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Stock Market Self-Cannibalization To Continue As Volume Implosion Accelerates

Tyler Durden's picture




 

The 'what we lose in margin, we'll make up for in volume' strategy is failing. And for the NYSE it is failing large. The decision to 'enable' HFT - for its 'liquidity-provision', which after all has done nothing but expose the dismal reality of a market structure designed to nickel-and-dime retail til the last penny drops, has had the absolute opposite unintended consequence of driving the only real liquidity provider - the retail trader putting his real money to work - out of the market. As Securities Technology reports, the NYSE Euronext reports daily volume of trading stocks down 16.9% from a year ago (and down 17.8% YTD compared to last year) and down 9.9% from June alone. Trading in stocks on its exchanges in Europe were also down 12.3%. This plunge in stock trading has knocked into the derivative markets which have seen a massive 15.8% cliff-dive worldwide from June to July.

 

One more nail statistic in the coffin of CNBC's audience is a 29.7% drop in ETF transactions year-over-year and NYSE/Arca/MKT's share of trading in NYSE-listed stocks is down 34.3% from a year ago as the dark pools rise.

 

With volumes collapsing it is only likely that we will see far more 'incidents' such as Knight - where companies whose top-line explicitly stems from flow trading - increasingly find themselves redundant; whether or not this is due to a self-inflicted algo, or other, potentially more sinister, reasons.

 

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Thu, 08/09/2012 - 15:33 | 2691955 mrktwtch2
mrktwtch2's picture

we dont trade stocks here!!  lol

Thu, 08/09/2012 - 15:37 | 2691970 SilverTree
SilverTree's picture

Pass the Chianti please.

Thu, 08/09/2012 - 15:40 | 2691981 Pladizow
Pladizow's picture

Its a Skynet, Hal & Joshua circle jerk - where fingers are replaced by digits!

Thu, 08/09/2012 - 15:41 | 2691990 Concentrated po...
Concentrated power has always been the enemy of liberty.'s picture

...and the fava beans

Thu, 08/09/2012 - 16:27 | 2692138 fonestar
fonestar's picture

The sheep will stay in their stocks, mutual funds and 401k's until the bitter end.  It's what they were told to do.

Thu, 08/09/2012 - 18:02 | 2692317 4horse
4horse's picture

a bunch of the boys were whooping it up, at the malamute saloon

up/down a dollar, every other hour, winning/losing while downing that blue ruin . . .

 

 

ALGO: @ the klondike kasino
0.01 x 10k/s x 100cos. = desperate pennies an hour, picked-off-the-bones of these 
 0.02 ?
49er-type goldcos as, a buncha bucks, along comes that croupier to wipe the table clean

 

 

 

oh my.
darling.
clementine

Thu, 08/09/2012 - 16:07 | 2692083 Hype Alert
Hype Alert's picture

Shouldn't the title read: HFT Cannibalization To Continue As Volume Implosion Accelerates since retail has left the building? 

 

I think at some point when the machines start fighting over the 10 remaining orders in the system, there will be more problems exposed.

Thu, 08/09/2012 - 18:21 | 2692383 Doubleguns
Doubleguns's picture

I am still waiting for the HFT machines to battle it out. Maybe something like this.

http://www.youtube.com/watch?v=DpYE8FtWXhA&feature=fvwrel

Thu, 08/09/2012 - 19:59 | 2692598 DeadFred
DeadFred's picture

I suspect that when the market drops over the cliff volume will return if only for a bit. If your a buy and hold type why would you trade when the robots are pumping things for you. If you're an active retail trader you're just a myth anyway so we don't care what you hypothetically would do.

Thu, 08/09/2012 - 22:24 | 2692904 Buck Johnson
Buck Johnson's picture

Remember Jeffries everyone, I bet they are next on the block and it won't be pretty.  The bankers and the US want out of this mess without pain and it's not possible.  The spider has spun a web so complicated that even he is caught in it.

Thu, 08/09/2012 - 15:35 | 2691956 Precious
Precious's picture

Bernanke says, "Pay no attention to that man behind the curtain!"

Thu, 08/09/2012 - 15:45 | 2692009 eclectic syncretist
eclectic syncretist's picture

He is the man behind the curtain.

Algos have ruined the market and everyone knows it.  Even those who don't smell a rat at this point.

Still time to get short here for those crazy enough to still be involved.  Bernanke's options are not nearly as robust as many interested people would like to believe.  In fact, what little is left of the Fed's credibility is at high risk right now.

Thu, 08/09/2012 - 16:44 | 2692183 CH1
CH1's picture

He is the man behind the curtain.

Right, but it was that man behind the curtain who said "pay no ateention to the man behind".....

Thu, 08/09/2012 - 17:56 | 2692313 silverserfer
silverserfer's picture

bernanke is NOT the man behind the curtian. HE is the wicked warlock of the East. The men behing the curtian are operating by cell phone from one of their 150 palaces spread across the world.

Thu, 08/09/2012 - 16:48 | 2692197 The Wizard of Oz
The Wizard of Oz's picture

Pay no attention to that man behind the curtain!

Thu, 08/09/2012 - 18:21 | 2692380 Zero Govt
Zero Govt's picture

pay no attention to the fat cats living in the 151 palaces spread across the globe

..and that short chubby balding little oik with a beard too

Thu, 08/09/2012 - 18:31 | 2692397 zippy_uk
zippy_uk's picture

Agreed - he is a dirty old man and he is naked

Thu, 08/09/2012 - 15:33 | 2691957 govttrader
govttrader's picture

Bond Market, Bond Market, Bond Market!!!!  Thunder Cats Hoooooo!!!!

http://govttrader.blogspot.com/

Thu, 08/09/2012 - 15:41 | 2691993 NotApplicable
NotApplicable's picture

You're going to wear out your welcome real quick-like if you keep spamming every thread. Especially if you aren't adding anything to the discussion.

Just sayin'.

Thu, 08/09/2012 - 15:46 | 2692016 DrDinkus
DrDinkus's picture

FWIW, govttrader's call on the bond auction price action today was spot on...so thank you, govttrader...

Thu, 08/09/2012 - 16:15 | 2692104 VisualCSharp
VisualCSharp's picture

He's a bottom-feeder; in this case, he's bottom-feeding off ZH's traffic.

Thu, 08/09/2012 - 15:34 | 2691958 Squid Vicious
Squid Vicious's picture

Must be busy in the Hampsteins...

Thu, 08/09/2012 - 15:35 | 2691961 HaroldWang
HaroldWang's picture

Again, another important point that no one talks about on CNBC as they're all busy calling for SPX 1600 by EOY. It's really going to hurt these guys - no trading, no revenue. Scary situation when these guys start to come up with "creative" ways to make up the difference. Knight will look tame at that point.

Thu, 08/09/2012 - 15:39 | 2691980 Manthong
Manthong's picture

I don't know , man..

I'm getting the feeling that the digital printing press has been displaced by the replicator that has no need for digital book entries.

Thu, 08/09/2012 - 15:37 | 2691974 Bunga Bunga
Bunga Bunga's picture

Don't worry about low volume. There is not enough supply. Stocks are sold out.

Thu, 08/09/2012 - 15:39 | 2691978 FromGaltsGulch
FromGaltsGulch's picture

Well it's 3:35 ET and the NYSE volume has finally surpassed the volume from the 1:00PM close  of July 3rd..way to go NYSE...

Thu, 08/09/2012 - 15:39 | 2691979 Getting Old Sucks
Getting Old Sucks's picture

CNBS is pure propaganda.  It's the real Muppet Show.

Thu, 08/09/2012 - 15:44 | 2691998 Pladizow
Pladizow's picture

That would be a great skit - if someone could overlay the Muppet Show theme music over CNBC's Cramer!

http://www.youtube.com/watch?v=UlXMboPnETU

Thu, 08/09/2012 - 15:49 | 2692019 Getting Old Sucks
Getting Old Sucks's picture

LOL, Becky can put her arm up his ass make him scream BOOYA! 

Thu, 08/09/2012 - 16:18 | 2692114 Pladizow
Pladizow's picture

Screaming BOOYA implies Cramer would feel Becky's arm!

Thu, 08/09/2012 - 16:52 | 2692205 alfred b.
alfred b.'s picture

 

    If it were not for reporting data, cnbs would have NO viewers!

 

Thu, 08/09/2012 - 17:25 | 2692258 johnjkiii
johnjkiii's picture

Tell me when the 'I Love Lucy' reruns begin

Thu, 08/09/2012 - 15:39 | 2691982 sessinpo
sessinpo's picture

Already called this one 4 days ago.

2681280

"Yes, this was a setup. Not being talked about is the fact that KCG had $7.5B in cash as of their last quarterly statement in June 2012. They could have handled the loss. This was engineered to remove competition and control an avenue of the markets. Interactive Brokers needs to take caution (IBKR)."

 

2679907

"Watching them cannibalize each other should be interesting over the next few years."

Thu, 08/09/2012 - 15:39 | 2691984 buzzsaw99
buzzsaw99's picture

the lower the volume the higher the stock market

Thu, 08/09/2012 - 15:43 | 2691999 LoneStarHog
LoneStarHog's picture

Yeah! ... It is called a Hammerhead Stall and we all know what happens when gravity becomes stronger than lift.

Thu, 08/09/2012 - 17:00 | 2692216 slewie the pi-rat
slewie the pi-rat's picture

you fall into the shark-infested waters for lunch?

i think the sharks like bear a'la fresca;  thery've been having it for lunch all week...

whenever angela strolls back onto the bourse we'll get a bit more drama, but the banksters will take every point they get on the indices b4 that fateful day

what is angela thinking?

slewie intel indicates some pretty subtle indications to figure, here

  1. Merkel Government Embroiled in Gay Rights Debate
  2. Angela Merkel spotted changing swimwear in public

and check this out: SPIEGEL ONLINE Poll Barometer - SPIEGEL ONLINE where we see:

  • [even the polls look phoney, w/ the CDU-CSU perfectly flatlined for a month]
  • (and note that unlike the crappy greek polls, this one has a built-in CoalitionCalculator and slewie has ordered the home model from bavarianBenz)
  • {finally, there are not enuf pirates yet;  duh}
Thu, 08/09/2012 - 15:49 | 2692027 BlandJoe24
BlandJoe24's picture

why?

 

Thu, 08/09/2012 - 15:40 | 2691985 LoneStarHog
LoneStarHog's picture

Self-Cannibalization? ... Those last few bites are going to be a real bitch to accomplish.

Thu, 08/09/2012 - 15:40 | 2691987 Dollar Bill Hiccup
Dollar Bill Hiccup's picture

One share to bid them all, One share to find them,
One share to short them all and in the darkness bind them

Thu, 08/09/2012 - 15:41 | 2691991 Cognitive Dissonance
Cognitive Dissonance's picture

I hear it tastes like chicken.

Thu, 08/09/2012 - 15:41 | 2691994 Itch
Itch's picture

It would be interesting to identify whether there were any "stand-out" parties involved in buying everything the Knight Algo was selling. When you think about it, it would be the perfect crime in today’s uber-complex market, i.e. some algo conveniently goes berserk, and another algo in another location conveniently buys everything it sells...then the company files for bankruptcy, several hundred million go missing with no one looking for it, and no one is prosecuted because it was an “accident”.

Thu, 08/09/2012 - 15:57 | 2692054 pods
pods's picture

Well GS actually did say their algo could be used to manipulate the market in unfair ways if stolen.

All algos are equal, but some are more equal than others.

pods

Thu, 08/09/2012 - 17:09 | 2692234 tenpanhandle
tenpanhandle's picture

unfair in their case meant - someone else doing it.

Thu, 08/09/2012 - 22:37 | 2692924 MinnesotaMD
MinnesotaMD's picture

I agree. Maybe it was no accident. Maybe they were using Whack a mole algo to destroy KCG for someone's profit. Talk about corporate espionage reaching new levels. Who wrote the algo program? What prompted it to cannibalize KCG? I would love to get full post-mortem.

Thu, 08/09/2012 - 15:45 | 2692011 adr
adr's picture

The market seems to have broken at 2:30. I guess the Algo goal was to end the day unchanged.

The Dow had a nice triple top to almost the exact same price, and then fell 70 points, made the 70 points back and started going directionless for the next hour.

What algo driven madness will we find this time.

Thu, 08/09/2012 - 15:47 | 2692015 azzhatter
azzhatter's picture

I have $7K left in the market out of my $850K cash net worth. Haven't traded a stock in 14 months. Never felt better, couldn't care less what assholes like Cramer, Pisani, and the enumerous jackoffs paraded on TV have to say. I cashed in some 401K money early and paid a penalty 2 years ago to buy more metals. Fuck You Ben Bernanke

Thu, 08/09/2012 - 15:53 | 2692038 PeaceLover
PeaceLover's picture

Nice did they 1099 you on the gold?

Thu, 08/09/2012 - 15:59 | 2692063 Getting Old Sucks
Getting Old Sucks's picture

What Gold?

Thu, 08/09/2012 - 17:54 | 2692312 OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

Stock Market Reverse Singularity: 1 Share of stock left, and BenB can mint 1 $10 Trillion Platinum Dollar Coin to buy it with.

Thu, 08/09/2012 - 16:07 | 2692084 Getting Old Sucks
Getting Old Sucks's picture

Cashed in half of IRA last year and will finish this year before taxes go up.  Cash is in 6 different banks, spread it around, don't go over that 250k mark and watch they don't lower it back to 100k.  Look for small solid banks.  If in NY area, Take a look at Ridgewood Savings on Bank Rate.

http://www.bankrate.com/rates/safe-sound/bank-ratings.aspx?t=cb&i=ridgewood+savings&r=&a=&c=&s=&z=

Click on MEMO and STATEMENT to see the figures.  I have dough in 4 of the big banks and a credit union.  Largest deposit in Ridgewood.

Thu, 08/09/2012 - 16:09 | 2692088 SKY85hawk
SKY85hawk's picture

Have you considered converting some 401K money to a Roth-IRA?

Depending on your other income, some or all of the taxes would be consumed by your deductibles.

I use last year's turbo-tax to estimate the cost of a partial conversion in this year.

That money can then be steered towards additional tax free income!

 

Thu, 08/09/2012 - 15:48 | 2692020 chancee
chancee's picture

Must.  Close.  Above.   1400.

Thu, 08/09/2012 - 15:52 | 2692036 Getting Old Sucks
Getting Old Sucks's picture

It's there, on schedule.

Thu, 08/09/2012 - 15:52 | 2692039 Dr. Engali
Dr. Engali's picture

After being in the business so long it's almost surreal watching the system slowly kill itself off.

Thu, 08/09/2012 - 15:58 | 2692059 rottor
rottor's picture

HFT solution is simple, it is CAPTCHA

 

add captcha for every order entered .. and the volume will be back

Thu, 08/09/2012 - 16:22 | 2692124 Zola
Zola's picture

One Printer to rule them all,
One Printer to confuse them
One Printer to bankrupt them all
and in poverty bind them.

Thu, 08/09/2012 - 16:28 | 2692144 rsnoble
rsnoble's picture

Well I guess we better hurry up and give Social Security to Wall Street and initiate forced employer stock purchases as well.

Lord.....just fucking crash already.

Thu, 08/09/2012 - 16:28 | 2692145 Meesohaawnee
Meesohaawnee's picture

Yesterday Bubblevision had a "story" about how SPY1400 "was the most hated rally on Wall Street" Hmm. While i have little time to spend everyday reading how CNBS urinates down its leg daily i could only guess. The real story was some "bull" standing all cocky (maybe it was robo?) telling all to just run with it , that anyone so negative "must be reading too much zerohedge". I kid you not. Whats so bothersome to me is IQs of 2 cant understand. Its not the algos in my world. The rally is hated because anyone with a brain knows its fake,fraudulent and on mom and pops dime. Its really just more Wall Street bailouts at the expense of the rest.  I just cant understand whats so difficult to understand about that??!!

 

Thu, 08/09/2012 - 16:32 | 2692156 bagehot99
bagehot99's picture

Mucho hi-quality stock tied up in long accounts, earning divvies. They won't know what hit them.

Wonders if retail sell orders will get drowned out by the algo sells when the journey over the cliff begins....

Thu, 08/09/2012 - 22:30 | 2692913 MinnesotaMD
MinnesotaMD's picture

Algo sells are first in line. They'll unload like Knight, in milliseconds while you are still trying to log into Charles Schwab or TDA like me.

Thu, 08/09/2012 - 16:49 | 2692198 mammoth mo
mammoth mo's picture

Let's see fundamentals don't matter.  Earnings don't matter.  Outlook doesn't matter.  Cash on hand doesn't matter.  Sector outlook doesn't matter.  Recession doesn't matter.

It's clear there is no spoon.

 

 

Thu, 08/09/2012 - 17:28 | 2692262 Quinvarius
Quinvarius's picture

Why doubt that doing a triple on the money supply will do a triple on the stock market?  I was a hyper nflationist when they started the printing.  I still am.  I am telling you, YOU CANNOT HAVE A BANKING PANIC IF THE BANKS GET FREE MONEY.  Selloffs don't happen because of fundamentals.  They happen because of the macro environment.  Our macro-envirment is continued free money to banks at zero percent and lies about secret bailouts.  No banking panic, no selloff.

I hate to sound like Robo.  But he is right about exactly one thing.  This stock market is bullish until the Fed DECIDES to kill the banks.  The Treasury market is bullish until the Fed DECIDES to stop propping it up.

I don't like it.  I know it ends up in inflation.  If you want out, the absolute only thing you can do is buy gold.  That is it.  We don't have a market.  We have central planning and printing until hyper-inflation resets this mess. 

Thu, 08/09/2012 - 18:35 | 2692283 Duke Dog
Duke Dog's picture

LOL, how in the fuke can you call the last 12 years in the equity market "BULLISH"? Granted, being short equities during most of that time would have ruined you due to margin fees, but being long during that entire time sure as hell wouldn't have been profitable if you had been proportionaly weighted in NASDAQ.

Thu, 08/09/2012 - 19:08 | 2692477 chump666
chump666's picture

short but excellent post ZH

This market s being eaten alive from within.

Thu, 08/09/2012 - 19:10 | 2692481 toomanyfakecons...
toomanyfakeconservatives's picture

Scary... they'd better pull the trigger on the MASS ARREST soon... http://tinyurl.com/cd5cyjo/

Thu, 08/09/2012 - 20:01 | 2692595 Ignorance is bliss
Ignorance is bliss's picture

I stopped trading about a year ago due to the collusion of the stock market. Fun while it lasted. I got rid of my 401K in 2010. I only wish I had broken it out over several years rather then swallowing the tax pill all at once. Better to be a couple years early then 1 day late.

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