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These Are Not The VWAP Reversion Algorithms You Are Looking For
I am broadcasting on all IP frequencies. I will be at 85 Broad everyday at midday, when the sun is highest in the sky. If you
are out there—if anyone is out there—I can provide charts, I can provide
data, I can provide flagrant breaches of market integrity. If there's anybody out there in the SEC's enforcement division—anybody—please, you are not alone.
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Are you serious?
Durden took his hand off the mouse, and raised his head only to find himself staring into what could only be desribed as the eyes of Hell. He quickly regained his composure and said, "High noon Goldfein. Out front of Miss Kittys saloon Don't make me come getcha.""
Hight Noon as sung by Don Vito Blankfein:
Do not expose me, oh, you bloggers,
On this, Goldmans most profitable year.
Do not forsake me, oh, digital dickweed,
Wait; wait SEC.
I do not know what bonus awaits me.
I only know I am very rich.
For I must fleece traders who hate me,
Or lie a middle class, a craven coward;
Or lie a rotting in my grave.
I hate NY, but Id take a vaca there if you actually put a call out to spark the revolution.
Ill bring beer.
I Am Legend. Nice...
So Goldman is the plague virus... we are the mutant plague victims... the SEC perished with the all the others... then Tyler that means you better bring the antidote.
Keep calling, someone will answer.
muwahahahahahha LOL!!!!
Tyler U R D Best Man!
But what isn't funny is the bounce USO gets off the sell off
Tyler:
This is Joe from GS. How would you like to come to work for us for, let's say, 10 mil/year? Deal?
Tyler:
This is Jane from JPM. I double that salary, let say 20 mil/year + 1 billion in bonus + special manipulation software designed by prime russian mafia brains.
That's the other way around, you idiot
Tyler:
Ken from Bank of America here.
No, not THAT Ken.. Ken Lewis.
Yes, I'm still the CEO.
Anyway, we were expecting to pay double the $33mm amount to the SEC for the unfortunate misunderstanding between me and Hank and Benny.
How about you coming over to the dark side to BofA-Merill and share in the fruits of our enhanced bonus pool?. We'll even give you a nice office overlooking 50 Broad (we know you like keeping an eye on these ba$tard$).
Tyler,
This is Hu Jintao from the Peoples Republic of China. I watch you blog for long time. You know those offers are fakes (like Rolex watch you look at in Tianjin alley market).
If you want to make real money, you come see me. American market not need interference from outsiders like you. We have lovely office for you and good seat at Hong Kong race track.
Hu
haaaaaaaaaaa! You win!
Tyler: This is Goldfellas ... come to the darkside we have cookies.
I am woman, hear me roar
In numbers too big to ignore
And I know too much to go back an' pretend
'cause I've heard it all before
And I've been down there on the floor
No one's ever gonna keep me down again
CHORUS
Oh yes I am wise
But it's wisdom born of pain
Yes, I've paid the price
But look how much I gained
If I have to, I can do anything
I am strong (strong)
I am invincible (invincible)
I am woman
You can bend but never break me
'cause it only serves to make me
More determined to achieve my final goal
And I come back even stronger
Not a novice any longer
'cause you've deepened the conviction in my soul
make sure you wear your kevlar...
The 8 point GOLDMAN SACHS Manifesto for destroying Democracy in America--
Socialism for the RICH, Capitalism for everyone else...
(Posted on Marketwatch of all places. At least Paul Farrell isnt a bought and paid for SHILL)---
1. Always elect a figurehead president
Putin skirted term limits by getting Medvedev elected president. Then Putin was appointed party leader and prime minister, the real power behind the throne. That's one way power stays in power playing the game. Wall Street is a master at playing this game, as the single largest money donor to political campaigns. Donations assure continued control behind an illusion of democracy, where all politicians are mere pawns.
2. Greed is great in the new 'Socialist-Capitalism'
In his blog, Matt Taibbi asks "what's wrong" with Goldman's $3.44 billion second-quarter profits on top of setting aside $11.4 billion for insiders? "What's wrong is that this is not free-market earnings but an almost pure state subsidy" as Congress steals our tax dollars giving them "to the same guys who had just blown up the financial world."
3. Too-stupid-to-fail big banks will always get bailed out
In the New Yorker Joe Haggen described their arrogant culture: "The god is Goldman. You subjugate yourself to that god, and in return we will make you a gazillionaire." But as recently as last fall "not a single Wall Street executive" Haggen interviewed "believed Goldman would have survived an overall collapse of the financial system. A large loss would have been inevitable as lending evaporated, and Goldman Sachs would have struggled to shrink the company to a fraction of its size overnight."
Taibbi adds: "AIG owed Goldman about $20 billion at the time it went into a death spiral." Thanks to Paulson's $13 billion gift, tax dollars went through AIG straight into Goldman's pockets.
4. Pretend to be a commercial bank, risk like an investment bank
Wall Street still gambles as investment banks. Worse: Taibbi says when Goldman converted they became "eligible for a new program that gives commercial banks FDIC backing for unsecured debt ... a free AAA rating to the big banks and allows them access to mountains of cheap money." No wonder "Goldman took full advantage of this deal, issuing $28 billion in FDIC-backed debt after its conversion. Exactly how hard is it for a bank to make a profit when it has unlimited access to virtually free money?"
5. American taxpayers are Wall Street's personal piggy bank
Taibbi notes that Goldman got $10 billion TARP money, claims they're now paid off. But the Treasury still has warrants which Goldman wants to renegotiate below market prices, and the juicy low-interest loans help them increase their profit margin.
6. High-risk leveraging guarantees high-paid insider bonuses
After converting into a commercial bank Reuter's reported that Wall Street was "taking steps to reduce leverage." But since then "Goldman has been emboldened by all its state backing to borrow more and gamble more than ever," says Taibbi. "This is the equivalent of a regular casino gambler who hears that the house has doubled down on his credit line and decides to stay up at the tables all night, instead of going home and sobering up."
Meanwhile, "Goldman's VaR, or Value at Risk, which measures the amount of money the bank puts at risk on any given day" has "soared since last year."
7. Government-approved CIA-style silence hides 'The Game'
The TARP Inspector General estimates total new debt for all bailout programs will be a staggering $23.7 trillion. But the Fed Chairman refuses to disclose vital information, even to Congress. Bernanke learned that trick from the CIA, so they can't be audited.
Taibbi warns that taxpayers are stuck with piles of Wall Street's "worthless crap assets they acquired while they were playing roulette the past 10 years or so. We just have no idea how much crap they unloaded on the Fed, or how much they borrowed."
8. New laws secure perpetual power for new 'Socialist Conspiracy'
Wall Street, under the command of the Goldman Conspiracy, can further consolidate power over the American people forever by making sure Congress and the President (no matter which party wins elections) passes other new laws:
Kill the proposed Consumer Financial Protection Agency. Kill "public option" competition in the health-care reform. Kill all efforts to revive Glass-Steagall. Pass a "cap and trade" law so Wall Street can start gambling trillions in a new derivatives bubble. Pass laws to guarantee Wall Street's "too-stupid-to-fail" big banks unlimited access to taxpayer funds in the future, as they've enjoyed since October.
Final comment: More demands will naturally follow to empower this banana republic dictatorship disguised as the new "American Socialism."
Paul Farrell is the definition of a bought and paid for liberal operative.
He spends the entire beginning of the full version of this article specifically trying to pin this issue on Bush to divert any direct criticism of the slackey he voted into office.
He is scum.
Calling Harry Markopolous, please pick up...
800 billion goes a long way.
Masturbate, rinse and repeat
The SEC? Thanx 4 teh funny!
Ah come on Tyler, the SEC is the Beotch of the 2 Big 2 Fail. And after all, the big banks are keeping the Economics of Mass Destruction from occurring, don't ya know, so te SEC will do nothing.
Does ANYBODY in the SEC have the moral and intellectual courage to talk to TD and DO SOMETHING TO STOP THIS CRAP.
Hmm.
Ps- I got some oil fields in Iraq to sell ya. ;)
JESUS Tyler - would you STFU already??!?! You're angering TPTB and they're gunning the market and wahhhh, my shorts - they are so soiley!!
/DO *NOT* STFU!!!!!
That was the funniest thing I've read in a LONG time.
Tyler....you mean only the public see's the price but they don't see the volume because the majority of transaction now (according to Goldman Sachs own Sigma X press release 'aren't ever sent to the public market' which are executed in its 'dark pools') So we now have a private exchange where only people of significant wealth can play in ...not the general public....
Of course there is someone watching to make sure that they aren't catching a spread or even possibly selling their own shares (ie front running thier clients) because that would "be illegal"....of course 100M a day comes for "just being smart" and making 3BN on the crash and 3BN on the reflation are all just 'being smart'.....anyone who believes they are 'smart' or 'lucky' should be wearing a tin foil hat...
So a "high volume or low volume break out" doesn't exist anymore now that a VERY HIGH percentage of all order flow occur in the dark pools?
BTW WHERE THE FUCK WAS THE SEC BEFORE SCHUMER!!!! It took a politician to do your FUCKING JOB!!!! You mother fuckers! WOW Madeoff really taught you guys a fucking lesson didn't he....or didn't he....wake the fuck up America....wake the fuck up....
I am tired of having people tell American's to wake up. I have written the SEC a dozen times on manipulation in gold and silver, I have called Congress. They don't give a fuck.
Bullshit...did you see those Congress fucks come home and push their Healthcare bullshit...did you see what happened...America is waking up (at least the ones on this blog)
Very little was publically known about HFT before Tyler or SIGMA X -SLP/Dark Pool and actually spoke intelligently about it.
Did you see what happened today...yes Flash orders got banded...did it win the war? no but ZH-1 and spreading the word....this is what it is all about.
If you don't believe in the change IT WILL NEVER HAPPEN...Call your congressman send the email..and publicly flog them and shame them when they don't represent you. If they get away with it then you are the only one to blame....
Hate to break it to you but nobody give a fuck about gold or silver...
'cause very few own either or both, why the rest should give a fuck if for them it's a sideline issue?
Wake the fuck up America....? Do you think "America" gives a shit about where stocks are traded? Dark pools, light pools, shallow pools, beaver ponds, money lakes..... whatever. America doesn't give a rat's ass because it seems to have nothing to do with them. Not many people who I know can afford to invest in the stock market. So whether the Dow is at 20,000 or 0, they don't care. Everyone who actively participates in the market comprise a small percentage of "America". And this shit is so damn confusing, it wouldn't matter if everyone did because they wouldn't understand what's Tyler's saying anyway.
The market is a sham. Live with it or get out. I think it's hilarious listening to people complain about how "the market is rigged and IT'S NOT FAIR!" Nothing about capitalism is fair. It's not supposed to be. You want fair? Join the real Tyler Durden's fight to destroy the upper, hidden tiers of the system. And put in its place a system of equality and "fairness"--whatever that may mean. But complaining about how it's not fair... Well guess what, I don't really care. And neither does America. It never has.
anyone know where us non bb'ers can get the major indices w/ vwap overlay intraday? might as well take advantage of this!
Why does VWAP reversion matter?
Thanks,
Long time reader, first time commenter
What are the graphs telling us? Sorry, I don't get it... well I get the I Am Legend reference, just not the apparent reason behind the post :)
Denninger on "How to blow a Bubble".....
So once again we have The Fed blowing bubbles, this time in the equity markets, with (another) wink and a nod from Congress. This explains why there has been no "great rush" for individual investors to "get back in", and it explains why the money market accounts aren't being drained by individuals "hopping on the bus", despite the screeching of CNBC and others that you better "buy now or be priced out", with Larry Kudlow's "New Bull Market" claim being particularly offensive.
Unfortunately the banksters on Wall Street and the NY Fed did their job too well - by engineering a 50% rally off the bottom in March while revenues continue to tank, personal income is in the toilet and tax receipts are in freefall they have exposed the equity markets for what they have (unfortunately) turned into - a computer-trading rigged casino with the grand lever-meister being housed at the NY Fed.
Bull Markets are not formed out of The Fed playing "Quantitative Easing", throwing literally $500 billion dollars into the pool which then get "fractionally reserved" by 10:1 to produce a literal $4 trillion dollar market ramp job. Go ask the Japanese how that works - the BOJ did the same thing, the Nikkei rallied off the bottom in the 90s like a rocket ship, but when reality asserted itself (and it always does) it collapsed again and has never been back to its all-time highs since.
No, real buying is just that - real buying from real retail investors who believe in the forward prospects for the economy and business, not funny-money Treasury and MBS buying by The Fed from "newly created bank reserves" funneled back into the market via high-speed computers. The latter is nothing more than a manufactured ramp job that will last only until "the boyz" get to the end of their rope (and yes, that rope does have an end) as the fractional creation machine does run just as well in reverse, and as such "the boyz" cannot allow the trade to run the wrong way lest it literally destroy them (10:1 or more leverage is a real bitch when its working against you!)
Is it coming to an end now? Nobody can be certain when, but what is certain is that over the last week or so there have been signs of heavy distribution - that is, the selling off of big blocks of stock into the market by these very same "boyz." This is not proof that the floor is about to disappear, but it is an absolute certainty that these "players" are protecting themselves from the possibility and making sure that if there is to be a bagholder, it will be you.
Beware the unwind of this mess; unfortunately bubbles, when blown, have a nasty habit of detonating with surprising force and reverting not just to the mean but well beyond it.
The beauty of the web is that those of us who want to read Denninger can go directly to his blog. While we're at Zero Hedge, we prefer to read Zero Hedge. Thanks though.
Post Nazi.
We love what you are doing TYLER~~~
Standing up for justice and going for the JUGULAR!!
Gidde UPPPP!!!
XOXO,
Your MSM Friends at the Network you love to Hate
p.s...Can we work for you someday?
I'll honest... I don't get it.
I'll be honest... I don't get it.
Dear Mr. Durden:
Thank you for your concern. Please be assured that me and my staff don't really give a flying fuck what you think.
Thanks again for contacting the SEC and thank you for willingness to continue getting screwed in the capital markets. Without good Americans like you, the system would have already collapsed.
Warm personal regards,
Mary Schapiro
Securities and Exchange Commission
WOW, Doom and Gloomers missed out on one the biggest runups ever. At this point in time it becomes ever riskier. We got burned in 2007 and 2008 and are afraid of risk.
Dear Mr. Durden:
One more thing. I agree with you about CNBC. They are the useful idiots Lenin referred to. I'd bust that prick Liesman fast, but he's so stupid and so bloody useful. Personally, I am constantly getting Dennis Kneale and Tim Geithner confused. I can't tell them apart. i wish they'd fire his ass. Kneale, I mean. Geithner too, for that matter.
Warm personal regards,
Mary Schapiro
Securities and Exchange Commission
Haven't ya seen the memo?
No more sell offs, no more pullbacks. With all the mayhem on healthcare, the O admin has signed this into law. Good news and good reports only promoted by a good and green stock market. We called it Pravda, you call it CNBC.
It's amusing watching the bots try to find some bagholders on the eminis and not get any takers. About time.
Forced buy-in on HYG. Give me a break..... Any other traders having these issues?
i gotta throw in the towel here. i can't find any shenangians, chicanery or tomfoolery in VWAP reversion.
so many buyside traders are benchmarked to vwap. and so many algo's are set to vwap. so, yea, if a stock is too far above that, and the only at-market buying interest is at or around the vwap, it will create a natural air pocket that a stock will trend to...as it falls, the algo's kick in a buy a little and support it around that price (and yes, that price moves over the course of the day).
same if we're below vwap, buyside traders have every incentive to buy as much as they can up to the vwap - creating a natural trend towards that price. once its there, they stop hitting offers to keep their benchmark vwap below market vwap. its just how it works.
i need a little more explanation as to why you're insinuating massive fraud . and this is coming from someone who actually has entered in a simple participation vwap order and bought blocks over the course of long time periods. beyond that, i day trade WITH this vwap as a benchmark (support / resistance)
get technical if you have to. show your math. there are folks on here that dont know what a vwap is. but i'm getting the sense that there are also folks on here that do, that are starting to yearn for a little more than ambiguous assertations of fraud.
good critical reply, long on information that will help me trade, and asks tyler to explain some graphs, which he doesn't do often enough!!
I think the point is that the firms have said they use algo trades to trade the VWAP, and they are clearly not doing this. It looks much more like pump and dump. To me it is manipulation to run things up so you can then sell stuff from prior days. May not be illegal, but for sure BS. they also buy big blocks which push things up and then sell in little packets so it doesn't push the markets down. Maybe not manipulation, but certainly BS
Wow I'm impressed you can detect market manipulation so effectively just by looking at a bloomberg chart.
Why are you wasting your time commenting on a blog? Go! The world needs you!
Nice to see an honest challenging comment. While I can't provide the mathematics behind this, I can give you a layman's explanation since I do a ton of VWAP trading for buyside accounts. Here's what I see...
There have been a boatload of days like the one we've seen today.. not much underlying tick volume but lots of movement around the VWAP. And down days on average have been on higher volume, and conversely, harder to move the needle on.
So lets take a low volume day and pretend you have a VWAP buy order for the end of day. If you are committed VWAP buyer and few others are playing on the other side (again, due to lack of underlying volume), an "astute" broker with program trading ability can actively "push up" the VWAP during the day by "front running" a typical VWAP algorithm, i.e., getting more aggressive on the revision BEFORE a broker developed VWAP program kicks into gear for more volume buying.
There are 2 importantant things to remember about buyisde intitated VWAP trades: (1) most buy side traders use broker issued VWAP algos; and (2) VWAP is a moving target throughout the day. A rapidly rising VWAP is a killer for a buyer on a low volume day, because the opportunities are few and far between to really pick up shares on the reversion. When a predatory trading program gooses the reversion, it also gooses the VWAP trend. The less volume, the more perverse.
On low volume days, it really doesn't take much to move the needle, But there are times that "gunning" requires higher program trade volumes (think near the end of close). In those cases, many VWAP trades are filling in orders despite the spike above VWAP because the order is required to be filled. I've been stuck on the wrong side of those once or twice, and it wasn't very fun at all.
In most cases these days, I'm getting very aggressive on buy orders in the morning and leaving off the VWAP algo altogether... if the underlying volume will alllow for it. If not, I'm buying aggressive early, and running a VWAP until an hour before market close (no need to feed the beast). In most cases, we're buying on negative events when the volume is bid is heavy anyway. Sell orders are certainly easier to VWAP, but many of these days, it's just easier to wait until the last hour and wait for the volume spike. if it doesn't happen today, it will happen the next day.
In issues such as the SPY, there clearly are weird spikes in very large volumes that require intense scrutiny. While I don't see enough evidence to prove any abuses by any one HFT party, we know that very few can pull off some of these trades in a very short period of time. So while I woudn't go so far as say there is manipulation going on, I don't dare get involved in trading around these issues. It's a losers game.
Does this happen in just the spys or in individual issues too? No access to a bloomberg sadly.
Also, can you run the reasoning by us again? Is it brokers guaranteeing VWAP execution? Or is it all the computers closing out for the day?
It happens in both ETFs and individual issues. A lot of the end of day games going on are in the major ETFs, and most of the games of the VWAP reversion variety are in individual names that have fallen in trading volume and then get heatmapped.
Essentially, most brokers will not "guarantee" a VWAP price, unless they can somehow profit from it. One major Wall Street broker we fired recently allowed us to use their VWAP alogrithm, but reserved the right to claim any profits above VWAP if there was a gain from execution. However, they did not bother to claim reponsibility for VWAP losses. That being said there are many brokers that there that do a good job and have VWAP algos that get you real close, plus or minus. And you can keep the gains on the plus days.
Whats the code you are typing into the Bberg terminal to generate these graphs.
Standard VWAP gives you the dashboard and then what, looks like a regression analysis but the gif is small and you have cropped the typed code from the top right.
Sorry if its a dumb question but want to see if i can replicate this and then over certain time frames.
Tks.
Retarded BBerg user.
Well HOT DAMN look at that market CRANK (this, after doing shiat-all of nothing most of the day).
I can't wait until the vast *dark pools* of excrement collide with the electric-powered convective cooling device(s) at GREAT velocity.....
Folks, it is time to pull all funds from the big money center banks. I mean any bank on the "too big to fail" list. Maybe JPM will then give GS a margin call on some of their unsecured loans.
Love the I am Legend reference
I pool data and send it to Ny times, and FT. ask why it isn't manipulation. I ask Ft all the time why they do not appear to be investigating this, and why when william dudley (president of NY fed gets quoted they never mention his goldman association. I feel this helps expalin why the programs do such a great job of putting money in their pockets. I try to force these SOB's to confront the issue, saying this is the greatest rip off of all time. additionally sending crap to senate and house banking committees asking why their votes appear to be bought and paid for!!!
I have ssent data to RNC telling them if they want to win in med term elections this is the issue. How Obama keeps stuffing money into wall street packets while americans suffer.
Those are my ideas, but everyone don't forget to write!!
Come on, VWAP? VWAP is harmless, its been around for at least 10 years, and if you find that if price reverts to VWAP, TRADE on it. Wouldn't you love to game the computers? Besides, one of the heroes of this site, Joe Saluzzi, trades VWAP, only he says he does it manually. That's why he is on TV complaining about computers, because he is getting beat by them. Don't use poor Joe to defend your positions on Flash and HFT, and then give him a free pass when it comes to VWAP.
Hi, I'm from Estonia and I can assure you, that there is not such a thing as Russian mafia brain..it works based on quantity and not based on quality ;)
I have found that when you start seeing this trading pattern it usually means a reversal. I'd be interested to knw how much goldman is trading right now compared to others. usually in increase all of a sudden represents some kind of change in the wind.
I remember at 5, when I first heard the fairy tale, thinking that it could never happen...
http://en.wikipedia.org/wiki/The_Emperor%27s_New_Clothes
As I read these comments I think I'm a little clearer on this... ok, great post!
It amazes me how everyone on this site will just blindly follow TD, even if they have no idea what he's talking about. VWAP charts show absolutely nothing, except of course the price relative to VWAP. Tell me, anybody, what exactly is so nefarious about price divergences from VWAP?
And I hate to break it to you guys, but talk of banning flash orders has nothing to do with fairness and has nothing to do with TD or zerohedge. Direct Edge was stealing market share away from the other exchanges, and they realized that it was because of the ELP/flash program. So these exchanges added similar, if not more egregious, order types in order to stir up some drama and then went and complained to the regulators about the very order types they'd added. The result? Direct Edge loses its "edge", so to speak.
And banning flash orders will have minimal, if any, impact on HFT as a whole. Sorry to rain on everyone's parade, but the amount of misinformation getting thrown around on this site has reached epic proportions.
You said it man. Outrageous claims without a shred of proof is called religion, and this cult of personality is short on facts. Or maybe just long on inverse-ETF idiots- I mean investors.
The cheerleaders will either respond with snarky comments ("you must work for GS!") or not answer at all, because they have nothing of substance to say.
yes quite clear indeed...
"As I read these comments I think I'm a little clearer on this... ok, great post!"
Tell me... what are you clear on?
Assuming that you wanks work for GS is the only thing that might make your lttle noises worth reading, you mean you don't?
Go team.
Thank you for proving my point so eloquently. Can YOU explain the evil deeds that VWAP charts supposedly show? And conveniently, bloomberg ran an article today basically proving my point re: flash orders.
TD's simple BB charts in attempts to paraphrase a concept are often lacking in every aspect - havent you people figured this out? Remember the post last week about the Citi pref arb? Sorry bud, that exchange offer had already happened.
Explain how VWAP divergences have anything to do with manipulation, please. Also, why are you looking at the SPY? The constituents wag the SPY, not vice versa. Not even to mention the futures...
Quickly becoming the National Enquirer of finance blogs.
flat wrong. spu's move the spy's, spy's move the sectors, sectors move the underlying.
So funds buying based off VWAP? what's the issue here?
Ok at the risk of being wrong...
The VWAP prices shown on Tylers charts seem to be the weighted average price from the beginning of the day up to the current bar.
The VWAP price you get from your broker is the weighted average price from the current bar to the end of the day.
These are completely different, uncomparable datasets, or have I missed something?