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A Million HFT Algos Suddenly Cry Out In Terror And Are Suddenly Silenced As Citi Announces 1 For 10 Reverse Stock Split

Tyler Durden's picture




 

While the wacky desperation antics of America's nationalized bank (that would be Citigroup for the cheap seats) enter the surreal zone, after the bank just announced a 1 for 10 reserve stock split (finally returning the stock price to Al Waleed's cost basis, if not entrance market cap) and a 1 cent dividend (which effectively means the Fed can now exit the prop each failing bank game... but won't), the bigger question is what happens to the momentum algos that traditionally traded 500 million shares of Citi stock, providing a supporting base for the market courtesy of massive momentum surges that provided a buying feedback loop mechanism driven out of pure churn volume. Those days are now over, as the volume will plunge pro rata from half a billion to a measly 50 million shares. Furthermore, with algos receiving liquidity rebates on a volume basis, it is conceivable that the biggest piggy bank to the 3 man Ph.D. HFT operations is about to break, as exchanges cut their rebate payouts by 90%. And with the stock market these days being far more a function of volume churn than technicals or, heaven forbid, fundamentals, what happens with the natural HFT support to the market is anyone's guess. One simple assumption: the next time the S&P does a May 6, or a USDJPY flash crash, the liquidity providers will pull out that much faster, leading to a massive freefall without any of the foreplay.

Full release:

NEW YORK--(BUSINESS WIRE)--
Citigroup Inc. today announced a 1-for-10 reverse stock split of
Citigroup common stock. Citi also announced that it intends to reinstate
a quarterly dividend of $0.01 per common share in the second quarter of
2011, following the effective date of the reverse stock split.

“Citi is a fundamentally different company than it was three years ago,”
said Vikram Pandit, Chief Executive Officer of Citigroup. “The reverse
stock split and intention to reinstate a dividend are important steps as
we anticipate returning capital to shareholders starting next year.”

Citi anticipates the reverse stock split will be effective after the
close of trading on May 6, 2011, and that Citi common stock will begin
trading on a split adjusted basis on the New York Stock Exchange (NYSE)
at the opening of trading on May 9, 2011. When the reverse stock split
becomes effective, every ten shares of issued and outstanding Citigroup
common stock will be automatically combined into one issued and
outstanding share of common stock without any change in the par value
per share. This will reduce the number of outstanding shares of
Citigroup common stock from approximately 29 billion to approximately
2.9 billion. Citigroup common stock will continue trading on the NYSE
under the symbol “C” but will trade under a new CUSIP number.

No fractional shares will be issued in connection with the reverse stock
split. Following the completion of the reverse stock split, Citi’s
transfer agent will aggregate all fractional shares that otherwise would
have been issued as a result of the reverse stock split and those shares
will be sold into the market. Stockholders who would otherwise hold a
fractional share of Citigroup common stock will receive a cash payment
from the proceeds of that sale in lieu of such fractional share.
Additional information on the treatment of fractional shares and other
effects of the reverse split can be found in Citi’s definitive proxy
statement filed with the Securities and Exchange Commission on March 12,
2010.

Citi is executing its strategy of focusing on its core businesses in
Citicorp to support economic growth including banking, providing loans
to small businesses, making markets and providing capital, while
continuing to wind down Citi Holdings in an economically rational
manner. At the end of 2010, the U.S Treasury sold its remaining shares
of common stock, earning in total a $12 billion profit for taxpayers on
its investment in Citi. 2010 was Citi’s first year of four profitable
quarters since 2006, with $10.6 billion of net income. Citi's capital
strength is among the best in the industry and the bank is focused on
putting its unmatched global network to use for its clients to foster
sustainable and responsible growth.

 

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Mon, 03/21/2011 - 08:22 | 1081114 Yen Cross
Yen Cross's picture

FUCK algoes!

Mon, 03/21/2011 - 08:27 | 1081124 Terminus C
Terminus C's picture

In Soviet America algoes fuck you.

Mon, 03/21/2011 - 08:42 | 1081165 PhD
PhD's picture

Oh dont worry, you havent been left out. The algo minidick has been ramming your ass for years now. You just havent noticed.

Mon, 03/21/2011 - 08:46 | 1081184 Nobody special
Nobody special's picture

Its much better than becoming penny stock isn't it?  I'm betting that, within 6 months, we'll see these stocks in the $10 range, which would result in de-listing without the reverse split.

Mon, 03/21/2011 - 21:51 | 1084366 living on the edge
living on the edge's picture

Reverse splits are the kiss of death. Goodbye C (with a new cusip number)

LOL.

Mon, 03/21/2011 - 13:40 | 1082343 PrDtR
PrDtR's picture

BRAVO! my friend..

Mon, 03/21/2011 - 08:23 | 1081115 TradingJoe
TradingJoe's picture

I'd love to short Vikram's sick bank @ 45!

Mon, 03/21/2011 - 10:17 | 1081574 asteroids
asteroids's picture

Why not make it 100:1 or 1000:1 and put it into the same league ask BRK.A? Why not to the same for all the other banks and GM too. Let's see how long the market holds up the balloon then. How stupid do they think we are?

Mon, 03/21/2011 - 08:23 | 1081116 virgilcaine
virgilcaine's picture

No Black Swan at least.

Mon, 03/21/2011 - 08:25 | 1081121 Trillax
Trillax's picture

"Citi is a fundamentally different company than it was three years ago,” said Vikram Pandit, Chief Executive Officer of Citigroup."

The corporate caffeteria changed from canola oil to Extra Virgin olive oil?  The mailroom started using eco-friendly post 30% consumer recycled paper? Sorry, don't see the difference.

Mon, 03/21/2011 - 08:53 | 1081208 sharkbait
sharkbait's picture

That is a good laugh, 'fundamentally different'  what a joke.  Are they making donuts now, selling coffee maybe?

Mon, 03/21/2011 - 08:54 | 1081211 Yen Cross
Yen Cross's picture

You are getting a bit cocky.

Mon, 03/21/2011 - 09:06 | 1081261 LowProfile
LowProfile's picture

It's now 50% more bubblicious!

Mon, 03/21/2011 - 10:16 | 1081565 GetZeeGold
GetZeeGold's picture

 

 

That's because it now has electrolytes.

 

 

 

Mon, 03/21/2011 - 15:26 | 1082774 patience...
patience...'s picture

No, they are now staying at Holiday Inn.

Mon, 03/21/2011 - 08:27 | 1081122 firstdivision
firstdivision's picture

This will be an amusing stock to watch for the next few days.  Once it is up about 7%, I might look into shorting the crap out of it.  No more bid/ask IOC to float the price.

Mon, 03/21/2011 - 08:25 | 1081123 Yen Cross
Yen Cross's picture

Shoot those bitch ass bankers that lack skills my way. I'll beat those BITCHES into the turf. They know it's coming

Mon, 03/21/2011 - 08:31 | 1081133 Hephasteus
Hephasteus's picture

WTF bomb.

Mon, 03/21/2011 - 08:49 | 1081193 Yen Cross
Yen Cross's picture

Get lost!

Mon, 03/21/2011 - 08:30 | 1081134 cossack55
cossack55's picture

Tyler, my hat is off to the whole crew. None better at turning a phrase. 

Mon, 03/21/2011 - 08:51 | 1081199 Yen Cross
Yen Cross's picture

I doubt you could turn your nuts .

Mon, 03/21/2011 - 08:33 | 1081140 WhatCouldGoWrong
WhatCouldGoWrong's picture

May 6th.... Really? What a wonderful way to remember an anniversary.

Mon, 03/21/2011 - 08:35 | 1081144 Eric Cartman
Eric Cartman's picture

At least you'll remember it. 

Mon, 03/21/2011 - 08:35 | 1081145 jesse livermoore
jesse livermoore's picture

I love the star wars one liner .....headline..........

Mon, 03/21/2011 - 09:14 | 1081296 Blano
Blano's picture

Yes, kudos.

"You will never find a more retched hive of scum and villany.  We must be cautious."

Mon, 03/21/2011 - 08:37 | 1081146 MiningJunkie
MiningJunkie's picture

Sell FRN's - BUY Citi. Sell CASH. Buy Citi. SELL U.S. dollars. Buy Citi. Jettison all debasement items and buy assets - including Citi.

You are witnessing the final end-game collapse of the U.S. dollar and therefore cannot be short.

BTFDYFI.

Mon, 03/21/2011 - 08:36 | 1081149 Id fight Gandhi
Id fight Gandhi's picture

Always dump a reverse split. Almost 90% of the time it falls post split.

Maybe momos and algos are weeping at terminals this morning.

Mon, 03/21/2011 - 08:40 | 1081159 prophet
prophet's picture

When evaluating trading hedge funds one of the red flags for me is when their successful methods require shorter and shorter time frames in order to keep working.  It says to me that the edge they had is fading.  Translating that to the HFT phenomenon and what the future holds for them is intriguing.

Mon, 03/21/2011 - 08:48 | 1081185 Yen Cross
Yen Cross's picture

SO Passe.

Mon, 03/21/2011 - 09:58 | 1081487 prophet
prophet's picture

SO Sorry.

Mon, 03/21/2011 - 08:44 | 1081173 Tense INDIAN
Tense INDIAN's picture

just check marketwatch.com  WHy India is RED when the whole world is green ...heres the reason ...n its simple.

 

http://markettechnicals-jonak.blogspot.com/

Mon, 03/21/2011 - 08:51 | 1081207 Yen Cross
Yen Cross's picture

Ok I'll read it. Took you long enough?

Mon, 03/21/2011 - 08:45 | 1081178 jkruffin
jkruffin's picture

Gap it higher and sell all day, the smart money has been bailing out of the ponzi. 

Mon, 03/21/2011 - 08:49 | 1081180 curbyourrisk
curbyourrisk's picture

Gotta love an entry point for shorting........

 

Just be careful, Ben Bernanke will be obtaining the identifying information for every short trade entrant.  He will personally be coming to you home with 4 goons and will explain to you that there is no need for you to be so un-patriotic and that you must be taught a lesson.  Shorting un-american so they say..... 

 

 

Fuck that.....   load up with both fists and watch this mutha fucker burn TWICE.

Mon, 03/21/2011 - 09:21 | 1081329 hamurobby
hamurobby's picture

Just waiting for the s+p to bump the 50 day.

Mon, 03/21/2011 - 08:49 | 1081194 Wakanda
Wakanda's picture

"...leading to a massive freefall without any of the foreplay."

Making popcorn for the big one.  Too bad about the foreplay though.

Mon, 03/21/2011 - 08:50 | 1081203 Bruce Krasting
Bruce Krasting's picture

You can't get margin on <$5 stocks. Most big funds don't buy < $5 stocks.

Problem solved.....

Mon, 03/21/2011 - 08:57 | 1081222 overmedicatedun...
overmedicatedundersexed's picture

avoiding delisting is child's play these days of the big moon..not a bullish signal or is it in Ben's mirror..Mirror mirror on the wall who's the greatest ponzi man of all??

Mon, 03/21/2011 - 08:57 | 1081223 iinthesky
iinthesky's picture

Thats like dressing up a busted fat ugly french whore to look 'like a virgin'

Mon, 03/21/2011 - 09:01 | 1081242 Rogerwilco
Rogerwilco's picture

Drives out the riff-raff and makes the counting that much easier when Obama nationalizes their ass later in the year.

Mon, 03/21/2011 - 09:03 | 1081251 Seasmoke
Seasmoke's picture

way back in the old days (1999) a reverse split, was a sure sign of the kiss of death......probably not the same in 2011

Mon, 03/21/2011 - 09:05 | 1081268 smlbizman
smlbizman's picture

i want all fed, state, gm type unions to have their future pensions invested in the following newly not yet created fund, please feel free to help me add the missing companies.

gm, aig, the top 5 big banks, the dollar, treasuries,  u.s. bonds, fannie, freddie, sallie????  

Mon, 03/21/2011 - 09:10 | 1081278 Seasmoke
Seasmoke's picture

berkshire

 

Mon, 03/21/2011 - 09:14 | 1081290 apberusdisvet
apberusdisvet's picture

"a massive freefall without the foreplay"

 

All long as we have an orgasm, everything is fine; move on sheeple.  Your wealth will just be placed in more appropriate hands.

Mon, 03/21/2011 - 09:26 | 1081350 defn8Dog
defn8Dog's picture

Cramer to sheeple "told you it was going higher."

Mon, 03/21/2011 - 11:12 | 1081809 Rogerwilco
Rogerwilco's picture

LOL    +1:10

Mon, 03/21/2011 - 09:27 | 1081361 NumberNone
NumberNone's picture

Tiffany just reported good numbers.  Everything will be fine. 

Mon, 03/21/2011 - 09:28 | 1081362 rickA
rickA's picture

tyler. just come out already. admit you coded the algos and now feel guilty that they've gotten so out of hand.

Mon, 03/21/2011 - 09:53 | 1081459 hettygreen
hettygreen's picture

Didn't the VIX reverse split before last fall's equity launch? Just about every 2X inverse ETF I follow has split at least once over the last couple of years and the price has always subsequently declined. Seems to me the best possible course of action when this happens is to get out asap or risk substantial losses. Can anyone provide an example of a reverse stock split that has not been the kiss of death?

Mon, 03/21/2011 - 10:10 | 1081530 iinthesky
iinthesky's picture

I refuse to watch CNBC so what are those idiots saying about all this?

Mon, 03/21/2011 - 11:27 | 1081864 DarkMath
DarkMath's picture

Tyler,

"A Million HFT Algos Suddenly Cry Out In Terror And Are Suddenly Silenced"

That is f'ing hysterical. Combinig Star Wars quotes and HFT, you have arrived. I think I have a man crush on you.

Mon, 03/21/2011 - 13:31 | 1082303 bugs_
bugs_'s picture

keep reverse splitting until there is no paper equity left.

Do NOT follow this link or you will be banned from the site!