Citadel

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Frontrunning: August 3





  • Deadline Draws Near for Puerto Rico (WSJ)
  • U.S. to defend Syrian rebels with airpower, including from Assad (Reuters)
  • Alpha Natural Resources to Seek Chapter 11 (WSJ)
  • Iran’s Rouhani Says Nuclear Deal ‘More Than What Was Imagined’ (BBG)
  • Cables Show Hillary Clinton's State Department Deeply Involved in Trans-Pacific Partnership (IBTimes)
  • Win or Lose, U.S. Stocks Get Biggest Earnings Bang Since ’12 (BBG)
  • Weaker China factories argue for more policy support as stocks swoon (Reuters)
 
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Citadel Barred From Trading In China After Regulator Accuses "Automated Trading" Unit Of Manipulation





Define irony: for the past 7 years, Wall Street's worst kept secret is that Citadel, the world's most levered hedge fund, has been the NY Fed's just slightly more than arms-length enforcer of market stability, by which we mean spoofer, buyer and otherwise "plunge protector" in the equity and E-mini futures markets. Which is why Citadel must have been shocked to learn late last week that China had suspended trading at a brokerage account used by Citadel in China.

 
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The Swiss National Bank Is Long $94 Billion In Stocks, Reports Record Loss Equal To 7% Of Swiss GDP





Earlier today, the SNB which is perhaps the most transparent hedge fund of all central banks and actually lays out its financial statements in a respectable manner every quarter, released its results for the second quarter (and first half) of 2015. The result: another absolutely epic loss, amounting to €50.1 billion ($51.8 billion) of which €47.2 billion on currency positions - a whopping 7% of Swiss GDP - meaning that in Q2 the SNB lost another €20 billion. This happened despite the SNB having invested 17%, or $94 billion, in foreign - mostly US -stocks.

 
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Violent Government Buying Spree Sends Chinese Stocks Soaring At Close Of Trading; Yellen On Deck





On a day when market participants will care about only one thing - how hawkish (or dovish) the FOMC sounds at 2:00 pm (no Yellen press conference today) - Chinese stocks provided the usual dramatic sideshow and traded unchanged or modestly negative for most of the day despite the latest $100 billion injection, the close of trading on Wednesday was a mirror image of what happened in the last hour on Monday, as various Chinese "plunge-protection" mechanism went into a furious buying frenzy and government-backed funds rushed to buy anything that trades in the last 60 minutes of trading in what may be the most glaring example of banging the close yet.

 
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The Hard Truth: For Retail Investors, The NYSE Is Always Out Of Service





The real reason why retail investors weren't impacted by the NYSE's halt is a hard truth... to retail investors, the NYSE is always dark

Where Do Retail Investor Orders Go? The simple answer: to the highest contracted bidder. Stock "wholesalers" or internalizers like Citadel or Knight pay retail brokers lots of cash to execute retail trades, essentially creating a "third market". Why? Because in a high frequency trading world, where stock prices have never been more fuzzy to the end user, but crystal clear to those that spend enormous sums on colocation and PhD employees, it's never been easier to print money (not unlike Bernie Madoff's scheme in the 90's). But that is the subject of a much, much longer story. Someone should write a book.

 
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"No Longer Confined To The Lunatic Fringe": SocGen Admits Markets Are Completely Manipulated





"If in the short run, to paraphrase Benjamin Graham, equities are a voting machine, then it seems many of these votes are being coerced by interventionists.Central bankers the world over have become obsessed with asset prices, to the extent that the notion of central banks making outright purchases of equities is no longer confined to the lunatic fringe."

 
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Stocks Storm Into The Green As Entire 33 Point Post-Greferendum Dip Is BTF





Futures opened 33 points lower a little over 12 hours ago because, well, nobody has any idea how the Greek fiasco would play out. And then, moments ago the entire gap lower was closed as ES stormed into the green...

 
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S&P Futures Tumble 1.5% At Open: ES Down 33, Brent Under $60





The number everyone's been waiting for all afternoon is finally here: moments ago ES opened for trading after the holiday weekend and it's not pretty, down 1.5% to 2035 in early illiquid trading.

 
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Investors Sue Wall Street, Markit For Conspiring To Monopolize CDS Market





With a DoJ probe having predictably gone nowhere, a group of pensioners and retirement funds are suing Wall Street and Markit for colluding to monopolize the CDS market. Amusingly, Citadel has been subpoenaed to discuss how it was shut out of creating a CDS trading platform by the "oligopolistic" activities of TBTF banks, even as the firm looks set to dominate the market for IR swaps.

 
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Black Box Trading: Why They All “Blow-Up”





Strong Conviction + Low Volatility + High Levels/Low Costs of Leverage [irrespective of Dodd-Frank] + More Absolute Capital at Risk + Increased Concentration of “At Risk” capital + “Doing the Same Thing" = combustible market cocktail.

 
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The Rich Have Never Been Richer: US Household Assets Hit $99 Trillion





Moments ago the Fed's latest Flow of Funds report confirmed what the Philly Fed noted recently (and what blogger and Citadel trader Ben Bernanke vehemently denies): that the Fed keeps making America's uber rich ever richer, when in the first quarter thanks mostly to yet another $1.1 trilion increase in the value of financial assets (read stock market), the asset holdings of US households (or at least a very small subsection of them) rose by $1.6 trillion to a record $99 trillion.

 
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Meet The Participants Of This Year's Bilderberg Conference





From Greek lobbyists to Silicon Valley VCs and from Goldman BSDs to FT reporters, The Bilderberg Group will meet later this week in Tirol to discuss what happens next to the rest of the world... here are the participants...

 
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Volatility Explodes: China, Bunds Crash Then Smash; Dow, S&P500 Tumble Below Key Support Levels





When Draghi warned traders yesterday that "markets must get used to periods of higher volatility" boy was he not kidding.

 
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