• Gold Money
    05/26/2016 - 14:27
    Here’s a question that might have you pondering: Is gold a commodity? More importantly, are we doing a disservice to the gold industry by calling gold a commodity? These may sound like silly...

Reg NMS

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The CME Admits Futures Trading Was Rigged Under Old System





CME Group Inc., the world’s largest exchange operator, just completed an upgrade traders said would eliminate a shortcoming that gave some participants an advantage. Under the old system, data connections that linked customers to CME -- where key products like Treasury futures and contracts tied to the Standard & Poor’s 500 Index trade -- had noticeably different speeds, opening up the potential for gaming, according to traders and other experts. Those who knew how to gain faster access could increase their odds of being first in line to trade.

 
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"The Liquidity Just Dries Up In A Stressed Market" - How HFT Killed FX Trading





Collin Crownover, head of currency management at State Street Global Advisors Inc., which oversees about $2.4 trillion,  who during a panel presentation said that "we are concerned. During volatile periods, market participants are backing away until conditions settle down, making it harder to complete large orders."“A lot of the electronification of the market, which by and large is a good thing, has led to kill switches on a lot of that algorithmic-provided liquidity,” Crownover said. “The liquidity just dries up in a stressed market.”

 
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Beware The "Massive Stop Loss" - JPM's Head Quant Warns This Unexpected Downside Catalyst Looms Next Week





"There are $1.1 trillion of S&P 500 options expiring on Friday morning. $670Bn of these are puts, of which $215Bn are struck relatively close below the market level, between 1900 and 2050. At the time of the Fed announcement, these put options will essentially look like a massive stop loss order under the market. This important event falls at a peculiar time—less than 48 hours before the largest option expiry in many years. "

 
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Who Will Be Blamed?





"... you can bet that whenever an earthquake like this happens, especially when it’s triggered by two invisible tectonic plates like put gamma and call gamma and then cascades through arcane geologies like options expiration dates and ETF pricing software, both the media and self-interested parties will begin a mad rush to find someone or something a tad bit more obvious to blame. So you end up getting every investment process that uses a computer – from high frequency trading to risk parity allocations to derivative hedges – all lumped together in one big shotgun blast"

 
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It A "Liquidity Mirage": New York Fed Finally Grasps How Broken The Market Is Due To HFTs





Goodbye to "fat fingers" being blamed for flash crashes, and welcome to the Heisenberg uncertainty market: you can have your 1 cent bid/ask spreads... but you can't have any real market depth at the same time.

 
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Spoofer Complains About Spoofing, Is Ignored, Starts Spoofing, Gets Busted





This is the story of a veteran NYSE specialist who noticed manipulation in the NYSE market open Imbalance, loudly complained to the NYSE, was ignored, then decided to profit from said manipulation himself... and got busted.  And that's where the story begins...

 
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HFTs Have Devolved To Two-Bit Criminals Straight Out Of "Office Space"





A quick summary of the latest HFT market-rigging scam: mysteriously, and "erroneously", a change in Latour Trading's code was made, which the firm lacked "direct and exclusive control" over, and which was non-compliant with Reg NMS requirements, yet which mysteriously ended up generating "gross trading profits and rebates by stock exchanges" amounting to $2.8 million. Where have we seen this? Oh yes...

 
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The Letter That Stock Exchanges Should Write To Investors





Dear Investors, The last few weeks have exposed that our equity markets are not as liquid as we have long claimed mainly due to market fragmentation and the lack of diverse liquidity pools...

 
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Cutting Through The HFT Lies: What Really Happened During The Flash Crash Of August 24, 2015





One of the fallacies being propagated about yesterday's flash crash, is that somehow HFTs came riding in as noble white knights and rescued the market from a collapse instead of actually causing it. This particular lie is worth a few quick observations and explanations of what really happened.

 
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The HFT "Treasure Map" - Presenting The Rigged Stock Market's Full "Latency Arbitrage" In One Chart





The following map lays out the embedded, and regulator blessed, latencies between the three big New Jersey exchange centers: Mahwah (NYSE), Secaucus (BATS), and Carteret (Nasdaq) for everyone but the top tier exchange clients, the HFTs, who are greenlighted to frontrun everyone else, and generate quarter after quarter of perfect trading records.

 
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In Latest Market-Rigging Scandal, ITG Busted For Frontrunning Clients In Its Dark Pool





Since the market is once again on the verge of a terminal liquidity seizure with its associated side-effects (see China for details), the authorities needed to remind the "market" just who the scapegoat will be when the next crash finally does come. Which is why earlier today in an unexpected "preliminary second quarter guidance" release, ITG, owner of the Posit dark pool, was just busted with a $22.6 million potential SEC settlement for what appears to have been blatant frontrunning of company clients in its own prop trading pod. But what is particularly amusing in this case is that while everyone knows that when it comes to HFT's, it is never called "rigging" - the proper nomenclature is "glitch", so now we learn a new term to use instead of "criminal frontrunning" - drumroll... trading experiment,

 
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Both SEC And FINRA Admit That The Market Is Rigged (And They Are Powerless To Fix It)





"When an HFT that is not a member of an association executes an off-exchange trade, the HFT’s identity is usually not reported to the Financial Industry Regulatory Authority, or FINRA, which is the only association currently in existence. This frustrates FINRA’s surveillance efforts as it cannot quickly link trades to the HFTs responsible for them. This is a serious problem because, according to FINRA’s current Chairman, certain market participants disperse their trading activity across multiple markets in an attempt to hide various forms of market abuse, including layering, spoofing, algorithm gaming, and wash sales."

- SEC Commissioner Luis Aguilar.

 
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Flash Boys' Michael Lewis Warns "The Problem's Not Just HFT, The Problem Is The Entire System"





As HFT shops begin to turn on each other, it seems appropriate to reflect on the impact that Michael Lewis' Flash Boys book had on exposing the ugly truth that many have been discussing for years in US (and international) equity (and non-equity) markets. As Lewis concludes, after explaining the attacks he has suffered from the HFT industry, "If I didn't do more to distinguish 'good' H.F.T. from 'bad' H.F.T., it was because I saw, early on, that there was no practical way for me or anyone else... to do it. ...  The big banks and the exchanges [have] been paid to compromise investors’ interests while pretending to guard those interests. I was surprised more people weren’t angry with them."

 
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