tradings days and 98% successful Q2 trading days, would this not qualify as CERTAINTY? If in fact one trades with certainty one would have to have full control of the market. The media has been all over GS of late but why has their 98% success rate NOT highlighted?
http://www.zerohedge.com/article/goldmans-42-100mm-trading-days-q2-absolute-unprecedented-record-just-two-days-trading-losses
the only explanation is market manipulation.
There is literally no other explanation.
None.
Nada.
If you have a trading strategy that makes many trades, and has even the slightest bias towards the win side (i.e. 50.1% winners), then the law of large numbers kicks in and you can go for very long stretches without a trading day loss.
My record is 18 days in a row - on a portfolio that is less than a rounding error for GS, making hundreds rather than millions of trades per day.
You don't need to do anything illegal to have consistent returns. You just need to have a strategy that is ever so slightly more than 50/50 in win/loss, and be able to ramp that strategy up.
But Goldman does control the market.
peterpeterpeter, first you're assuming Goldman's gains are exactly the same as their losses. Second, if they are operating on 0.1% profit margin and they are making over $100,000,000 per day profit, then their trading volume is over $100,000,000,000 per day.
Now peterpeter, I know that Goldman sells themselves as "the smartest guys in the room", but do you really believe that? Rubin did wonders at Citi and Paulson is pure genius. Oh, and let's not forget Corzine and all he's done for the Jersey economy.
You need to brush up on your Kelly criterion OR remember that you let your winners run.
His message was being spread and gaining even more support...therefore he needed to be censored.
Until we have guys like Black back as regulators nothing will change. We just can not compete with the vast amounts of money being used to influence decisions. The Rich article says"
for all, recommended website.
I think it may be related to Fannie Mae's losses, actually.
A very conservative trading approach could get a high strike rate but profit volume would be low. High profits and very high strike rate in a mainstream market is fishy.
Many slots run on a 97.8% and Black Jack (6 deck) runs about 54.7%. GS has them both beat. No wonder MGM and the Sands wanted to avoid having to do another equity raising. They know that GS holds the crossroads.
Rubbish.
There has probably never been a losing day for any casino in the world using slots (other than progressive slots where eventually part of the accrued winnings are given back in a lump sum distribution with rare occurence).
If GS makes enough trades at 50.1% win rate, they will consistently make money.
There is no way that they have any strategy where the odds on any 1 trade are better than the odds a casino has on any game of chance.
"There is no way that they have any strategy where the odds on any 1 trade are better than the odds a casino has on any game of chance."
Bwhaahaahaaa....
I should have written "on any 1 trade made by a HF strategy"... and I'll stick with that.
When GS plays the spread on interest rate products, front-runs their own clients (if they do that) or gets word from Treasury about actions in advance of the market place - then all bets are off.
But, when it comes to a co-located computer making millions of trades per day, the win/loss rate is going to be above 50% (or else they would shut it down), but not by much.
In roulette which has the best odds, the house edge is 2.70% on a European wheel (i.e. only 1 green). That's as good a deal as a casino anywhere will give you (ignoring progressive video poker at some infrequent times and any form of cheating).
If GS had a trading strategy that they were running at a 52.71% win rate, they would likely have made the software too conservative, and they could make more money going after many more trades with a lower win rate.
The two down trading days in a quarter look bad, until you look at the market as a whole. That quarter was an explosion and there were very few down days in the quarter. If GS had done nothing more than avoid loss on just 60% of down days, it's possible that's the result we might get, given that they were making money on bond holdings each day.
HAHAHAHAHAHAHAHAHAHAH .... i have a bridge i would like to sell you ...
ya think
Is it possible that Barry Bonds would have won 7 MVP awards absent the use of steriods?
31059..denninger had a nice piece on this in additon to the zh piece td cited.
All this crazy nonsense makes our markets inherently unstable. It's funny that most if not all of the lying and propaganda intended to defend practices like these is aimed at the American people - but does anyone think the Chinese are being fooled? That's who they need to convince, not us. And the Chinese aren't stupid: they know, for one thing, that you can't have more consumer debt when the consumers have no income or next to no income. This kind of frontrunning doesn't help: the Chinese know we're going down. That's what buying 400t of gold was all about.
"All this crazy nonsense makes our markets inherently unstable."
Says who?
Douchebag on his computer on a Sunday evening?
You were interested enough to engage...
"Says who? Douchebag on his computer on a Sunday evening?"
Says the douche on his computer on Sunday evening...
LOL, the ignorance is astounding...
And they do it anonymously, too... what's up with that?
In any case, Geithner had to come out with Hillary the other day and bow to their Chinese masters so I think the Company's sock puppet brigades are pretty upset... Apparently the Chinese DO want to start using their industrial capacity to service their own markets so their people don't have to live in shit so much anymore. China wagged the stick pretty hard, it seems. Their message was simple: get your shit together and at least try to pretend you aren't a banana republic or we send our business elsewhere...
http://www.youtube.com/watch?v=o_0Gf9n8Rw8&eurl=http%3A%2F%2Fnews.google...
And as my own blog starts to pick up a readership, I'm dealing with more and more of these sock puppets myself. Gonna have to have a regular hate mail feature lol!!!
But once again: it's not me you have to convince. It's the Chinese.
re: HAL / Azimov reference
2001: A Space Odyssey was of course written by Arthur C. Clarke.
Re: GS winning percent - ??
- Nobody is that good given the level of risk employed.
Risk as it pertains to ... ? Backstop behind the SLPz? So, conceivably, a "past ball" (not seen coming, i.e. flashed in a dark pool) thrown in the dirt could get by the catcher and roll how far (without a backstop)? There is no risk when Bernanke is the umpire behind the plate.
What is the predictability that if Obama/Bernanke/Geithner/Summers actually knew what went wrong with Housing/Economy etc that they could fix it with any degree of certainty. My guess would be 10%. I still don't think they have a clue that they are the problem. The Government created the housing mess. They created or promoted CDOs, CMOs to get money moving to get more tax money.
The consumer is not going to start buying, people will walk on their homes they will follow the examples of Wall street on the individual level. It will get uglier and the only thing the government can really do is suspend their pay and benefits voluntarily until they fix the problem. Not going to happen soon they are more interested in private jets than a balanced budget. You can't fix anything till you know what is wrong. Washington and Wall street doesn't have a clue.
Shill alert!
You're part of the problem, douche bag. Do everyone a favor - get a hysterectomy. We've got enough inbreds.
Haven't they done enough already, this is just a grandiose plantation economy, with well paid media shills blowing smoke up your ass.
U.S. Economy May Be on Brink of Recovery, Tyson, Krugman Say
http://www.bloomberg.com/apps/news?pid=20601087&sid=aXgtL5wHZN8k
They should seize his Nobel Prize
Related to that - Who will get the big one this year? ZH should have an online poll/
Will we see a big correction? The fundamentals say yes, but ppl keep buying anyway. That's why I'm also in the buy & hold camp, I admit.. I've observed too many time where a stock trades lower while on balance volume
hat tip to good finance articles..
Only you pissin' in the pants shittin' in yo' jammas' bulls
bother to read ZH and blast the man's ass. It is your money, do what the fuck you want. You will cry later about how you wuz fucked. You are pathetic bunch of gay cocksuckers (sorry to be redundant) --- go enjoy a dick sucking brunch and wake up to the real world --- a black man sold his soul to the " " for the title enjoys --- GoldmanBallSack rules and rocks..................
ride it up, and then ride it down - If you know the game is rigged you can play it accordingly.
Hey Cheeky, you got a problem with free and open discourse?
You want a platform for uncontested diatribe, this ain't it h0m0.
Now, besides obsessing about how THEY are stealing from you, how do you and TD MAKE MONEY?
The take away from this blog is to buy guns , ammo, and gold which gets stuffed in a mattress. Nothing more.
Ruhh Roh.... what's wrong Dennis, did they tell you up the ratings or your gone?
what the hell is wrong with you; and who the fuck are you anyway, except some little bitch who is obsessed with money because he doesn't have any; you should conclude by my posts here that i really don't care about money, and ask yourself is that because of
a) i have it more than enough
or
b) I'm a Buddhist monk living in Nepal cleansed from the need of material possession ...
c) bothered that people can post anonymously.
d) have no problem letting somebody pound my ass to make a quick five bucks.
no; that would be your mom, but she only wanted a Ho-Ho for her service ..
Cheeky, I'm voting for the Buddhist monk :-) And TD I'd be happy to pay for a Gold Plan to weed out the crazies... however all non-crazy dissenting opinions have to be allowed to participate. However, unsolicitated homophobic attacks like the one from Anon #31131 really add nothing to the conversation.
there isn't enough evidence in the use of the word 'homo' to conclude somebody is 'homophobic'.
i would like to here more to learn if this is the case.
i would appreciate it if you stand by, but let's be careful. a blog entry may never be able to confirm anything about somebody.
and if college-educated, you must bear in mind the likely use of poetic license to convey complex ideas, almost as complex as the banking system and financial instruments and processes, which nonetheless, can easily be flushed down the toilet.
By default, the use of 'homo' in such a negative context shows you have little respect for that class of individuals... with a subsequent inference that you have a negative bias for the class... with an additional inference that you sound homophobic. I am not homosexual, nor homophobic, but I do feel that someone needs to revoke your "poetic license", until you learn that you do not need to use unsolicited attacks to convey complex ideas. It is usually the person who has minimal mastery of the English language who feels the need to convey "complex ideas" in such a way... and by the way your ideas didn't seem too "complex"... so your idea of "poetic license" wouldn't apply.
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Thanks RT. Why don't you call it the Sunday night global preview since you spanned the globe.
Thanks also again for the highpoint of last week with Beavis and Butthead. Truly gut-splittingly perfect.
Will we see a big correction? The fundamentals say yes, but ppl keep buying anyway. That's why I'm also in the buy & hold camp,
hat tip to recommended reading 4 slow news day ..http://www....
This is really getting out of control :(
"
more major bank failure...DOW futures take a divehttp://www.bloomberg.com/apps/news?pid=20601087&sid=ajgUp7xQIn6c&refer=home
ng is starting to look like a submerged beach ball. patience grasshopper.
I have come to understand that, barring some otherworldly-catastrophic/black swan/WWIII-type scenario, we really are NEVER going anywhere near those March lows again. Ever. It just ain't. gonna. happen. Period.
The markets are clearly being manipulated by GS and whoever else with the full authority, approval & complicity of not only the US Government; but probably the Governments of Britain, Germany & Japan, as well. It is an orchestrated effort. Manipulated, at the very least, to keep it from going back down to 666 or lower on the S&P. Worse case scenario, we MIGHT - M-I-G-H-T - go back down to 850. I don't know how they're doing it, but they're doing it (one day, Tyler, you're gonna have to put up a post connecting all the dots for us and just spell it out in black & white how they've managed to do it.) It's obviously a matter of national/global security, is how they (the FED) probably justify it to themselves. They simply can not/will not let the market fall/fail again.
You see how GS came out and called the jobs # to within a few thousand on Thursday? Well, I traded accordingly in pre-market on Friday, because they've made a believer out of me, at long last. And now that they've come out and called for S&P 1050 to 1100 by the end of the year, I'm trying to figure out how to play it. And this is what I've come up with -
If the market keeps going the way it has over the last few weeks (140 uninterrupted points in a matter of 3 weeks - that's gotta be some kind of record), we'll be at 1100 by the end of September, and maybe 1200-1250 by X-Mas. I don't think that's gonna happen. That would be overkill, even for them. They want to bring back the average long term retail investor, all that "sideline money" we hear so much about, make them feel safe about playing the markets yet again, and in order to do that they're gonna have to loosen up their grip on the reins a bit, in order to provide that correction that everyone and their mother is waiting on, and, until they get it, they and their mothers will continue to mistrust this rally. So I think we're gonna see it, this "correction", or re-testing of what some might call the lows (low-ER, at least.) Only they'll take it back down to a not-so-scary, safe number like 850 or thereabouts (which, if this was the real world, is what we, under the circumstances, is what we SHOULD be trading around for the next 15-20 years.) Then we'll get inventory #'s for the 3rd quarter, and that'll be the spark...
This is all conjecture on my part. But it's about as good a theory as I've heard anyone come up with: I say the rest of this month, September & October the market goes down in a nice, orderly fashion to S&P 850 or so. Everyone feels good about the correction; bears get suckered back in, thinking we going much further,... then - BOOM - huge fucking party-unto-the-edge-of-death rally through Christmas with SPX 1100 in Santa's bag.
If GS says the that's where we're going by the end of the year, I believe them. Because, I repeat, they've made a believer out of me.
(If it turns out I'm right, and you've traded accordingly, you all owe me a beer.)
Interesting. I'll be watching how the 500B congress in passing along to the FDIC gets levered to smooth out the next leg down in residential and commercial coming this fall & winter. The "saving" of many smaller regional banks by the TBTF institutions might turn the trick for the late year rally you are calling for.
We'll still eventually have the problem of too few dollars chasing too many stocks.
More and more players are cashing out at these levels every day.
You want to justify a prolonged rally, you need to:
a) Identify the buyers. (And don't make the common mistake of confusing volume with liquidity).
b) Show me an example of credit creation being used to stave off credit collapse.
Popo
Risk as it pertains to ... ? Backstop behind the SLPz? So, conceivably, a "past ball" (not seen coming, i.e. flashed in a dark pool) thrown in the dirt could get by the catcher and roll how far (without a backstop)? There is no risk when Bernanke is the umpire behind the plate.
more info on goldmans flash orders
You believe they can control everything. You would be wrong.
you think GS wants you to make money in the market? lol
they screw their own freakin customers
one thing they will NOT tell you is where they intend the market to go
of course, there are some big surprises in store for GS as well...
wow.... market set to crash...did a major bank fail???
Very good post. I got another theory for ya. Intel's earnings are bullcrap. They are totally pulling a Healthsouth. So is nvidia. The reason for all the push to call this recession over is because everyone is sitting on cooked books and it's going to blow up in their damn face in even just a few more months. So I'm going to watch the market kick make believe economic butt for a while and act all big and bad. What'll be funny is that there won't be a way out. If they try to dump stocks and cut and run the treasury will be there holding the bag. AHAHAHA.
That's what they said 80 years ago too.
I agree with the manipulation theroies (and TD, Marla and co, you rock), but we seem to have lost history. ALL of this happened in the GD too. ALL of it.
Hell, the superb video on Bill Black TD had a few posts ago confirmed that.
The correction will occur within the next 2 weeks. It may take up to 2 months to re-rest the lows.
As an aside, I've been reading historical papers from the GD this weekend. The comments are identical to yours.
And the cycles go on...
It is a wise thing to review historical happenings.
Yeah, we had a whole thread on exactly the same subject about a week ago. With all the comparisons to the GD, with the charts all lined up and everything. I mean, people started pulling those charts out back in January, claiming it was gonna play out exactly like the GD. But my argument against that was in the 1930's, they didn't have supercomputers and HFT and Dark Pools and Flash Trading and they certainly didn't have an unlimited line of credit at the window. And, as I stated in the other thread, one of the things that exacerbated the crashes back then were the fact that, often times, the ticker was running literally HOURS behind the actual quotes; so by the time you found out that the stock you bought @ 40 was trading @ 20, by the time that bit of news got to you it was really trading @ 10, and so you'd put your order in to sell IMMEDIATELY, and by the time it was executed it was already trading @ 5. Can you fucking imagine?
I know my history; shit, in the last year alone I read The Great Crash at least 8 times. I'm telling you, man - they got it down to a science. We ain't hitting anywhere near those lows again. But I guess we'll see. I know all those earnings are bullshit. But it doesn't seem to matter. Look at BC - they're profits are down fucking 90% YOY, and their stock still rallied sick based on some ludicrous notion of an impending... I don't even know what, to tell you the truth. Luxury boats? Okay, whatever.
It's just a theory I have that I plan on trying to trade on. I firmly believe that, with the low volume and all, they can pretty much do what they want - and so far nothing has happened to make me think otherwise.
So you're saying, "it's different this time."
Time and due diligence will prove out that the current transaction methodology is basically "controlling" prices unless the situation is overpowered with news etc. . I've observed too many time where a stock trades lower while on balance volume is in an uptrend, indicating accumulation, not distribution and vice versa. My conclusion was that this is done to "control" stock prices while either a market maker, specialist, or trading desk accumulates a position while holding down the stock, or the opposite for someone wanting to short a stock. This accumulation/distribution pattern is too often the opposite of what normal buying/selling patterns should portray. Who would be the major beneficiary of this type activity? Top of the heap would be the largest firms with specialist/marketmaker/option markmaker divisions that supposedly are behind a chinese wall, lol. This has evolved our markets into a "casino atmosphere' that chips away at ordinary investors accounts and is not a free market anymore too often,but controlled by big moneypools, just as in the thirties. Then it took 2-3 years of discovery to find out what was really going on, including the stealth rule changes to facilitate this robbery.
transaction methodology is basically "controlling" prices unless the situation is overpowered with news etc. . I've observed too many time where a stock trades lower while on balance volume
hat tip to good finance articles..
That sounds plausible, except what happens when all the 3rd party "liquidity providers" pull their bids and the stops stack up like a tower of babel, and the speed and freneticism of the resulting 15-min bars attracts leveraged short selling trying to catch the next leg down on a percieved bear trend? Just saying, it could get out of hand very easily when 70% of the volume is flaky.
A lot of people worry about that. But I don't get it. If there was ever a serious risk of that happening, don't you think it would have happened at some point during 2008? So many huge selling days, yet not one when you just couldn't sell. As bad is it was, it was nothing like previous crashes when there was simply no bid, period. It was nothing like the credit markets which became so illiquid that our entire economy was nearly put into bankruptcy. As much as I'm sure it hurts your ears to hear, I think you can probably thank the HFT's for that.
Amusing how you all have these cockamamie theories about how and why everything is manipulated and how if it wasn't you'd be wealthier.
I suggest that the manipulation is to your benefit and be glad of it.
Few is any of the readers of this blog have a skill worth more than $7 an hour in an unmanipulated economy.
For TD, make that $3
$7 an hour????
Must be what your mother is charging.
About all she's worth too.
If anyone has ever tried to unload 1000 shares while dark pools were trading heavily, that person has discovered what a horror show feels like. There's almost no liquidity, and your sell order gets delayed.
When it's actually filled, it's been chopped up into 100-share segments? Why? Because the dark pools are chopping their own trades up into 100-share segment and trading them rapidly. Result? No liquidity for the rest of us.