High Frequency Trading

High Frequency Trading
smartknowledgeu's picture

Currently, there is massive negativity surrounding gold and silver and in particular, gold and silver mining stocks. At times like this, when gold and silver have taken a fairly brutal hit in a condensed period of time thanks to low daily trading volumes both in PM futures and PM stock markets that make it very easy for the banking cartel to manipulate them, it can be difficult not to sell out of everything and run for the hills if one allows emotions to dictate one’s decisions (always a bad move).

America's Most Important Slidedeck

Every quarter as part of its refunding announcement, the Office of Debt Management together with the all important Treasury Borrowing Advisory Committee, which as noted previously is basically Wall Street's conduit telling the Treasury what to do, releases its Fiscal Quarterly Report which is for all intents and purposes the most important presentation of any 3 month period, containing not only 70 slides worth of critical charts about the fiscal status of the country, America's debt issuance, its funding needs, the structure of the Treasury portfolio, but more importantly what future debt supply and demand needs look like, as well as various sundry topics which will shape the debate between Wall Street and Treasury execs for the next 3 months: some of the fascinating topics touched upon are fixed income ETFs, algo trading in Treasurys, and finally the implications of High Frequency trading - a topic which has finally made it to the highest levels of executive discussion. It is presented in its entirety below (in a non-click bait fashion as we respect readers' intelligence), although we find the following statement absolutely priceless: "Anticipation of central bank behavior has become a significant driver of market sentiment." This is coming from the banks and Treasury. Q.E.D.

ilene's picture

Market Forces

Stock World Weekly visits w/ Mark Hanna, Washington's Blog, Allan Trends, Lee Adler and Pharmboy. 

Fasten Your Seatbelts: High Frequency Trading Is Coming To The Treasury Market

In what may be the gray swan indication that all hell is about to break loose, we read that one of the world's largest hedge funds, British Man Group with $58 billion in AUM, is about to launch High Frequency Trading - the same high volume churning, sub-pennying, liquidity extracting, stub quoting and quote stuffing parasite that crashes the equity, and as of recently the FX and commodity markets, into that most sacred of markets: US Treasurys. The official spin: "The Man Systematic Fixed Income fund, yet to be launched, will try to identify and profit from dislocations in liquid government bond markets." What this really means is that the final frontier of market rationality is about to be invaded by artificial momentum generating algorithms, who couldn't care less about fundamentals, and whose propensity to crash and burn at the worst of times, may end up costing the Fed all those tens of trillions it has spent to keep the Treasury market calm, cool, collected, and largely devoid of any volatility and MOVEment. But all that is about to change: "The unit is run by Sandy Rattray, who co-developed the VIX. VIX volatility index, also known as the "fear index", widely used to measure investors' perception of risk." As a reminder, the VIX index is only relevant when there are surges in volatility, something which we are confident Mr. Rattray will no doubt bring to Treasury trading momentarily. 

The Porn Addicts Formerly Known As The SEC Take Their Vendetta With Egan-Jones To The Next Level

This is so pathetic, it is beyond words:

  • US SEC EXPECETED TO VOTE ON POSSIBLE CHARGES AGAINST RATING FIRM EGAN JONES ON THURSDAY - RTRS
  • POSSIBLE CHARGES STEM FROM ALLEGED WILFUL MISTATEMENTS ON EGAN JONES' REGULATORY APPLICATION WITH SEC - RTRS

If nothing else, it explains the recent WSJ hit piece against Egan, just so it can make the public record in the SEC documentation. In other news, this will surely teach any other rating agency to downgrade the US not once (ahead of everyone else), but twice. In the meantime, the SEC still has NO IDEA what liquidity is, and continues to refuse to take ANY action against High Frequency Trading, to press criminal charges against ANY banker, or for that matter, to do anything that may jeopardize its staffers future careers as 7th assistant general council at assorted bailed out Wall Street firms. Now we wait to hear news that Fitch and Moody's will receive a cash bonus from the SEC for not downgrading the US properly filing their regulatory applications. And now back to midget porn.

Why The Market Is Slowly Dying

From Morgan Stanley: "In our mind, many of the approaches to algorithmic execution were developed in an environment that is substantially, structurally different from today’s environment. In particular, the early part of the last decade saw households as significant natural liquidity providers as they sold their single stock positions over time to exchange them for institutionally managed products... While the time horizon over which liquidity is provided can range from microseconds to months, it is particularly shorter-term liquidity provisioning that has become more common." Translation: as retail investors retrench more and more, which they will due to previously discussed secular themes as well as demographics, and HFT becomes and ever more dominant force, which it has no choice but to, liquidity and investment horizons will get ever shorter and shorter and shorter, until eventually by simple limit expansion, they hit zero, or some investing singularity, for those who are thought experiment inclined. That is when the currently unsustainable course of market de-evolution will, to use a symbolic 100 year anniversary allegory, finally hit the iceberg head one one final time.

Was The SEC "Explanation" Of The Flash Crash Maliciously Fabricated Or Completely Flawed Out Of Plain Incompetence?

Regular readers know that since the beginning, Zero Hedge has been vehemently opposed to the official SEC explanation of the chain of events that brought upon the Flash Crash of May 6, 2010, in which the Dow Jones Industrial Average lost 1000 points in a span of seconds, and during which billions were lost when stop loss orders were triggered catching hapless victims unaware (unless of course, one had a stop loss well beyond a reasonable interval of 20%, in which case the trades were simply DKed). It is no secret that one of the main reasons why the retail investor has since declared a boycott of capital markets, which lasts to this day, and manifests itself in hundreds of billions pulled out of equities and deposited into bonds and hard assets, has been precisely the SEC's unwillingness to probe into this still open issue, and not only come up with a reasonable and accurate explanation for what truly happened, but hold anyone responsible for the biggest market crash in history in absolute terms. Instead, the SEC, naively has been pushing forth a ridiculous story that the entire market crash was the doing of one small mutual fund: Waddell and Reed, and its 75,000 E-mini trade, which initially was opposed to being scapegoated, but subsequently went oddly radio silent. Well, if they didn't mind shouldering the blame, the SEC was likely right, most would say. However, as virtually always happens, most would be wrong. Over the past few days, Nanex has one again, without any assistance from the regulators or any third parties, managed to unravel a critical component of the entire 104 page SEC "findings" which as is now known, indemnified all forms of high frequency trading (even as subsequently it was found, again by Nanex, that it was precisely HFT quote churning that was the primary, if not sole, reason for the catastrophic chain of events) with a finding so profound which in turn discredits the entire analytical framework of the SEC report, and makes it null and void.... The only open question is whether the SEC, which certainly co-opted the authors of the paper to reach the desired conclusion, real facts be damned, acted out of malice and purposefully fabricated the data knowing very well the evidence does not support the conclusion, or, just as bad, was the entire supporting cast and crew so glaringly incompetent they did not understand what they were looking at in the first place.

Guest Post: Temporary Backwardation: The Path Forward From 2008

The March silver futures contract first entered backwardation on Mar 9 and with a few zigs and zags has not only remained there but has gone deeper and deeper in. The April gold future just entered backwardation today. We shall see what the coming days bring for the April gold future, but the fact that backwardation has occurred at all is significant. The fact that it is now a “normal” occurrence since fall 2008 indicates a deep pathology. Backwardation means that anyone who has gold or silver could simultaneously sell the metal and buy futures contracts to recover their position, and make a profit. The market is tight. The metal is out there, but obviously those who have it in an unencumbered form are not able (retail) or willing (others?) to take this backwardation bait.

Does High Frequency Trading Add To Market Liquidity? Vote Here

At this point it is safe to say that the world has far greater issues than simple trade scalping and a broken market structure courtesy of the few robotic algorithms that still trade, even compared to three years ago. Back than it was far less obvious that the global ponzi was on the edge every day, and that only coordinated efforts such as today's one-two punch by Jamie Dimon and his subordinates at the FRBNY could mask the fact that the stress test was never actually needed, as any time banks suffer a 20% drop the Fed would simply proceed to the New QE (pass go, and give the $200 direct to the banks). And yet, years after the flash crash, pervasive central planning notwithstanding, the High Freaks are still around, subpennying, stub quoting, channel stuffing and otherwise making a total mockery of the retail investor (at least the one who is dumb enough to put in a limit order and not split up a big order into many tiny ones). Which is simply stunning - by now, even if reading just a fraction of the hundreds of posts on the topic on this site alone of which this one may be the most encompassing, one would think that everyone, and that even includes the SEC, would be well aware of the borderline criminal, and certainly liquidity destroying (although volume spiking via churn), product that is High Frequency Trading. Apparently not.

Guest Post: Money from Nothing - A Primer On Fake Wealth Creation And Its Implications (Part 1)

What is fraud except creating “value” from nothing and passing it off as something? Frauds interlink and grow upon each other. Our debt-based money system serves as the fraud foundation. In our debt-based money system, debt must grow in order to create money. Therefore, there is no way to pay off aggregate debt with available money. More money must be lent into the system to make the payments for old debts. This causes overall debt to expand as new money for actual people (vs. banks) always arrives at interest and compounds exponentially. This process is called financialization. Financialization: The process of making money from nothing in which debt (i.e. poverty, lack) is paradoxically considered an asset (i.e. wealth, gain). In current financialized economies “wealth expansion” comes from the parasitic taxation of productivity in the form of interest on fiat lending. This interest over time consumes a greater and greater share of resources, assets, labor, and livelihood until nothing is left.