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Let The Churn In QQQQ, Citi And Bank of America Hit Infinity: ISE To Offer Special Rebates For Liquidity Providers In These Three Names
Today, one quarter of the volume in the market is attributable to trading in Citi shares. This is simply a ridiculous statistic, and shows that the broader equity market, which merely trades based on the momentum of one stock, is and has been busted for about a year, when we first wrote about this phenomenon. Yet this insane churn is not enough for some: The ISE has just announced it is introducing a "Modified Maker/Taker Fee Schedule" for the three most actively traded options products on its exchange: QQQQ, C, and BAC. In essence, the ISE will provide even greater rebates to "liquidity providers" in these three stocks. The entire market will soon consists of exactly two companies (both of which are wards of the state) and one ETF, as liquidity finds the path of least resistance and greatest (evaporating) profit margins. This is what "liquidity" in the market has become. And all the while, the latest DMM, GETCO, which is certainly not frontrunning its prop positions based on massive NYSE flow traffic, is laughing all the way to the bank.
From the ISE:
ISE to Introduce a Modified Maker/Taker Fee Schedule for Three of the Most Actively Traded Options Products on its Exchange
NEW YORK, March 29, 2010 – The International Securities Exchange (ISE) today announced that it will introduce a modified maker/taker fee structure for options on the PowerShares QQQ Exchange Traded Fund (Nasdaq: QQQQ), Citigroup, Inc. (NYSE: C) and Bank of America Corporation (NYSE: BAC).
Effective April 1, 2010, market makers that meet minimum quoting requirements will receive a $0.10 maker rebate for posting liquidity in these names. Other highlights of the fee change include the introduction of competitive maker/taker fees for other market maker, broker dealer and professional customer orders as well as the elimination of payment for order flow. In addition, ISE will not charge maker fees for customer orders of any size and will not charge taker fees for customer orders of less than 100 contracts. The rebate-based fee structure combined with the elimination of payment for order flow will reduce overall costs for market makers, enabling them to improve the quality of ISE’s markets. ISE’s patented customer priority, pro-rata market structure will remain in place across all names.
“This unique fee structure in three of the most actively traded names at ISE will reward all market makers, further improve our high quality markets and preserve the market structure and pricing benefits that make ISE’s market attractive to retail and institutional customers,” said Boris Ilyevsky, Managing Director of ISE’s options exchange. “By reducing the overall transaction costs for market makers in these highly competitive products, we will help them continue to provide deep liquidity and high quality markets.”
ISE will also change its complex order fee structure for options on QQQQ, C and BAC. Customer orders of all sizes will receive a rebate of $0.15 per leg when trading against non-customer orders in the Complex Orderbook. ISE is maintaining its attractive pricing for crossing orders. For additional information about ISE’s fees, contact Business Development at bizdev@ise.com.
h/t Chop Shop
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QE 2.0, masquerading as liquidity. The only question is, how many ways can they disguise QE 2.0 and still maintain credibility?
Answer. For as long as the people on the other side of the trade wish to believe the delusion. And there are compelling reasons to believe. I have a tremendous incentive to believe in the tooth fairy if my compensation is based upon my belief in the tooth fairy.
Oh look, there's one now. Ka-ching! And another one. Oh goody. Ka-ching! Who would've thought there were so many tooth fairies out there? Ka-ching!
This should be illegal.
At what point do the liquidity providers become the only liquidity in the market?
About a year ago, as best I can tell ...
exactly.
this is simply astounding. no other way to say it.
I was going to suggest people just stop buying stocks. But it seems people HAVE stopped buying stocks. Thank god for the machines.
The stock market presently is a giant game of musical chairs.
Umm...well I kinda grasped at straws, thinking "this is too insane, it's not real."
And I saw the incept date for the program "April 1" and thought:
Ohhhhhh Boy that Tyler Durden!!! What an April Fools joke this is.
Well then I went to the ISE site and unless they are in on the joke (well in the larger sense....Yes), then this is not an elbow to the ribs.
Time to change the boxers.
Of course it's for April 1st. QE allegedly ends March 31 and we can't have the market crash down can we? QE will go on till for quite a long while I suspect only they are going to try to keep it on the sly to keep any bond vigilantes away. Don't want to spook the Chinese or Japanese to much yet.
A year ago.
Let's see, first the machines run all of the daily trading, or at least 80% of it. Now, they are running it in THREE FRIGGING SECURITIES? I feel like the Terminator 3 Nuclear Volley is about to occur with SkyNet bombing the crap out of stock market. Maybe, what, two weeks or so until we see the meltdown? Two months? This is insane. I keep hoping that Black Monday won't get turned into a joke when compared to what's coming.
What happens to the market if there is ZERO VOLUME? Does the stock market just stay flat? I wonder...
The volume hasn't disappeared. It's just moved over to Goldman's Sigma X dark pool, where mere mortals such as you and I can't see it.
On most days, the majority of folks here rail against too much trading...
Not sure what you all figure is the goldilocks magic volume number, but NYSE volume of ~4.8B shares today doesn't strike me a particularly light.
Today BTW, C + QQQQ + BAC accounted for a total of around 16% of volume.
It doesn't take a genius to understand why C traded double avg 3mo volume today.
The way I see it there are only really a few scenarios that could cause a multi-session drop in the major indices.
1) Yellowstone turns into a major volcano making half the US uninhabitable. Markets drop 10% initially, but rally back 20% when we realize that all that death and destruction actually makes SS and Medicare solvent again. HB index rallies hard.
2) Aliens come to earth and offer to share all their knowledge and technology. Nasdaq sells off hard but other indices manage to stay unchanged.
3) Supreme court denies Fed's appeal and Congress authorizes immediate audit. Banking index drops 90% in a week. Leadership of major banks, Fed, and Treasury disappear, followed by launch of enormous space ship destined for Mars.
The red, white, and blue portfolio allocation for your IRA:
20% C
20% GM
20% BAC
40% laddered U.S. Treasuries
It is the American way to wealth.
What could go wrong?
Red, white, blue.....as in the Russian flag, right?
tremendous, hedgeless_horseman ! Morningstar Advisor Workstation Portfolio X-Ray would probably give you 4 "stars" and a style box pat on the back. Should you be able to replicate such brilliant tactical allocation on the fixed side of the ledger, Calamos might have a fledgling bond fund for you to run.
Reminds me of the death of poker tournaments after the big run. One day you're in there playing and you realize all the fish are gone. It's just you and the other pros fluctuating your money. The only winner is the house.
Bingo
I've said this for many months. There is literally almost noone left in the market. Back out HFT, 2 or 3 stocks, and ETFs and there is no volume. Of course, no volume also represents the perfect opportunity to manipulate at will.
I don't think it's gone, per se. It's just moved to Goldman's Sigma X dark pool. And will never come back.
that and foreign markets; derivatives are the future. volume hasn't disappeared so much as it has migrated to other instruments, exchanges and avenues. futures on foreign exchanges and even cash (for corporations and 9+ figure investment parking) has made an aggressive move toward structured notes. dark pools for equities, overseas (and south to mexico & brazil) for futures and private linked / structured notes for corporate cash management ... it's under all our noses, hiding in plain sight.
Right... so the HFT are all trading with themselves and still making money?
Try again.
Scary scenario for corporates...all the capital you can attract is the cash you now have. Need more? You'll have to borrow, at soon unbelievable rates. So, no expansion. Lots of M&A, sector consolidation, more layoffs, tax increases....the big spiral downward.
All you folks railing about lack of liquidity / volume or too much volume in select names do realize that this is about trading in OPTIONS - not equities right???
you realize the two are interconnected, right? just for kicks, take out the penny stock C and it's billion shares a day volume, and see what's left. back out BAC and it gets really depressing.
QQQQ, BAC and C combined for ~16% of volume today.
Back them all out and you're still at a healthy volume number of ~5.6B shares.
It's not near the peaks reached during the 2007/2008 selloff, but it is nothing to sneeze at.
i bought and sold the same 100 shares 9000 times today!!! for no gain!! and I can tax write off all my commissions!!! whheeeeeeeeee!!!!
If you had bought and sold the same 900K shares for no gain, you would as you say be able to write off your loss on the commissions (assuming you had other gains to write off), but you are still very much in the hole on those trades since tax rates (and hence write offs) are substantially below 100%.
At 900K shares a day, you'd likely be paying all in commissions as a liquidity taker of about 4/10th of a penny per share. You'd therefore lose about $3,600 - and if you were in NYC and had a combined tax rate of ~50% and other gains that you could offset, your day of folly would still have cost you ~$1,800.
Buying and selling at the same price without having added liquidity is always a losing game.
INTRODUCING IVAN BOESKY'S HALL OF FRAUD:
http://williambanzai7.blogspot.com/2010/03/ivan-boeskys-haul-of-fraud.html
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