HFT

The Florida Panthers finished this season with the 2nd lowest points total in the NHL and drew the 2nd lowest average attendance of 14,200 fans per home game. The team is losing $25 million annually. All of this is the exact opposite situation of the team's owner - Vincent Viola of HFT firm Virtu Financial infamy. As Bloomberg reports, Viola, whose high-frequency trading firm plans to raise millions in an initial public offering next month, is seeking tax dollars to help cover the bills for the hockey team he bought six months ago. Viola asked lawmakers in South Florida’s Broward County to use $64 million in taxpayer funds for arena bond payments owed by the team. In addition to taking over bond payments, which would be made over the next 14 years, the team wants concessions that would cost county taxpayers another $14 million in the same period.

Another day, another epic ramp. Any "investor" watching the last two days of totally manic market behavior must be open-mouthed at the total lack of fundamental sanity behind any of the moves. Even the mainstream media is stunned by the moves embarrased into mere commentary and afraid to opine on any reason. The reason for today's rip - an economic assessment downgrade for Japan which smahed USDJPY higher and through magic of carry, lifted US equities. There was no let-up in Ukraine, no data to confirm growth hype, no US news... but the Russell and Nasdaq managed a 2.5% bounce in a stright line after the Japan headline. Away from the idiocy in stocks, precious metals were rammed lower early on but leaked back higher all day. The USD pushed higher but FX was relatively quiet aside from the idiotic moves in JPY. Treasuries rallied at the long-end on the day (despite the surge in stocks). "unrigged"

For the first time since Novemeber 2012 (when QE4EVA was kicked off in style), the Russell 2000 - that long-heralded indication that everything is great in the US economy and the indicator that stocks are great at discounting the future that is undoubtedly rosy - has broken back below its 200-day moving-average. In the meantime, an oddly dominant algorithm is swamping options markets with millions of fake orders..."rigged?"

On the 'growth' side, Commercial and Industrial loans are rising at a double digit annual rate of change (although it is unclear whether this is an indication of business optimism or stress - after all, we did see a big jump in these loans leading into the last recession).  On the flip side, the bond market and the US dollar index seem to be flashing some warning signs about future growth. Simply put, the outlook for the economy is decidedly uncertain right now and we think so is the confidence in Janet Yellen. We think the more dire outcome for stocks would be if Toto fully pulled back the curtain on monetary policy and revealed it to be nothing more than a bunch clueless economists sitting in a conference room with no ability to control the economy or the markets. If US growth disappoints after all the Fed has done, how could anyone continue to view the Fed wizards as omnipotent? That would send the stock market back over the rainbow to the reality of an economy with big structural problems that can only be solved through political negotiation, something that has been notable only by its absence over – at least – the last 6 years. Are we headed back to Kansas?

Now that both the FBI and the DOJ have woken up from a half-decade slumber realizing there was riggedness, RIGGEDNESS going on in these here stock markets courtesy of Michael Lewis' book, it wasn't long before those most impacted by the frontrunning startegies of HFTs spoke up - anyone who has lost money in the stock market since Reg NMS was conceived. Sure enough, in a lawsuit that was just filed by lead plaintiff William Charles Braman, seeking class-action status, and filed on behalf of all users of real-time futures market data and futures contracts listed on the CBOT and CME from 2007 to now, the CME is allegd to have sold order information to high-frequency traders ahead of other market participants.

Ever since Goldman's anti-HFT Op-Ed less than a month ago, and since the even more recent full-hearted support by Goldman of Michael Lewis' most recent entry into the anti-HFT crusade (one promoting the Goldman-supported IEX exchange), one thing has been clear: the days of market structure in its current format are numbered. This was further confirmed after Goldman exited both its legacy Spear Leeds & Kellogg designated market making post at the NYSE, and is said to be winding down its market-dominating dark pool, Sigma X. Sure enough, Post reports that just three weeks after the Gary Cohn Op-Ed, the SEC is "preparing to remove some high-frequency trading firms."

As the bitcoin bubble bursts, the residual price momentum and "mining" bubbles remain only in those currencies where the "mining" of bitcoin is easier. This explains the shift from bitcoin to litecoin. In other words, where it is easier to create digital currencies out of thin air and where there is still a momentum-based surge in popularity. In yet other words - to permit a faster dilution of the existing currency pool.

In a world filled with innuendo, false flags, and more one thing remains constant: What is Goldman Sachs (GS) up to and more importantly – why?

Rickards does not expressly say one should put 33% of one’s wealth in gold but suggests that an allocation of between 10% and 33% would be prudent. In this regard, he echos Dr Marc Faber who suggested a 25% allocation to precious metals last week.

In what the firm believes will be an improvement over other so-called dark pools because it will be a collaboration among big mutual-fund firms, WSJ reports that the giant fund manager is quietly building a new trading venue designed to let big money managers sidestep many of the problems that they argue lead to unfair or costly trading - i.e. avoid the HFT predation. Fidelity, with $1.95 trillion of assets under management, is in the initial stages of planning the trading venue and has just begun to pitch the idea to other large asset managers. It seems 5 years of vociferous exposure and a Michael Lewis book may be beginning to starve the HFTs of their prey.

The problem is now readily apparent: without any gates to prevent HFT (ab)users from positioning themselves anywhere they wish in the constructiveness/profitabilty spectrum, it goes without saying that everyone will immediately flock to the most profitable, and hence, least constructive and most predatory, HFT strategies.

It was about 5 years ago, roughly the same time we launched our crusade against HFT, that we also first made the accusation that as a result of QE and the Fed's central planning, the forward-looking, discounting mechanism formerly known as the "market" no longer exists, and instead has been replaced with a policy vehicle designed to create a "wealth effect" if only for those already wealthy. In other words, while HFT may have rigged the market, it was the Fed that has openly broken it. Today, none other than the WSJ is the latest to confirm this.

I contend that Lewis should have done a lot more to identify the parties involved and tell the full story of latency arbitrage in Sigma X.

One sees a market reaction such as this, and what can one say but... alpha!

In top place, for many years in a row, remains that HFT and quant wolf in fundamental analyst sheep's clothing, Chicago's very own HFT champion Citadel, followed closely by perpetual SAC pod-PM wannabe, Millennium.