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Why Nobody Trades During Regular Hours Any More (And How Prop Funds Just Stop Trading When Volatility Spikes)
For those who follow our periodic updates on intraday stock volume, today's article by the Wall Street Journal which focuses on the dramatic decline in activity during regular working hours will come as no surprise. In a piece looking at prop trading shop Briargate (oh so witty anagram of arbitrage), founded by several former NYSE specialists, we learn that at least one firm (and likely many more) now no longer does any trading during the hours of 11 to 2. As this creates a feedback loop of inactivity, pretty soon the core of daily stock market activity will merely be the half an hour of action at the open, and the dark pool-ETF-open exchange rebalance at the very close, with everything inbetween deemed obsolete. Of course, what this will do, is create even more volatility in trading, force an even greater decline in stock trading volumes (and pain for Wall Street firms), and a further divergence between stocks and fundamentals, as momentum trading gains an even more prominent role in determine "price discovery."
From the WSJ:
On the day the "flash crash" bludgeoned the stock market and chaos swept over the floor of the New York Stock Exchange, the founders of Briargate Trading were at the movies.
Rick Oscher and Steven Rubinstein weren't playing hooky. Briargate, a proprietary-trading firm that the two former NYSE floor "specialist" traders started in 2008, is mostly active at the stock market's open and close.
In between, when market activity typically drops, the Wall Street veterans play tennis in Central Park, take leisurely lunches, visit their children's schools and work out at the gym. Dress shoes have been replaced with flip-flops, slacks with cargo shorts. Once during market hours, they walked about five miles and crossed the Brooklyn Bridge to try Grimaldi's pizza.
"We actually planned on working a full day," says Mr. Oscher, wearing a white polo shirt and blue-plaid shorts. "But from 11 to 2, the markets are pretty quiet—what's the point? As a specialist, you have to stand in your spot all day and we did that for 20 years."
Briargate—an anagram of "arbitrage"—isn't the only firm taking an extended recess during the 6½-hour U.S. trading day. Trading has become increasingly concentrated in the first and last hours of the session.
Those two hours now make up more than half of the entire day's trading volume, according to an analysis of data provided by Thomson Reuters. In August, the first and last hour generated nearly 58% of New York Stock Exchange primary volume, up from 45% in August 2005, the analysis shows. The rise of high-frequency trading, where algorithms are used to exploit small discrepancies in high-volume situations, amplifies the concentration of trading at the beginning and end of the day, analysts say.
Heavy trading in the first hour is largely due to the accumulation of orders placed by individual investors and their brokers after the previous day's close, mutual-fund activity and new strategies deployed by institutional investors based on the latest research and overseas trading, says Adam Sussman, director of research at Tabb Group, a financial-markets research firm. Meanwhile, funds that track stock indexes often wait until the final hour to execute trades to better reflect the benchmark measures' last prices.
Focusing trading on those times could limit gains, but Messrs. Oscher and Rubinstein are at peace with that. "Would you rather play tennis or make an extra $80? It's a lifestyle question," says Mr. Rubinstein, who sometimes works remotely from Florida. "I can go play 18 holes of golf and then come back and trade and that's a workday."
As for how this strategy of avoiding "noise" trading is working out, the answer is - apparently not too bad. Which can only mean that many more lazy copycats will soon emerge.
While the firm declined to disclose their returns, Messrs. Rubinstein
and Oscher say they make more than they did in their later, leaner years
as specialists, though not as much as they did in the late 1990s before
the industry started to consolidate.
Oh and remember that selective "HFT Off" switch pulled during the flash crash? The same that many HFTs said is what helped them avoid massive losses (and which makes all their statements of providing liquidity moot)? It shows up again, this time helping Briargate avoid losses. We are confident all retail investors and readers will be able to stop trading at precisely the right moment as well (in addition to selling all their holdings at the very top of the bear market rally).
Mr. Oscher said the firm, which trades only its own money, hedges its
risks "so there isn't any scenario that would move our profit and loss
beyond boundaries of comfort." Briargate says it didn't sustain losses
during the May 6 flash crash because it closes its books when the market
tends to be volatile. "We actually had a pretty good day," Mr. Oscher
says.
Indeed, with everyone not only not trading between 11 and 2, but completely shutting down when vol passes a threshold, someone please remind us what the Chicago School of Fraud case for an efficient stock market was again?
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LOL look @ SPY vol
might be the lowest vol of the year
someone better kick a robot
Sorry to highjack thread...but will all traders please put down the tennis raquets, pizza boxes, children, pets, polo ponies or whatever you may be holding at this time. Please report back to the trading floor. Management requires you work 1.5 hours a day.
That is all.
lol. Looks like they took the remainder of Friday off.
so this will be my last friday playlist for y'all. it is a best-of not just of my previous playlists but some of marla's favorite tracks as well :)
freshy fresh (a playlist): http://www.youtube.com/view_play_list?p=B64086D4A6EDA49C
teleprompter market - set the level for yet another BS speech;
like a bad replay of sat nite live skit
The melt-up will continue until there is a spark, and no one knows where or when that will happen. Period.
the spark has been replaced with an electric glow lite;
lies for everyone coming up
Perhaps glow plug. Useful igniting stubborn fuel...
I'm thinking thermite. Anyone know if it can ignite a giant pile of shit?
Thanks for the laugh, nice one :)
Don't tase me bro!
pretty big spark in that SanFran 'burb right now..
Grimaldi's pizza
yes
I read this article yesterday and the first thing that struck me about it is how it seemed to be one gigantic attempt to rationalize a market that many simply no longer want any part of.
While the article is a "cute" lifestyle piece, it can hardly be considered a valid justification or explanation for the dearth of volume in this ponzi market.
just my .02
While the article is a "cute" lifestyle piece, it can hardly be considered a valid justification or explanation for the dearth of volume in this ponzi market.
You can bet it will piss off the working stiff, putting in double shifts to pay the mortgage on his home that has negative equity. What a f-ing joke... seems like lazy zebras loafing at the watering hole. Where is the lion?
The lion is on his daily 8 hour copulation orgy with 3 female pride members as has been his want for the past 6 months. It's been a very good year.
There's only so many times you can watch every trade go against you for at least 45 minutes from the second you put it on.
I'm glad to hear this happens to you also. I thought I was the only one.
Oh thank God, I'm not alone.
Hasn't happened to me since 1999. That's when I sold my last stock.
next time you do a buy, quickly do a short at twice the position... just to see what happens
For me it's back to the future: even back in the first days of day trading, only suckers traded the dead zone (12-2).
Here is how "price discovery" works, now, in the health insurance business. The HHS Nazis call the health insurance company and asks what the new rates are. Regardless of the answer, the HHS then says the rates are too high, and the insurance company then "discovers" what their new rates are to be, or else.
I dislike health insurers as much as most people, but the enemy of my enemy is my friend.
http://www.kaiserhealthnews.org/Daily-Reports/2010/September/10/Sebelius-Warning-To-Insurers.aspx
Trust the government or trust an insurance company.
No thanks.
Either way the trust gets violated and your finances pillaged.
What she is saying, in other words is, "lie like Obama about the cause-effect equation and then you can raise your rates".
Unless of course it is the stock market or BLS numbers we are talking about.
I am my own worst enemy and the enemy of my enemy is my friend. Does this mean that all my friends are my enemies and all my enemies friends?
I was never this circular until the new normal was announced.
I am my own worst enemy and the enemy of my enemy is my friend. Does this mean that all my friends are my enemies and all my enemies friends?
I was never this circular until the new normal was announced.
So all that mid day trading was for parasites or parasitical activity? And now that everyone admits it, the parasites just go nocturnal?
And has the bond bubble been pricked?
There's a definite opposite correlation between the ten year and bond prices. I know I hold them.
Deepwater drillers breaking out of good bases.
I know that Diamond Offshore has over 6 days to cover short interest....
Any wonder why these stocks are taking off?
I'm short ME, long APA.
A bid for APA would make my freaking year.
The jump today in DO is lacking substance. It will be down next week.
Short the snot out of it and keep your finger on the cover button
Today's action being a 100% prime example.
DavidC
LOL the dictator starts his speech with Bush blame
total joke
I hope the military steps in and pulls this muslim out of the White House.
Announcing maoist 6 year plans of basic road maintenance complete with government slaves from his teleprompter, and calling it "stimulus". I hope something really bad happens to this guy.
LOL
says romer was "brillant" and saved us from a depression;
spike lee economy right on track
i hear the muslim world cheering
Has this guy ever offered a constructive solution, even as a community organizer? No leadership. None.
He couldn't sell beer at a ball game.
Las Vegas and Atlantic City really could create a great marketing campiagn...which is better gambling against Algos or gambling in a casino?
What? Casino gambling is WAY better! You get far better odds in Vegas, and girls in bikinis bring you free drinks!
Precisely!
first question:
how was your last vacation and where has michelle been shopping
Are you fucking kidding me?
Kinda glad im across the pond for now and dont have to deal with 8pm primetime being cancelled to hear a fucking idiot and his MSM sheep fondle his balls with their intellingent queries.
The paradigm shift is that you have to bet AGAINST America and its Citizens in order to make money in the so-called market. This is beyond naked shorting. You have to dig down and think like some raping sadist on board a school bus filled with nuns and cheerleaders. The trade is to kill the Republic at all isidious costs. Trade that concept for a week and you will finally see your portfolio explode. Its counter intuitive because human nature wants progress, wants growth, wants something "better." But in this dark age, the fake market is pillaged by wraiths, zombies and the Devil.
Nomen mihi Legio est, quia multi sumus.
Excellent. Off to the gym.
double fail at 1110 - it's now or never bears
Glad I'm not playing the blame the Republicans drinking game. I'd end up in the ER.
Maintaining my sanity by hitting the mute button as soon as he appears on TV or turning off the volume as soon as happens on radio. I have a two year perfect streak going. Never heard a word he has to say. He looks like a African Edward E Neuman.
"He looks like an African Edward E Neuman"
Priceless!! I know he looked like someone, but I could never put my finger on it. Advanced apologies, but I will steal this analogy from you...
Odd. I thought he was a dead ringer for this guy:
http://pbskids.org/curiousgeorge/
Slightly racist in a passive sort-of-way, but funny none-the-less!
What is he curious of? Socialism?
I haven't listened to a single presidential speech since Reagan and even Reagan's were stupid.
LOL me too. I have never listened to a word he said and I never will.
It's easier to criticize that way. Besides, all you'll need to know will be excerpted on Fox News. Why waste all that time listening to him.
27 minutes answer from community organizer- national leader. Lie, yada, lie, yada, lie, yada. Burn time in order to take 3 questions total. Lie, yada, lie.
Probably has the stock ticker in his teleprompter as long as the market stays up he talks.
Bah, this article is so far off: no one trades between 11 and 2 because they are all here talking their book or blowing farts into the wind. Even the algos stop by to have a go at the captcha's.
Regards
No everyone is here on zero hedge because there is no trading volume in the Market and being they cannot trade they hang out at zero hedge.
Hmmm, I dunno. That sounds like it could be a 'chicken/egg' situation...meh, credit is so cheap these days: it's yours.
Regards
dup.
Austan Goolsbee nominated by Obamoo to head Council of Economic Advisors. An Austan classic, share the love:
http://www.nytimes.com/2007/03/29/business/29scene.html?_r=2
We can assume anyone from university of chicago is a hegelian communist by now, no?
barry the job creator
http://www.bvonmoney.com/2010/09/06/black-unemployment-rate-increases-700-more-than-white/
I see it as a form of price fixing. They get the stock were they want it for the day and it trades within pennies of that price all day long. If it sways away from the predetermined price the HFT pulls it right back to where they want it. With no one trading all day long it makes it easier to control the price.
The HFTs were the ones that stopped everyone from trading during the day with the exception of the first 1/2 hour and the last 15 minutes because they maintain a pre programed price for the whole day.
I see it as a form of price fixing. They get the stock were they want it for the day and it trades within pennies of that price all day long. If it sways away from the predetermined price the HFT pulls it right back to where they want it. With no one trading all day long it makes it easier to control the price.
The HFTs were the ones that stopped everyone from trading during the day with the exception of the first 1/2 hour and the last 15 minutes because they maintain a pre programed price for the whole day.
Speaking of Las Vegas....
nice
Yeah. The charts are ok, too.
I don't get why they keep rising. Sands especially. I guess the Macau exposure is good, but every day up up.
lovely.
Legs, from here to there, and back again!
Barry described the economy as 'roaring back'. What. A. Tool.
A death rattle does sound somewhat 'like' a roar.
At first OHT was small and insignificant, now it's become clear that off hours is where the rigging is done. The sole purpose has been to screw daytraders. I say screw them, no more OHT. There used to be a thing called level playing field or transparent markets. Now we have a crooked, opaque, HFT dominated market overseen by porn watching SEC under protection from FOIA. Now we can't even know if the SEC is looking at boobs4boobs or trannys in tinsletown.
You know you have a very valid point there. Almost all of the trading is done while everyone is asleep, around 3 AM. So, when the average person wakes up their stocks either gap up or gap down. I guess which ever way screws up the most people. Not only can you not day trade with the daily flatline, you cannot keep any money in positions over night. Best to be out of the Market as the Market now is for suckers. Except of course if you are the Manipulator and own a black box.
Briargate = Big Errata
I don't see this as groundbreaking news at all. I worked on the largest (by volume) NASDAQ trading desk on the west coast from 1995 to 2001 when the NASDAQ was where the 'action' was. All of the senior traders only traded until the first hour (10:30am est.) and then everyone went surfing. the only people on the desk were junior traders handling order flow. At 3pm est. The senior traders would return and trade until about an hour after the close. This was everyday for 6 years. As a trader since 1984 This has always been the way trading desks/firms have operated as the middle of the day has been basically irrelevant since I have been in the business. The exception being when some huge news event occurred.
Nevermind.
You bitch-slap the BLS there is a price to pay. Entire ZH staff out yesterday for reprogramming.
JB, your prediction yesterday the market will be down today is not quite a lock at this point.
My challenge to you - let's keep track of whether you think the S&P 500 will finish up/down on a daily basis for 30 days and see how you do. I bet you hit less than 50%...
To be fair, it is about 1 point in positive territory.
I'll admit that I'm wrong, for now, but the day isn't over yet.
The turn is coming, even if it isn't today.
"The turn is coming, even if it isn't today."
So you're saying at some point in the future, the market is going to experience a down-trend. Wow, fabulous insight! No wonder your the [self-proclaimed] 'best trader on ZH'.
I gave you the benefit of the doubt at first, but c'mon - that statement is full retard...
No, I mean it's either coming before the end of the day, or like Monday.
When have you ever put your neck on the line for anything?
When have I put my neck on the line for anything??? Slow down pal, you don't know me. I'm not the one proclaiming myself the best trader on ZH or using my Amzing Kreskin abilities to predict market direction.
I sincerely hope you keep trading so I can continue to take your $. The saying goes, if you can't spot the idiot at the table - it's likely you...
Your prediction failed today, JB. Hope you didn't have too much of your HUGE pile of trading capital wagered on your conviction the market would begin its new downtrend today. We'll see how Monday goes...
JB = 0 for 1
That's not going to endear you to many here. Especially among those of us who are Vets. Crawl back onto the sofa in your mom's basement. Get a nap or you be tired in English 101.
I tried to give this guy the benefit of the doubt. I attempted to engage him in civil conversation and he failed. I always wondered why everyone on this board gangs-up on him so I thought I'd find out for myself. Well, I now know - JB is a complete and utter waste of time. As far as I'm concerned, he's muted...
He has become the site mascot, cute, inept, and clumsy -- but made fun of.
He loves attention so much that he'll even accept verbal abuse as a substitute.
Must have been a really traumatic childhood.
You are wrong today - gold AND S&P up! Now STFU and go back to class.
I thought this was supposed to be about the economy ? (POTUS) ?
Looks like someone is showing the wares for an election
It says "Obama on the economy" at the bottom of the screen
as erin burnett would remind you - dont be rude (by asking questions about the economy). the president made it clear in the first few minutes that all the bad stuff is Bushs fault - even obamas act of quadrupling the deficit in just 1 and half years.
oh yes and he has a new slogan/standard - we saved the US from a depression
Bush's last deficit was 1.4 trillion. He's the one who passed TARP, which was 700B alone.
Don't give me that B.S. that his last deficit was like 300B or whatever. It's a flat out lie. Government budgets operate a year in advance. We're FY 2011 right now. Bush's last year was FY 2009.
Obama's deficit isn't 5.6 trillion, which is what it would take for your statement to come true.
2 trillion at the Fed, 1.5 last year and on track for 1.5 this year at least maybe add in some Fannie and Freddie garbage and it probably higher
Uh oh. Gold hate, AND you love obama? Come on man, at least try to fit in.
But for serious, about obama. HOW. CAN. YOU?
From Yahoo News on the press conference:
Asked how he had changed Washington, Obama said the dreadful economy made it hard to demonstrate real progress.
"I think that's fair. I'm as frustrated as anybody by it," Obama said. At which point Obama ripped off his velco suit to reveal he was attired in a red Greg Norman golf shirt and khaki shorts underneath. "Boys, I'm off to get rid of some of this frustration on the golf course," Obama then said.
As Obama turned to exit the podium he was immediately greeted by Tim Geithner who was carrying Obama's golf bag and a glass of scotch. Unconfirmed reports state that Geithner informed Obama how much he enjoyed cleaning his balls...we assume this was in relation to the upcoming golf outing.
LOL.
Whenever I hear about folks wearing flip-flops to work and playing foosball or taking those long lunches, I know something is about to blow in that biz--you get complacent and you die.
"I can go play 18 holes of golf and then come back and trade and that's a workday."
With people like that representing the highest tax bracket, we wonder why the country is in the shitter.
Yeah, I pretty much wanted to reach through the internet and punch that smug bastard right in his trade-hole.
Hi tradertimm. If your name implies the truth, then i suppose you feel jealousy, as a retail daytrader has to sit at home all day (in his PJs nontheless) and watch his penny stocks move while the MM decides whether or not your subpenny bid is worthy or not of the print.
Nah, swing trade actually. Which means checking the open and then the close. I don't sit on the edge of my seat watching every wiggle. Think that would drive me insane. Just periodic checks, and if my thesis is still correct I stick with the trade.
What I objected to is just a personal 'gut feel' read on that guy that informed me he's a smug douchebag. If anyone trades successfully and can sail the world or what-have-you, fine, just try not to come off like a complete douche when relating the experience.
When will Google commence program trading?
here's to wishing i had the complacent attitude of these fellas. would probably extend my life a few years. anytime i'm not working a feeling of guilt overwhelms me.
BREAKING NEWS: We present you a regular fact of business, I mean BREAKING NEWS!!!
On the serious note though, this is a welcoming development as maybe this could be a start of a new trend. People taking a long lunch break, going home to sleep for an hour and then getting back to work. Everyone will be more relaxed and less overworked and more productive.
Yup that will be coming soon, on a darker note we will also have Mexican wages to match our siestas....
So much for the last hr. of trading.
I should've gone to the golf course to steal the wallets of all the traders-of-leisure from the clubhouse instead.
Drinks please, make mine a low-market-volume triple malt.
Thank u, i found this for a long time.
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