The clearly agitated BATS CEO came out swinging, blasting Katsuyama and Lewis "Shame On You," for apparently telling the truth of what occurs in the stock 'market and letting everyone in on it'. The tension grows when he presses Katsuyama on whether he really believes it is rigged... who then erupts "I believe the markets are rigged.. and that you are a part of the rigging." Then the gloves come off "you wanna do this, let's do this!" and then it got worse (or better)...
Considering the rancorous debate currently going on between Michael Lewis (we will have more to say about it shortly), DirectEdge CEO William O'Brien and IEX employee and latest HFT whistleblower, Brad Katsuyma, on CNBC, we decided that this would be an opportune moment to remind readers how BATS, which currently owns DirectEdge, IPOed, or rather how it failed to IPO, when it crashed and burned in its attempt to go public on March 23, 2012, when a rogue algo destabilized the order book and promptly sent the indicative price from around $16 to 0... in less than a second - perheps the perfect testament to just what HFT really does.... and just so readers have an objective perspective of how "unrigged" the market truly is.
The stock market really was rigged... “It’s 2009,” Katsuyama says. “This had been happening to me for almost two years. There’s no way I’m the first guy to have figured this out. So what happened to everyone else?” The question seemed to answer itself: Anyone who understood the problem was making money off it...
Value stocks handily outperformed Growth stocks by the end of Q1 but the window-dressing pump of the last 2 days rescued all but the blue-chip Dow from ending the quarter in the red. This is the worst quarterly performance for stocks since 2012. Despite disconnects all over the place today, stocks managed to hold onto gains today. Thanks to some dovosh comments by Yellen (that apparently "some time" is interpreted as more than 6 months), bonds and stocks ripped today leaving long-bonds best quarter since Q2 2012. Gold is the best performing asset of the quarter and HY bonds worst as the USD ended unchanged.
'Growth' continues to underperform 'Value' as once again today's early gains - used by many to indicate that the worst is over - were decimated rather quickly especially in the Biotechs (new cycle lows) and momos (NFLX & FB ugly). KING's failed IPO persists (-4% today) and now down over 17% from its IPO day highs. The S&P held miraculously above the red-line year-to-date but Nasdaq, and Russell joined the Dow in negative territory as growth is now underperforming for the year. The USD index ended the week unchanged (with weakness in JPY offset by strength in AUD and CAD) but the JPY-carry trade decoupled from stocks in the late-day today rather ominously. Bonds flattened on the week (30y -6bps, 5Y +3.5bps) with some profit-taking on flatteners today. 'Growth' commodities rallied with oil and copper up 2 and 3% respectively as PMs dropped 3% as Emerging Markets had their best week in almost 7 months.
Yesterday's late bounce and this morning's opening follow-thrugh were heralded by many talking-heads this morning as the end of the sell-off and a great buying opportunity. Well, on the bright side, those stocks are now at least 3% cheaper having plunged from the opening highs - even as the broader indices hold in. The Momos, also considered to have seen the worst, are re-collapsing...
The major US equity indices all pushed into negative YTD territory today in yet another pump-dump-and-small-ramp deja vu day. Early strength gave way quicker today as Biotechs bounced off an early dump (but closed back below their 100DMA for 2nd day - first time in 18 months), momo names were crushed (down 10-14% post-FOMC), Citi was banged over 5% (on extremely heavy volume post CCAR), and the NASDAQ tested down (and bounced off) its 100DMA. Treasuries were mixed once again with bear-flattening the dominant theme. The USD ended the day unch on the week with EUR weakness offset by CAD and GBP strength. AUDJPY was in chgarge of stocks most of the day-session. Copper and oil improved as gold and silver slipped more (though bounced at the close). Late-day JPY pump, VIX dump rescued the S&P back to +0.03% return for 2014.
For the first time in over 6 weeks, all major US equity indices are in the red for 2014. Early-year leaders Nasdaq and Russell are being crushed by the battering of Biotechs and monkey-hammering of Momo names. Since FOMC, Momos are down 14% and Biotech down 12%. The high-growth hope is fading and nowhere is that more evident than the tumble in 30Y yields - now at 10 month lows. The hopes that financials would lead have nw left as they are also in the red post-FOMC (post-CCAR hope).
30Y yields are now over 10bps below post-Yellen spike highs as growth-hope-driven US equities were monkey-hammered in another pump-and-dump deja vu day - with one difference - no late-day bounce to provide solace for the bulls. The Nasdaq and Russell 2000 are down over 3.5% from Yellen; Biotechs broke to new lows (down over 14% and below the 100DMA); momo names were slammed (FB) as King IPO's and lost over 15% on the day. The Nasdaq and Russell have joined the Dow in the red year-to-date, S&P and Trannies barely positive. The USD lost ground on the day after early strength. Gold, silver, and copper fell notably. VIX jumped from 2-month lows to back over 15%. USDJPY was sin charge all day - and broke below the key 102 level into the close.
Not only is it deja vu all over again (again) but our warning this morning of reality of a virtual reality world coming unglued is all too real. Biotechs and Momos are at the lows of the day; Nasdaq and Russell 2000 are now down 3% post-Yellen and all major indices (including the IBM-sponsored Dow) are now in negative territory post-Yellen. Financials, ahead of tonight's CCAR, are also fading fast (catching down to their credit counterparts). Of course, it's all about USDJPY... (oh sorry - fun-durr-mentals)
It's deja vu all over again in Biotech bubble land. For the 4th day in a row, and opening salvo of hope-fueled buying has faded quickly into a sea of red-faced selling as The Nasdaq Biotech Index holds down 13% from the highs at is 100-day-moving-average. Will 4th time be the charm for the revival of the bubble? or is today the break?
Pre-open gold dump, USDJPY pump, check. Opening dump in USDJPY and stocks led by Momos and Biotechs, check. European close marks the bottom, check. EURJPY takes over and ramps stocks back up to highs, check. Fade into close, check. Today was an almost perfect echo of yesterday's market action with blue-chips benefitting from the weakness in Nasdaq and Russell high-beta honeys. Bonds were quite with very modest steepening. Gold and silver bounced off earlier lows but their losses mirror Copper's 1.7% rise on the week. The USD lost ground as Draghi's failed jawboning sparked EUR strength. VIX fell 1 vol to its lowest close in 2 weeks as a late-day VIX -slam failed to get SPX green post-FOMC.
The Nasdaq Biotech index is down 4% from earlier opening highs and is once again testing the 100-day-moving-average that provided some impetus for a modest bounce yesterday. This is a 10-week low level (-14% from Feb highs) and has retraced over 60% of the gains since the Fed announced the taper in December. Volume has been very heavy.
Chart 1 proves it is crystal clear that every time the US Federal Reserve acts to "save us" from one crisis, it directly sows the seeds for an even bigger crisis in the future.
Friday was an extremely volatile day with new record highs being achieved miraculously at the open only to be followed by free-fall in the market's most-loved momentum names into the close. It seems that the quad-witching was of particular interest to the algos as Nanex notes, a new record was set for most trades in a 1-second interval. What was even more unusual was the record number of 'unusual' price changes that occurred in the 3 seconds before the market opened and index futures expired. "Efficient" markets indeed...