Not So Paranoid Ramblings On Isolated Futures Gunning, And How HFT Has Cost The US Economy 22 Million Jobs
SPY gunning was part of the Fed's spring/summer collection. Fall/Winter is all about the ES. With all the SPY IOIAs broadcast for the world to see, and JPM's clients not too happy that pop media like Zero Hedge makes it all too obvious when Jamie Dimon's boys are executing market manipulation orders for their prime quant clients, the latest way to drive the market higher, especially on days like, well, everyday when there is no volume to speak of, is by AUG-Steyring the futures market. Our friend, the Pragmatic Capitalist does a pretty, pretty, pretty convicing job of demonstrating just how that happens.
I don’t know if any characteristic of this massive 6 month rally has
been more apparent than the huge futures run-ups we’ve seen at random
points during the trading day. Without news, the S&P 500 futures
get gunned on huge volume and surge higher. I’ve seen it at least
every other day for 6 months. It tends to occur on low volume days
such as the one we’re currently experiencing. As you can see in the
chart below, the futures are getting gunned on massive volume without
any coinciding volume in SPY. This means an institution is jamming the
futures higher knowing that they can drive the market higher on no
volume. Effectively, they can take out every asking price with a large
enough order and immediately create a 0.25% bump in the market in no
time. If you’ve been wondering why we’ve seen huge surges on low volume days and conviction high volume selling on down days
this explains much of it. I don’t know if there is malfeasance behind
this or if the buyer is simply too stupid to input trades at the bid
(like most rational investors
do as they try to achieve the best low price), but this is certainly an
odd phenomenon that I cannot recall occurring so routinely over the
course of my career. Who is the mystery institutional buyer that just needs to place their huge block orders with such urgency?
And in the "more tin-foil hat" category we present this report by the black helicopter fearing men of Grant Thornton which summarizes many of our, Themis Trading, as well as Senator Kaufman and Schumer's concerns about what is happening to the no-longer free markets, and in fact, the overall economy, courtesy of the casino style strategies that have become the norm with the advent of high frequency trading. It may have cost 22 million jobs, but at least HFT provides liquidity and tightens spreads in AIG, C and FNM. Fair tradeoff.
- The decline in the number of U.S. listed companies has cost our economy millions of potential jobs.
- Market structure changes began to erode support for small cap stocks and eventually worked their way up to damage the support for larger companies.
- The results of low transaction-cost Casino Capitalism are that short-term, high-frequency traders are squeezing out long-term investors, the listed market for public companies is in decline, and this decline is taking the U.S. economy with it.
- The small and micro cap markets have in many ways become a Hotel California – companies check in but they can’t check out by going private (except through delisting, bankruptcy or acquisition).
- The need for improved stock markets has never been greater. Bridging the widening gap between small cap and large cap issuer needs should be a national imperative