for years the big money managers stoically took it on the chin, and whether out of lazyness or some other unexplained motive, allowed their orders to continue being HFT-frontrun on public exchanges and 3rd party dark pools year after year, making VWAP and TWAP orders a cost center, boosting the case that HFTs aren't really bad for stocks. Until now. According to the WSJ, some of America's largest mutual funds and asset managers led by Fidelity Investments "are close to launching a private trading venue designed to let them buy and sell large blocks of stock without the involvement of Wall Street firms and high-speed traders, according to people familiar with the matter." The new venture is the who's who of traditional asset management and includes nine firms, including BlackRock Inc., Bank of New York Mellon Corp. , J.P. Morgan Chase & Co. and T. Rowe Price Group Inc., who are saying goodbye to "lit" markets, i.e. public exchanges, "and forming a company that will operate a their own "dark pool”...
- Earnings Pessimism Jumps as Oil Threatens S&P 500 Growth (BBG)
- It’s Amateur Hour in the Booming Chinese Stock Market (BBG)
- France mobilizes 10,000 troops at home after Paris shootings (Reuters)
- European Stocks Gain With S&P 500 Futures While Oil Drops (BBG)
- Nasdaq Looks to Operate Dark Pools for Banks (WSJ)
- This Guy Called Bonds in ’14. You Listening This Time? (BBG)
- Paris attacks boost support for Dutch anti-Islam populist Wilders (Reuters)
- OPEC price war in Asia intensifies as oil falls below $50 (Reuters)
Is the world's biggest hedge fund going all-in on HFT and Dark Pools? We ask because Ray Dalio's Westport, CT-based Bridgewater, which at last check manages around $160 billion between its Pure Alpha and All Weather fund products, and which according to preliminary data had a solid performance in 2014, has just hired Jose Marques, the former global head of the quant and algo-heavy electronic trading at Deutsche Bank, to become Bridgewater's new head of trading.
That markets are rigged, at both the macro level, through central banks, and micro, through HFTs, dark pools and purposeful market fragmentation, should be painfully obvious to everyone by now. But when even the regulators engage in "jury rigging", or in this case blocking prominent HFT-critic Joseph Stiglitz, a Nobel prize winning economist (a prize which doesn't count for much on these pages but should - at least on paper - impress such statist cronies as the SEC), has been blocked from a government panel that will advise regulators on issues facing U.S. equity markets, it becomes clear as day that the rigging is not just in the markets: worse, it is openly involves the market's "regulator" and "enforcer."
When the 5th largest dark pool trading venue (by volume) in America is shuttered, as Citi notes because its "capital, resources and efforts would be better redeployed elsewhere," you know there is a problem in US stock trading volumes and liquidity. Everyday we get 'glimpses' of this collapse - most recently yesterday's AAPL flash-crash - as human traders (who provide the 'fish' for the machines) disappear and HFT liquidity-providers pull liquidity in a flash. Crucially, as we hinted previously, we wonder if the large firms are exiting the dark pool business before some engineered market collapse is pinned on these opaque 'markets' who have come under increased regulatory scrutiny.
Anti-HFT Revulsion Grows: IEX Ties For Fourth In Dark Pool Trading Thanks To World's Largest Wealth FundSubmitted by Tyler Durden on 11/17/2014 14:56 -0500
While Wall Street is certainly free to broken record that Michael Lewis' hugely popular story about HFT and market rigging did not impact the natural course of events, the reality is it did: the collapse in Barclays' dark pool LX (shown in the bolded red line on the chart below), in the aftermath of the NY AG case against the British bank, has been documented in the past, and is just one example. An even more vivid case study comes from the surge in popularity of upstart dark pool IEX (green dotted line below), the protagonist of Lewis' Flash Boys book, and which out of nowhere, has just tied with Lavaflow's dark pool for fourth spot in ATS trading with just over 200 million shares in the week ended October 27. The catalyst? Norway's sovereign wealth fund just said not to HFT parasites.
"Solutions to the world's problems are not produced in a meeting between Bill Gates and George Soros... Renewal has to come from below... Limiting the influence [of the richest] is of the utmost importance... so that today's upper-class, high-finance capitalism can once again revert to being a capitalism of the real economy and the societal center."
In August 2013, the Nasdaq SIP broke and trading in Nasdaq stocks was halted for 3 hours. Yesterday, at 1:07 PM ET, the NYSE SIP broke but trading was allowed to continue until the backup facility was put on line. ?Apparently, the NYSE didn’t think it was necessary to halt trading in their listed stocks... despite customers not receiving accurate pricing.
First it was Libor, then gold, then dark pools, now for those who want a glimpse into just how for years bank FX traders, whether belonging to "The Cartel" or "The Bandits Club" or otherwise, colluded on trades around the daily fix, breached fiduciary duty, and generally engaged in illegal rigging of the world's largest market by volume, Bloomberg News had received a transcript of the instant-messages by various FX traders currently being investgated for FX rigging. Here are some excerpts.
Could we have imagined anything more far-fetched and unlikely as this practice by the SEC itself? We’ll answer this question. No.
"Western economies have lost the ability to generate real new wealth of the type that their debt-based monetary systems require for ongoing operations (such as paying interest on old debt). I suspect the subject will force itself on the national consciousness in the year ahead as one company after another in the shale oil regions craps out on a shortage of available investment capital. That’s the inflection point where fake wealth is unmasked for what it really is: crippled capital formation. The disappointment from that looming event will thunder through our society." In the meantime, the distractions are many and powerful.
If you thought the last several days were volatile in the market, you ain't seen nothing yet: judging by the early liquidity, or rather complete lack thereof, in the market moving E-Mini contract, the asset class through which as we disclosed a month ago central banks directly manipulate markets with the CME's blessing, then we urge all those who have stop losses close to the NBBO to quietly pull those as they will get hit adversely. The reason? As this Nanex chart of ES orderbook levels show, there is zero, zilch, nada liquidity in the ES.
- Dallas County May Declare State of Disaster From Ebola Virus (BBG)
- Markets on edge after worst turmoil in four years (Reuters)
- Central bankers may have no quick fix as markets swoon, economy weakens (Reuters)
- Risk of Deflation Feeds Global Fears (Hilsenrath)
- U.S. health official allowed new Ebola patient on plane with slight fever (Reuters)
- Texas Hospital Fights Allegations About Ebola Protocols (BBG)
- Treasuries Gain as Oil Drops Below $80 While Stocks Slide (BBG)
- Greek Bonds Slump on Bailout Concern as Spain Misses Sale Target (BBG)
- White House shifts into crisis mode on Ebola response (Reuters)
- Obama Confronts Slippery Slope as Islamic State Advances (BBG)
"Risk: NEW LOW for Net free credit at -$183b is major risk should the market drop: Net free credit is free credit balances in cash and margin accounts net of the debit balance in margin accounts. Net free credit dropped to -$183b and moved to a new low below the prior record of -$178b in February. This measure of cash to meet margin calls remains at an extreme low or negative reading below the February 2000 low of $-129b. The risk is if the market drops and triggers margin calls, investors do not have cash and would be forced to sell stocks or get cash from other sources to meet the margin calls. This would exacerbate an equity market sell-off." - BofA