This page has been archived and commenting is disabled.
Why Should GS And NYSE Stocks Be Nervous About The Flash Ban?
Ignore the retracement, it is just the 19 year old momo quants "with no financial or business background" who are about to get a rude awakening in what happens when non-linear equations diverge from the stock market.
»
- 9583 reads
- Printer-friendly version
- Send to friend
- advertisements -
Looks like the quants are in a hurry before the flash trading is shut down.
Check out Orbitz and MBI.
They are picking out overshorted junkers and gunning these in a hell squeeze.
Today's chart of CIT above $1 looks quite interesting
Airlines, Bond Insurers, REITs (even Hotel/Motel whatcha gonna do, say what?)... I haven't even opened a Heatmap yet today.
Is the usd/jpy sitting at an unbreachable high at 95.4? Let's remember the old carry trade's complicity in this ramp job. Conversely, is usd/jpy sell the safest position in the market? It should break 90 and 80 is not that far off.
Did you sell oww and mbi at the top today?
Voldy
Think that is hot.....check out GGC.
This is a dog of a company.....high debt and huge overhang in inventory. Yet...it is flying.
Avoided BK, for now. That's worth a 10-bagger.
I blogged about GGC a week ago, It was in my list of "failed" companies along with likes of PEIX, CTHR and so on...Look at how these basturds are making shorts to cover forcefully and creating a bubble...I just hope that the doomsday is in sight.
Dow at 20 points will be short of giving me pleasure and to see the banksters on kneels begging for food will make the day.
People are not even warmedup for talking about Proj. Mayhem yet, and many week apples are talking about victory after the flash order ban.
TD, wake the people up, set targets please. People are very naive and need a lot of leadership and spoon feeding.
you could have made a fortune in the past year buying and selling the likes of MBI, ABK, RDN, PMI, MTG. They are all basically back where they were this time last year, with multiple trips up and down several hundred percent. they must have betas of 100.
This will have a tiny impact on GS.
If you want to worry about it hurting a particular company, I would set sights on Pipeline Trading... since if the SEC next decides to ban dark pools (a decision I could only imagine is based on the poor choice of name from a public marketing perspective), then much of their gig is up.
I for one hope that the "ban" means that there will still be a way for people who would like to place flash orders to do so. I enjoyed the increased liquidity rebates that flash orders provided, and do not relish paying higher route-out fees in the future as a result of this popular backlash.
So you think the SEC response is based purely on a "populist backlash" - let's maybe wait to see what their findings conclude.
I do look forward to reading the SEC's rationale for why these order types will be banned (they are probably trying to sort that out as I type this, looking for things to change in Reg NMS).
I do think there are legitimate issues surrounding flash, but I thought that the best approach was for the institutions who didn't like their orders flashed to make the TRIVIAL changes to not flash them. If you don't like the trading facilities provided by a particular ECN or exchange, that is what competition is for.
I believe that the market would have sorted this out on its own in short order (with ludite institutional investors moving orders away from ECNs that flashed their orders when appropriate to do so). But if replacing the 4 letters "EDGA" with "ISLD" in their orders was really too technically difficult for them, then I guess the market needed to get senators and the SEC involved to give them a hand...
We'll see how much the large institutions who's ability to squeal about flash orders rather than make a 4 character order routing change like it if dark pools are shutdown (a change that I think would be a grave mistake, but from which I expect to profit).
profit how
Dark pools are used to make block trades without moving the market.
Without going into specifics of my trading software, if those orders are posted on exchanges/ECNs where I can see the bid/ask, or at least see the trade go by in a timely manner for orders that don't post to the order book - then I have a more accurate picture of the equities my strategy is following, and there are additional mis-priced orders for me to execute against.
I get more accurate pricing information and more looks at poorly priced orders.
How about dark pool Indications of Interests - you have no problem with blatant potential abuse there?
No, I don't.
Orders end up in dark pools because someone executing the trade thought that it was the best way for them to unwind or accumulate a position. There are all sorts of issues pro and con (I think the biggest frankly is that the execution price is based off of NBBO, and NBBO is delayed by several ms over what someone with L2 access to each feed to generate on their own) - but the people playing in the dark pools are grown-ups.
Sometimes these grown-ups are idiots, but other times - they are making rationale decisions armed with the understanding of the tradeoffs.
http://www.bloomberg.com/apps/news?pid=20601039&sid=a2X3hNaWcbeg
One wonders how AIG will do on this Friday's earnings
report. Watch the hilarity ensue Thursday afternoon.
I'm trying to see how would leveling the playing field by democratizing the speed of all orders to say, 800 miliseconds is a bad thing... But I've got nothin'.
You could just stop all trading and "level the playing field".
800ms is more than enough to keep a server in Hong Kong and trade. If you can't afford co-location, and you can't afford an account with a broker that will allow you to co-locate in their data center ($100K is all you need to get 1ms access), then surely you can afford a cable modem closer to the venues than Hong Kong.
As for the downside you don't see... if orders were held or delayed somehow for 800ms, then orders would be adjusted to the new risk environment and would be less agressive, resulting in less liquid markets with lower trading volumes and higher bid/ask spreads.
Somehow I don't think we're talking about the same thing.
Try trading F and HMC see the difference
@ peterpeter, re: "increased liquidity"
Is that the same type of liquidity that subprime mortgages offered the market with no down and no docs?
Yeah that worked out well ... didn't it?
No Joann, it is not.
Liquidity in your context means available capital to finance a bubble.
Liquidity in my context means an order posted to an order book which is visible to market participants, does not executve immediately, and which improves the previously posted best bid (i.e. is higher) or best ask (i.e. is lower).
Same work, but about as much to do with each other as the liquidity in the beer I look forward to having later today.
Why do you label institutions as Luddites ? Don't you see how this has evolved ? All of the "competition" and free market soulutions have once again benefitted the few at the expense of the many. There is no possible way to determine who is sniffing these systems looking to disadvantage users.
If you don't think that the record tight bid/ask spread and ridiculously low trading costs the US equity markets enjoy has been a benefit to the many, then all I can say is we greatly disagree...
And I called them luddites because they were incapable of making the most trivial of changes (literally 4 characters!) in their order routing to avoid flashing, if that is what they wanted to do.
Peter, Good point. Actually the situation seems to be even more benign than you describe. When they added flash order types you had to actually change software to make use of them (ie to avoid them you didn't even need to make a trivial change).
For example, at the bottom of page 4 of Nasdaq's BX spec you can see they added two new codes for flash orders so you'd change from one of the old codes to "S" or "F" to send it as a flash:
http://www.nasdaqtrader.com/content/technicalsupport/specifications/Trad...
As for the SEC's rationale I think it won't be a sham. Before this ill-informed populist "frontrunning" nonsense, there was already some debate in front of the SEC about flash orders circumventing the original purpose of Reg NMS because the flash wasn't immediately disseminated across all markets and reflected in the NBBO. There were reasonable people on both sides of the issue and it would be perfectly reasonable for the SEC to outlaw flash on this basis.
The fact remains that in the months you have been around, you have led your readership to slaughter.
Shorts have been bankrupted. No one bought a share since you insisted this was all going to zero.
Have you no shame?
Are you Cramer?
I, indeed, have no shame in presenting facts. As for investment recommendations, which Zero Hedge does not indulge in, I am sure you will find CNBC more suitable for investing style.
Don't listen to these idiots Tyler. You are doing a great job! Without you the thefts of Goldman et al would never be revealed
Nobody talks about all this stuff on TV or the blogosphere
Most do not understand it... and those you do, do not talk about it because they are the ones making money from these scams
Everyone needs to take a deep breath...
ZH provides great information if you want to educate yourself on a wide range of topics. I am 100% long and I read everything TD and the crew write.
If you only read negative sources of news and opinion, and use that to reinforce your own worldview you will miss out on not only stock market rallies but a lot of other good ways to make money. If you only watch CNBC, well, I don't know what to say.
Keep at TD. You do a great job.
Absolutely, ignore the yapping dogs and continue pulling at the curtain. Your content is priceless.
I second that
You are probably the guy who was telling Peter Schiff he was all wrong in 2006 and 2007. Facts win. Sorry you are using this site for short term investment advice. That alone speaks to your lack of intelligence and sophistication. BTW, grab another bag for the head. You need it.
Actually by pointing out the manipulations, crooks, cronies and other assorted and accurate market information one could have concluded that going long would be wise (why fight city hall?).
I believe the disclaimer on this site says it all. You should read it.
Don't assume all readers are bears. Far more bulls have been slaughtered.
Lemmesee... Cramer offers all sorts of hyperactive 'investing' advice, and has a 50% accuracy rate at best (although if you check the ones he got *really* wrong, I'd think on a dollar % basis he's waaaaay below 50% (e.g. Bear Stearns call).
Tyler doesn't offer any investing advice, but just calmly presents facts and analysis you can't get anywhere else.
I think that would make him the Anti-Cramer. Quick! Shave his head and look for the mark!
Why dont you shut the fuck up asswipe?
You got to be kidding. Tyler has provided no trading advice that I am aware of. We are grown ups here.
Replies are those of KoolAid drinking fan boys.
Every day for the last 5 months TD has warned you that it was about to hit the fan, only a matter of time, its all falling apart, its all rigged, only a moron could be long.
And this is what you enjoy?
The random tidbit thats of interest has nothing to do with the fact that this site is 100% BEARISH. Fuck the disclaimer, thats BS and TD knows it.
Another fool. Of course we have lost money. That does not mean we got the analysis wrong. It only means we got the timing wrong.
Go ahead buy a plenty. Hope you get out on time. Bear market rallies can last years (seldom). You might get lucky
lol @ "the market is wrong"
Personally, the SEC couldn't fight it's way out of a paper bag!! LOOK, I mean really LOOK at the Trillions in fraud that went on right beneath their noses, that they chose to do NOTHING about.
Honestly- We would all be better off with Jessica Simpson at the Helm. Throw Mary to the wolves--she has earned it.
The reality is really sinking in. My bank was shut down by the FDIC. Just days before the shut down, I renewed my CD against better judgment. Well the new bank stepped in but it doesnt make me feel much better. How long can this continue?
Obama is president now, fool. Cars, healthcare, and banking is a human right. It will continue until you no longer need it.
It's not only a right, it's your responsibility to buy. Now. No point in resisting.
yeh and if he gets his way, it will be everyone over 39 gets the needle....
Government Deathcare...those over 40...follow green line...Soylent Department...await instructions.
so that's what they meant by Green Jobs!
i agree any health care package passed this year is going to be garbage because both the dems and repubs are just bought off shills. but i'm a single payer advocate, which by the way , warren pollack's piece here, called the great reset, says they are many good benefits to a single payer healthcare system.
but you're comment seems to reflect the repubs, via limbaugh, talking point. so tell us, what is your solution to the healthcare dilemma?
Anyone for a remake of Logan's Run?
The speed limit will be 12 mph so that electric toys can provide green transportation.
1960s democrat platform?
everything is a human right
Well maybe you should use your better judgement and cash in that CD and buy a few gold coins.
Maybe you should count your blessings: at least you got taken in while Sheila still had some cookies in the jar. I'm going out to interview local credit unions this afternoon.
you are getting more mystic by the day, care to help us novices what a flash order is, so that we could chip in with our thoughts?
BTW, a very unique blog indeed.
"you are getting more mystic by the day, care to help us novices what a flash order is, so that we could chip in with our thoughts?"
http://www.tradersmagazine.com/issues/20_296/-103978-1.html
then, google 'flash order'
then, there's a tag up by the headline for other related columns.
Lloyd puts out the call to lay low. Is that nervous?
That new HFT building that's going up to skim the market cream forever, even if there is no real new money but only remaining mutual fund rips.
How you like me now?!
Lloyd says to hide the bling..right out of Gooldfellas with Jimmy reading the riot act on seeing the new car pull up to the bar..of course now it's Goldfellas!
New car?? Buuuuullshit. That was a baby pink Caddy Eldorado convertible coupe. Go ahead, call it a car again, I dare you.
ah, would you mind if we called it a "tank"? :)
What are you stupid? http://www.youtube.com/watch?v=_lgLaY9BiAo
Hahaha - "Jimmy" Blankfein...
so i would deduce there TD, that perhaps there is another one of those parabolic downslope red lines in our very near future, perhaps in as little as 5 minutes, like you have said before?
or up. volatility - http://en.wikipedia.org/wiki/Volatility_(finance)
TD: You every think you would be on the same page as Chuck S. two months ago? Funny how these things work out....
REIT Squeeze underway....
Chart Image Code
Chum. churn. Rinse & repeat.
Great insight. Thanks
Gold and Silver zooming today. Decoupled from USD and both in backwardation. Now let's get the Comex.
If Gold keeps rising despite the bullion banks' huge short positions, the upside explosion past $1000 will be a sight to behold. It will be the most spectacular explosion in the price of anything ever. For those on the right side of the trade, fortunes of a lifetime will be made.
Gordon,
If the bullion banks would have to cover their shorts at way more then 1000$/oz they will be broke. My guess is that the rules will be changed to protect the financial system. Futures will probably be settled in paper, be it cash or gld shares that are paper too. It will get interesting if the buyer is powerful enough to force settlement in real metal.
Jason Hommel looked at OTC positions in “other precious metals” from the BIS at 190 billion$ for (mostly) silver. The market for gold is way bigger, where will the money come from to buy the metal and will the actual owners sell for paper at all?
http://news.silverseek.com/GoldIsMoney/1247075892.php
Gunther
Actually, the bullion banks are already broke. All that's backing their operations is a printing press. The day they will be *really* broke is when people stop accepting paper money at which point Gold will not be sold for any amount of paper. Till we get to that point, I think there is a lot of room left for the price to rise because all they have to do is provide enough printed paper to the holders of physical metal in order to entice them to sell. Also, I think the fiat money system will end (actually, it already is) in a hyperinflationary explosion. What we are seeing now is only the beginning of that phase, so going forward I think a lot of observers will be surprised and confused by the extent of rise in the price of anything that is a real asset.
So how long after that does lead trump gold? Specifically, lead in roughly 4g quantities travelling at about 900m/s? (you can't eat gold, but you can use the threat of high-velocity lead to take gold from someone else :p)
Delivery can be counted as cash equivalent GLD etf :)
Fuck Goldman....
http://goingconcern.com/2009/08/sec-memo-says-guaranty-bank-to.php
look td, a big texas bank is going down and the fdic is taking the pipe for the whole load too......
aw..........
NYX popped on the news of the flash ban.
Td, I know this is totally off topic, but have you heard anything lately from Hayman Capital? You have quoted them in teh past. I would love to hear their recent thoughts, particulalry on the dollar and the inflation / deflation debate.
60% of new vehicles purchased under Cash for Clunkers are Toyoto, Honda and Hyundai
I hope with all my heart that the other 40% of vehicles I bought for other people are Fords.
I have heard very encouraging rumors that GM and Chrysler are being passed over as the lukewarm night of the living dead UAW minions that they are.
I do love this place, some moron comes in believing that we are all short.. maybe we are skeptical of this manufactured bull market and choose to be cautious. Remember the second mouse gets the cheese.
FYI - i just requested that all of my funds' order routing be excluded from any dark pools with GSEC-REDI. This means our order flow will no longer go through Sigma X or MS' and UBS' pools. Am curious to see if our executions are any different.
please update periodically!
Dennis.Kneale@nbcuni.com
Balderdash!
we here at zero intelligence don't talk much about gay beaker and his silly show. :)
WE DON'T FUCKING CLICK ON CNBC LINKS HERE!
Is that the third rule of ZH? ;)
With JPM at $40 or BAC running hrough $16 the equity deals can't be far off - the cap markets pipleline looking very thin and seq. comps hrorible, the pump must go on...
"Why Should GS And NYSE Stocks Be Nervous About The Flash Ban?"
GS - because their golden goose is about to be slaughtered.
NYSE - because they'll potentially be holding a black swan rather than a golden goose.
oh heck, the goldman sachs squid, when in trouble can always belly up to the government tarp window and get drunk again, on taxpayer money, and then call it profits .........again....
Umm, NYSE doesn't offer Flash trades. NASDAQ, BATS, DIRECTEDGE, AND CBSX do, and it only represents 4% of market volume. Big pat on the back to everyone for helping to ban an optional order type that helps retail investors by offering price improvement and reduced execution costs.
BAN on FLASH TRADING IMMINENT---
(No WONDER Lloyd Blankfein is asking his secretary to hold off purchasing the GulfStream and second house in the Hamptons)...(The JIG is up)!!
http://www.cnbc.com/id/32284889
blankfein was going to purchase that gulfstream so he can make a break for it, when the stuff hits the fan. trouble is , he won't make it out of town. he will be stopped somewhere along the line by the angry mob, dragged out by the big nose and beaten severely about the head and shoulders with rolled up newspapers.....
We can do without the CNBC links thank you.
Schapiro said any proposal to ban the transactions would require approval from SEC commissioners.
Ain't gonna hapen.
About Lloyd's request to lay low. I hope I had some influence..
A few sundays ago coming back from work in my town in Jerzy - I had this dumbass in a ferrari that could not even handle his triptonic cut me off. I'm driving my 15 yr old camaro that is stick & I'm still using my original clutch.
Idiot ferrari boy pull next to me & lower his windows and gives me a grin. I shoot back "You wall street boy better enjoy your money, before the revolution starts" - He gave me a nervous laughter & said he was not wall street...
You see boys intimidation is a great thing when you deal with loud annoying richsterss..
There is a reason wealthy people in other countries lie low..
"A proposal to eliminate the orders would still have to be approved by the entire commission and be open to public comment before being implemented."
Yawn and how long will THAT take... in the meantime all is the same and they frontrun orders
Exactly. It's high profile news so they gotta look like they're doing something until the herd moves on to something else.
I hear that the CFTC and the FSA in England are 'investigating' commodities speculation too :)
Lucky for all of them the pitchfork crowd has a short attention span. Either that, or there's so many shenanigans that are fleecing the little guy that it's impossible to keep on top of them all.
Anyway, we all know who wins.
I am about 10% net worth in gold coins. how far do you go with this? gold could go to 500. but the currency could also massively depresiate. despite all the blogin... no solutions.
Damn Tyler-- I love your freaking site. It is a refuge of truth and reason in a world of lies, fraud and more lies!!
Most people with half a brain are more convinced than ever that the MSM exists 90% as paid shills to keep pushing the fraudulent agendas of their parent Companies... CNBC seriously wonders why their viewership is down ALMOST 30%??
The masses are TIRED OF THE LIES!!!!!
Oh Darn it anyway. Guess this means I will have to post-pone the Gulfstream purchase.
Bob, The Goldman Mailroom guy
Why don't they ban it now like they did when the banks were having problems and banning new shorts just like that.
But oh no, because GS is making a mint got to go the slooooooooooooooooooooooooooooooooooooooooooooooow way about it
Goldman should be going down like Madoff.
Call in the Swat Teams.
If GS front run orders by using flash, then they should give all that profit to the US people
The new GOLDMAN Modus Operandi--
"STEALTH WEALTH".....
"Shhhhhh......It's OK to steal from the Taxpayers, just make sure you don't SHOW them you are doing it"!!!!
(HAAAAAAAAAAAAA Wow Lloyd- you just suck at this PR thang, you REALLY DO.
http://www.cnbc.com/id/32284889
WE DON'T CLICK ON CNBC LINKS HERE, THANK YOU VERY LITTLE.
No, they are not nervous because the real problem is not flash trading, but what happens right before the news, which is insider trading. It happens in futures all the frigging time. Flash trading is a scapegoat to hide the real crimes.
I blogged about GGC a week ago, It was in my list of "failed" companies along with likes of PEIX, CTHR and so on...Look at how these basturds are making shorts to cover forcefully and creating a bubble...I just hope that the doomsday is in sight.
Dow at 20 points will be short of giving me pleasure and to see the banksters on kneels begging for food will make the day.
People are not even warmedup for talking about Proj. Mayhem yet, and many week apples are talking about victory after the flash order ban.
TD, wake the people up, set targets please. People are very naive and need a lot of leadership and spoon feeding.
"People are very naive and need a lot of leadership and spoon feeding."
Sounds like brainwashing.
You're trying to attribute a lower market to a potential flash order ban? Seriously???
Flash orders, liquidity, spreads (and even profits at Goldman Sachs) have only a weak, if any, relationship to the valuation of the market.
Not sure why everyone assumes all GS trading gains are from flash orders. You cant even be sure that they use them at all. And NYSE doesnt have that capability. But anyway thanks for the short squeeze that zero hedge caused today in GS and NYX. lolool
"Christopher Nagy, managing director for order routing, sales and strategy at TD Ameritrade, said his firm's experience with Direct Edge's flash orders has been positive. Ameritrade began using Direct Edge's ELP program when it started in 2006. "We saw that clients were getting great executions on limit orders, and a more consistent execution experience, so we continued utilizing the program," he said.
For investors, Nagy continued, flash orders avoid slippage concerns associated with displayed orders. "Reg NMS doesn't incentivize retail or institutional orders to display their hands for fear of slippage," he said. "If you can enter a transparent environment but essentially be hidden, you're more apt to transact in that world." He added that Ameritrade usually receives better prices than the NBBO on Direct Edge."
from: http://www.tradersmagazine.com/issues/20_296/-103978-1.html?pg=1
It's a good piece of journalism, looking at both sides of the Flash order controversy.
GS don't make that much from equities trading, let alone HFT.
So even banning it completely won't make a huuuge difference to the bottom line.
I love your stuff tyler, but the level of discourse leaves something to be desired. Much better commentray on seeking alpha to your posts. It's clear some of the folks here know their sh.., but prefer to talk trash instead of making a point and educating.