So far in 2013, Bank of America lost money on 9 trading days out of a total 188. Statistically, this result is absolutely ridiculous when one considers that the bulk of bank trading revenues are still in the form of prop positions disguised as "flow" trading to evade Volcker which means the only way a bank could make money with near uniform perfection is if it either i) consistently has inside information that it trades on or ii) it consistently front-runs its clients (the latter incidentally was a topic we covered back in 2009 relating to Goldman Sachs, and which the bank sternly rejected). We now know that when it comes to Bank of America at least one of the two happened.
Stifel Nicolaus has been fined more than $1 million by FINRA for the "unsuitable sales of leveraged and inverse ETFs." While the fine in de minimus compared to the JPMorgan-esque amounts, the remarks by FINRA raise considerable risks for any apparent fiduciary bucket-shop promoting these popular instruments... "performance can quickly diverge from the performance of the underlying index or benchmark. It is possible that investors could suffer significant losses even if the long-term performance of the index showed a gain. This effect can be magnified in volatile markets." Nothing we don't already know but this time from a regulator...
JPMorgan, Madoff, And Why No One Dared Ask "The Cult" Any "Serious Questions As Long As The Performance Is Good"Submitted by Tyler Durden on 01/07/2014 19:02 -0400
JPMorgan: "[t]here are various elements in the story that could make us nervous," including the fund managers "apparent fear of Madoff, where no one dares to ask any serious questions as long as the performance is good.... personnel at one feeder fund seem[ed] very defensive and almost scared of Madoff... They seem unwilling to ask him any difficult questions and seem to be considering his 'interests' before those of the investors. It's almost a cult he seems to have fostered."
- Heavy snowstorm hammers northeastern U.S. (Reuters)
- Coins Remain a Bright Spot for Gold (WSJ)
- Gross’s Mistake on Fed Taper Echoes Across Pimco Funds (BBG)
- China December services PMI falls to four-month low (Reuters)
- General Mills Starts Making Some Cheerios Without GMOs (WSJ)
- U.S. considers flammability risk of Bakken crude after accidents (Reuters)
- China Mobile’s Costly iPhone Deal with Apple (WSJ)
- Hezbollah Upgrades Missile Threat to Israel (WSJ)
- UK House Prices Cap Best Year Since 2006 as Mortgages Surge (BBG)
- China tells police to be loyal to party amid graft crackdown (Reuters)
From the first headline to the last, the following brief month-by-month summary of the year shows just how far markets and global happenings have come...
Market fragmentation in combination with the maker-taker market model, and in conjunction with a dramatic period of exchange “innovation,” had resulted in a new form of artificial edge.
In a carry-trade driven world in which news and fundamentals no longer matter, the only relevant "variable" is whether the JPY is down (check) and the EUR is up (check) which always results in green equities around the globe and green futures in the US, with yesterday's sudden and sharp selloff on no liquidity and no news long forgotten. The conventional wisdom "reason" for the overnight JPY underperformance against all major FX is once again due to central bank rhetoric, when overnight BOJ's Kiuchi sees high uncertainty whether 2% CPI will be reached in 2 years, Shirai says bank should ease further if growth, CPI diverge from main scenario. Also the BOJ once again hinted at more QE, and since this has proven sufficient to keep the JPY selling momentum, for now, why not continue doing it until like in May it stops working. As a result EURJPY rose above the 4 year high resistance of 138.00, while USDJPY is bordering on 102.00. On the other hand, the EUR gained after German parties strike coalition accord, pushing the EURUSD over 1.36 and further making the ECB's life, now that it has to talk the currency down not up, impossible. This is especially true following reports in the German press that the ECB is looking at introducing an LTRO in order to help promote bank lending. Since that rumor made zero dent on the EUR, expect the ongoing daily litany of ECB rumors that the bank is "technically ready" for negative rates and even QE, although as has been shown in recent months this now has a half-life measured in minutes as the market largely is ignoring whatever "tools" Draghi and company believe they have left.
On Thursday, November 7, 2013, the Financial Industry Regulatory Authority, Inc. (“FINRA”) halted trading in all OTC Equity Securities pursuant to FINRA Rule 6440(a)(3). FINRA determined to impose a temporary halt because of a lack of current quotation information. Therefore, FINRA has determined that halting quoting and trading in all OTC Equity Securities is appropriate to protect investors and ensure a fair and orderly marketplace. The trading and quotation halt began on Thursday, November 7, 2013, at 11:25:00 a.m. E.T. FINRA will notify the market when trading may resume.
- The ice breaks; fiscal talks set (The Hill); Ryan steps up to shape a deal (The Hill), as predicted here yesterday
- Republicans consider short-term U.S. debt ceiling increase (Reuters)
- Shutdown Standoff Shows Signs of a Thaw (WSJ)
- JPMorgan Clients in Cash as Schwab’s Options Hedge Default (BBG)
- Mitch McConnell, Senate GOP search for way out (Politico)
- Meredith Whitney Winds Down Brokerage Unit After Setting Up Fund (BBG)
- Washington Budget Chaos Keeps Fed Rates Low for Longer (BBG)
- Chinese Premier Outlines US Debt Concerns (FT)
- Saudis brace for 'nightmare' of U.S.-Iran rapprochement (Reuters)
- Obama Urges Action on Yellen’s Fed Nomination (Reuters)
- Libyan Prime Minister Ali Zidan Freed After Kidnap (WSJ)
Trading Halt - Extraordinary Event Halt
"Trading is halted because FINRA has determined that an extraordinary event has occurred or is ongoing that has had a material effect on the market for the OTC Equity Security or the security underlying an OTC ADR or has caused or has the potential to cause major disruption to the marketplace or significant uncertainty in the settlement and clearance process."
Lately, the parasitic, price manipulative "Office Space"-inspired HFT practice known as "spoofing" has been consistently in the news: a week ago, it was the third largest futures broker, Newedge, who made headlines following a "record" FINRA handslap. Then yesterday, a Red Bank, NJ-based HFT shop called Panther Energy Trading, and its sole owner Michael Coscia were fined $4.5 million and got a 1 year ban from the industry for engaging in the same activity. "Panther, based in Red Bank, New Jersey, and Coscia used a computer algorithm that placed and quickly canceled bids and offers in futures contracts for commodities including oil, metals, interest rates and foreign currencies. Panther and Coscia engaged in spoofing from August 8, 2011, to October 18, 2011, related to 18 futures contracts. The firm accumulated $1.4 million in profits by using the algorithm." While none of this is fundamentally new to any of our readers, we are happy to report that in conjunction with Nanex, we can now present documentary evidence of the Panther algo in action.
It has been almost 2 years since FINRA started to get 'serious' about thinking about looking into an investigation of (get our point) high-frequency trading and dark pools but it seems, as the WSJ reports, this time they are more specific. In Sept 2011 FINRA noted "there's something that's troubling us in the marketplace," and it seems now that FINRA has spent the time since understanding the jargon they have some questions, "who is responsible for the automatic shut off or kill switch," asking firms how they avoid "quote bursts and stuffing" that create confusion for other investors and potentially distort the market, and approving a plan to force dark pools (15% of all stock trading) to disclose and detail trading activity on their platforms. Of course, we've seen this kind of bluster before and they did nothing then but hope springs eternal.
When we tapered our coverage of HFT manipulation and stock market abuse some time ago, we thought that the message had been heard loud and clear: high frequency trading is a sophisticated market manipulating parasite, whose only real function is to abuse market structure and integrity, by making conventional market manipulation practices more difficult to spot and identify. It turns out some, i.e., Newedge, thought they could still get away with traditional manipulative practices such as spoofing, layering, momentum ignition, wash trading, bypassing, and others, if only they were wrapped in an HFT blanket. It did so for four years from 2008 until 2011. As it turns out it was wrong, and in a stunning example of actually doing its job, FINRA fined Newedge, which is one of the largest futures brokers in the world and ranks third in terms of U.S. customer assets on deposit, a record $9.5 million.
Here are the worst IPO fails of all time in the world. The ones that we thought would be unfailingly good. The ones that we thought we could bet our bottom dollar on and still strike it rich.
Fed Releases Names Of Early FOMC Minutes Recipients: Include Employees Of ECB, Goldman, Barclays, JPM, Law And PE FirmsSubmitted by Tyler Durden on 04/10/2013 16:31 -0400
We will release the full list of named recipients once we get it, but here is what we now for now, via BBG and CNN:
- EMPLOYEES AT GOLDMAN SACHS, BARCLAYS, JP MORGAN, CITI, NOMURA, UBS, HSBC RECEIVED FED MINUTES EARLY YESTERDAY
- MOST OF THE BANK EMPLOYEES APPEAR TO WORK IN GOVERNMENTAL RELATIONS (Lobbies)
- ABA, SIFMA, SENATE STAFFERS RECEIVED FED MINUTES EARLY
- FED NAMES 154 RECIPIENTS OF EARLY RELEASE OF FOMC MINUTES
- FED MINUTES SENT EARLY TO BANKS, LAW FIRMS, PRIVATE EQUITY
- FED EARLIER SAID RELEASE WENT MAINLY TO CONGRESS, TRADE GROUPS
- NONE OF THE PEOPLE ON THE LIST ALERTED THE FED THAT THEY RECEIVED NONPUBLIC INFO A DAY EARLY
In other words: absolutely everyone who trades risk assets for a living.