Algorithmic Trading

The Biggest Bitcoin Arbitrage Ever?

"Can any of the Joe Sixpacks out there who’ve invested in this Bitcoin ETF to provide us a borrow as shorting it is not currently available..."

"Sell In May" ... And June

"Sell in May and go away" -- the old equity-market adage still holds water, but, as Bloomberg's Mark Cudmore explains, it's important to note how the seasonals have evolved since the great financial crisis.

"The Liquidity Just Dries Up In A Stressed Market" - How HFT Killed FX Trading

Collin Crownover, head of currency management at State Street Global Advisors Inc., which oversees about $2.4 trillion,  who during a panel presentation said that "we are concerned. During volatile periods, market participants are backing away until conditions settle down, making it harder to complete large orders."“A lot of the electronification of the market, which by and large is a good thing, has led to kill switches on a lot of that algorithmic-provided liquidity,” Crownover said. “The liquidity just dries up in a stressed market.”

Now It's China's Turn To Crash: Shanghai Plunges 6.4% Overnight

In recent weeks Chinese stocks remained relatively resilient, levitating quietly day after day. That all changed overnight when the Shanghai Composite plunged by 6.4% with the drop accelerating into the close. This was the biggest drop in over a month and was big enough to almost wipe out the entire 10% rebound from the January lows in one session.

Markets Ignore Fundamentals And Chase Headlines Because They Are Dying

No society wants to admit economic failure or economic sabotage, and this is why the con-game is able to continue in the face of so much concrete truth. Ultimately, the market trends and economic trends will flow into the negative. In the meantime, expect massive market rallies, rallies which will then disintegrate in a matter of days. And, whatever happens, never take what mainstream economists say very seriously. They have failed the public for long enough.

Why $1.5 Billion Nevsky Capital Is Shutting Down: The Full Letter

"It is time to accept that what we have done has worked brilliantly for twenty years but does not work anymore and move on. We are confident our process will eventually work again – for the laws of economics will never be repealed – but for now they are suspended and may be for some time; an indefinite period involving indeterminate levels of risk during which we think it would be wrong for us to be the stewards of your money."

High-Frequency Traders Face Crackdown As CFTC Proposes Tougher Regulations - Live Feed

CFTC meets this morning to propose a registration standard applying to as many as 100 firms that have changed markets by trading their own money using complex algorithms and advanced technology. As Bloomberg notes, this proposal follows more than 5 yrs of debate about market disruptions, such as the May 2010 flash crash. Crucially, as is well known now, high-speed, automated trading in recent years has surged to account for almost three-quarters of certain derivatives markets which means any regulatory crackdowns will no doubt have impacts on markets; as former CFTC chief Chilton noted “Clearly some of the rules are antiquated.”

With First Ever Criminal "Spoofer" Conviction, HFTs Issue Warning: "Outsmart Us, And You Go To Jail"

the case really boiled down to just one thing: not whether it is legal to spoof, which it is and yet massive, well-connected HFT firms get away with it every single day, but whether it is legal to take advantage of HFT algos programmed to do just one thing - frontrun orders, and activity which leads to massive losses for the algos and the Citadels behind them, when the spoofer realizes just how dumb his counterparty truly is. The verdict was clear: nobody is allowed to outspoof the spoofers.

"We're All Dr.Evil Now"

We’re all Dr. Evil today, thinking that one million dollars is a lot of money, or that one second is a short period of time, or that we are individually smart or capable in a systemically interesting way. We use our small-number brains to make sense of an increasingly large-number investment world, and as a result both our market fears and our market dreams are increasingly out of touch with reality.

"August Sucks" MIT Quant Warns New Strategies "Are Creating Volatility"

"August Sucks," concludes MIT Quant guru Andrew Lo, reflecting on the systematic-trading strategy effects on markets, and it's not going to get better any time soon. As he explains to Bloomberg, "algorithmic trading is speeding up the reaction times of these participants, so that’s the choppiness of the market. Everybody can move to the left side of the boat and the right side of the boat now within minutes as opposed to hours or days." As we have noted many time, Lo explains how "crowded trades have got to the point of alpha becoming beta," warning that volatility-targeting strategies (such as Risk-Parity) are not only "exaggerating the moves," but he cautions omniously reminiscent of the August 2007 quant crash, "I think they are creating volatility of volatility."

CyberWar & The False Comfort Of Mutually Assured Destruction

As an investor, you have enough to be concerned about just taking into account factors like inflation, deflation, Fed policy and the overall state of the economy. Now you have another major threat looming – financial warfare, enabled by cyberattacks and force multipliers. What can you do to preserve wealth when these cyberfinancial wars break out? The key is to have some portion of your total assets invested in nondigital assets that cannot be hacked, wiped out or disrupted by financial warfare. The time to take defensive action by acquiring some non-digital assets is now.

One Theory About Last Monday's ETF Implosion

Attempts to explain exactly what happened last Monday when prices for a whole host of ETFs and mutual funds diverged markedly from fair value abound and while there's no way to know for sure exactly what went wrong, FactSet has drawn some tentative conclusions after conducting a bit of "voodoo, tea-leaf reading."