Having the trade record of Bernie Madoff and the braggadocio of a WWF wrestler was just too much for New York Attorney General Eric Schneiderman to ignore. Rigged Market HFT Poster-child, and recent-delayed IPO, Virtu Financial has received a letter of inquiry from the AG's office requesting information about its business. As Bloomberg reports, a person with knowledge of the matter said this week that six high-frequency trading firms have received subpoenas as part of Schneiderman’s investigation and Virtu was asked for similar information in a letter of inquiry which could be escalated to a subpoena if the company doesn’t comply voluntarily.
Here’s something you don’t see very often: For a day and a half this week, the Japanese government’s benchmark 10-year bonds attracted not a single successful private sector bid. At today’s artificially-depressed yields, no one wants this paper — except of course the Bank of Japan, which is buying up the bonds with newly-created yen. In a world of markets rather than manipulations, this kind of imbalance would be an automatic short candidate. Actually, this kind of imbalance would never occur and as one trader noted "I know this could end badly."
The Philly Fed Business Outlook survey surged to 16.6, beating expectations by the most since September and rising to 7-month highs. Most subindices rose with shipments surging and new orders rising but prices paid flat. The big worry though is that this six-month forward expectations collapsed to their lowest since April 2013. So the pent-up-weather-demand is being seen as entirely unsustainable by the survey respondents...
While overall the beige book was an absolute snoozer, almost as boring as Yellen's earlier appearance at the economic club of New York, and its core message were quite bullish, namely that:
EIGHT OF 12 FED DISTRICTS SAY GROWTH `MODEST OR MODERATE'
FED SAYS ECONOMIC GROWTH `INCREASED IN MOST REGIONS' OF U.S.
FED SAYS LABOR MARKET CONDITIONS `MIXED BUT GENERALLY POSITIVE'
... confirming that the Beige Book contributors did not get the "ignore the dots" memo, the only "exciting" thing that everyone was looking for: what the Fed thought about the weather. Because with 103 instances of the word "weather" in the report (granted less than the 119 in February), it sure thought a lot.
*YELLEN SAYS FED COMMITTED TO ACCOMMODATION TO SUPPORT RECOVERY
Markets will be hanging on every word of what is likely Janet Yellen's first monetary policy speech and even more so the Q&A afterwards as she suggests that a considerable time is more than 6 months, and the delicate balance she has to play between admitting the economy is ugly while admitting that QE is over no matter what... all the while maintaining some semblance of credibility. One has to wonder if the ripfest rally of the last 24 hours is a buy the rumor ramp ahead of a sell the Yellen news event as once again she is tested...
" The Korean authorities should limit foreign exchange intervention to the exceptional circumstances of disorderly market conditions" - US Treasury
Pension funds over exposure to paper assets and lack of diversification has cost pension holders dearly in recent years. This will continue in the coming years with attendant consequences for pensions ...
- Three dead in shootings at Kansas Jewish centers; man to face charges (WSJ)
- Sanctions Blowback in Russia Targets Burgers to Movies (BBG)
- Deadly Virus's Spread Raises Alarms in Mideast (WSJ)
- China group buys $6bn Glencore Peru copper mine (BBG)
- Iran lodges complaint against United States over U.N. envoy ban (Reuters)
- Russian assets down sharply on Ukraine conflict fears (Reuters)
- ECB comments knock euro, but not much (Reuters)
- World-Leading $25 Hourly Wage Roils Swiss Businesses (BBG)
The market is 4% off its all time highs which means the time to pull IPOs due to "market conditions" has come. Here's why.
Update: As CNBC just reported moments ago, tech fund Coatue is returning $2 billion of $7 billion to investors, citing "difficult market conditions." Just wait until the "difficult market" drops more than just 3% from all time highs...
As a reminder, for those with Bloomberg (and the proper permissions) the easiest way to track the performance of the most popular hedge fund names is using the BBG ticker GSTHHVIP, and especially its performance against the S&P. But for those who don't have access, or are too lazy or depressed to type anything into their terminal today, here it is, straight from Goldman's sales and trading mouth, summarizing yesterday's market poundage:
Our HF VIP basket underperforms the SPX by over 100bps, 3 standard dev move and the worst since June 2012.
In the aftermath of Michael Lewis' book "Flash Boys" there has been a renewed surge in interest in High Frequency Trading. Alas, much of it is conflicted, biased, overly technical or simply wrong. And since we can't assume that all those interested have been followed our 5 year of coverage of a topic that finally has earned its day in the public spotlight, below is a simple summary for everyone.
February 2013 saw Russian visitors spend 16% more than in 2012 as "investor" visas flowed, property soared, and hot money slooshed into the UK recovery. However, as AFP reports, Russian spending in British shops fell by 17 percent last month compared to February 2013 as the "unstable situation in Russia has shown its effect on tourism spend this year," already. Shoppers from the Middle East (up 31%) and China (up 23%) continue to represent the highest proportion of international sales in Britain, but it is clear, as The Economist points out, Russian wealth has permeated the upper reaches of society in Britain more completely than in any other Western country, with the health of "Londongrad" now at stake if sanctions are extended.
As promised, the Johnson/Crapo bill has finally arrived. There are 442 pages of legal mumbo jumbo, guaranteed to cure all forms of insomnia and those suffering from low blood pressure. The agencies have been providing cheap financing to borrowers, courtesy of the Fed. The agencies have been providing cheap and bullet proof insurance for bond investors, courtesy of the Treasury. The Bill somehow expects some mysterious private capital will come in to insure the first loss position and the Government (including the FOMC) can gracefully exit its role in the mortgage monopoly. That is more than overly optimistic. Can anyone quantify that in dollars as well as mortgage rates? In summary, the Bill is going to increase mortgage compliance costs. It will confuse, rather than clarify, the mortgage application and approval process. It is a disaster. Fortunately, we suspect the Bill has no chance of passing in its present form.
The biggest news this past week was Janet Yellen's first post-FOMC meeting speech and press conference as the Federal Reserve Chairwoman. While some have the utmost respect for her accomplishments, every time we hear her speak all we can think of is a white haired, 75-year old grandmother baking cookies in her kitchen. This week's "Things To Ponder" covers several disparate takes on what she said, didn't say and the direction of the Federal Reserve from here.
In the aftermath of yesterday's key market event, the FOMC's $10 billion tapering and elimination of QE with "QualG", not to mention the "dots" and the "6 month" comment, the USD has been on fire against all key pairs, with the EURUSD sliding below 1.38, a 150 pip move in one day which should at least give Mario Draghi some comfort, but more importantly sending the USDJPY soaring to 102.500 even as US equity futures continue to slide, and not to mention the Nikkei which tumbled -1.7% to just above 14,000 overnight. Perhaps the biggest take home message for traders from yesterday is that the Yen carry trade correlation to the Emini is now dead if only for the time being until DE Shaw and Virtu recalibrate their all-important correlation signal algos. The other big news overnight was the plunge in the Yuan, tumbling 0.5%, 6.2286, up 343 pips and crushing countless speculators now that the "max vega" point has been passed. Expect under the radar news about insolvent trading desks over the next few days, as numerous mega levered FX traders, who had bet on continued CNY appreciation are quietly carted out the back door. Elsewhere, gold and other commodities continue to be hit on rising fear the plunging CNY will accelerate the unwind of Chinese Commodity Funding Deals.