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Posts Tagged ‘HFT’

Libya Next?

Courtesy of Tyler Durden

The one country landlocked between Tunisia and Egypt has so far been oddly silent. Not so much any more. Al Jazeera reports that the Libyan government has imposed a state of emergency for "fear of demonstrations and rallies" comparable to those in Tunisia and Egypt. And ranked 17 in the world for oil production (and 9th in proven reserves), this is one that crude HFT algos may want to keep an eye on.

From Al Jazeera, google translated:

Libyan sources familiar with the island revealed that a state of alert security prevail in the east of the Libyan cities, confirmed that elements of the police and support central and distributed to all government buildings.

The sources said that the Libyan government imposed a state of emergency and security alert since the outbreak of the revolution, Tunisia, for fear of demonstrations and rallies similar in Libyan cities.

The sources of the existence of orders to stop any gathering, whether in government or outside.

Under these instructions – Sources confirm – The Libyan government later abolished the league matches of Libyan Football Association which was to be organized during the month.

In conjunction with the ongoing events in neighboring Egypt, the forces imposed from the central support and the police since yesterday evening checkpoints in several major regions in both the white and Benghazi and Derna and Tobruk.

These enhancements come at a time when Libya is following with interest the Libyan street events taking place in Egypt over the satellite news channels deployed in all the cafes and shops in cities of Libya.

He said the Libyans before the popular revolution that swept cities in Tunisia and has succeeded in toppling President Zine El Abidine Ben Ali, after 23 years of rule.

It is feared the Libyan regime of infection along the Tunisian and Egyptian into Libya, especially in light of similar conditions and problems such as poor living conditions and the absence of freedoms


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Exclusive: Presenting The Flash Crashes Of 2010 – Part 1

Exclusive: Presenting The Flash Crashes Of 2010 – Part 1

Courtesy of Tyler Durden

high frequency tradingIn an exclusive collaboration between Nanex and Zero Hedge, we are pleased to present to our readers the first part of a multi-series project that will demonstrate the flash crashes of 2010, and subsequently, of 2009 and 2008. The concern is that since the number of mini crashes, precipitated in most part by HFT algorithms gone wild, is simply staggering, it is impossible to present all the individual events in one presentation due to size limitations. The reason – there have been 549 "flash crash" events in 2010 to date alone! We dare anyone at the SEC to go through this list and look anyone in the eye and tell them that i) the market is not broken and ii) that High Frequency Trading is not a major scourge to proper and efficiently operating markets. And while we do not want to take away from the recent uproar at ETFs, courtesy of the Kauffman foundation (and its chairman who as we presented earlier has a rather sizable conflict of interest in DST Systems, Inc) none of the presented 549 crashes are ETFs implicated: this is (mostly) all HFT, baby, all the way.

Without further ado, we present the first part of our joint presentation: the mini flash crashes of Q1, all 112 of them. As there are 64 work days between 1/1/2010 and 3/31/2010 (excluding holidays) this amounts to 1.75 mini crashes per day (and wait until you see Q2). And this is a market that the SEC would like to have you believe is perfectly operational…

The crashes are presented in chronological order.

We urge readers to distribute this report to friends and relatives, as we hope that people can finally understand what a complete and broken scam the US stock market is. That said, we expressly prohibit the creation of "per click" slideshow decks out of the underlying data.

The Flash Crashes of 2010 – Q1 (pdf)


Q1 Flash Crashes

Attachment Size
Q1 Flash Crashes.pdf 1.24 MB

Picture courtesy of Jr. Deputy Accountant


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70% Of All Stock Market Trades Are Held for An Average of 11 SECONDS

70% Of All Stock Market Trades Are Held for An Average of 11 SECONDS

Courtesy of Washington’s Blog

The Fourteenth Banker writes today:

In the stock market, program trading dominates volume. I heard recently that 70% of trade positions are held for an average of 11 seconds.

He’s correct.

As the New York Times dealbook noted in May:

These are short-term bets. Very short. The founder of Tradebot, in Kansas City, Mo., told students in 2008 that his firm typically held stocks for 11 seconds. Tradebot, one of the biggest high-frequency traders around, had not had a losing day in four years, he said

Similarly, FT’s Martin Wheatley pointed out last month:

I know of one HFT firm operated out of the west coast of the US that boasts its average holding period for US equities is 11 seconds

And market analyst Peter Cohan writes at AOL’s Daily Finance:

70% of trading volume on the major exchanges is conducted by high-frequency traders who hold a stock for an average of 11 seconds.

The fact that the vast majority of stock market trades are held for 11 seconds shows that the stock market is not a real market with real traders governed by the law of supply and demand, and with no real price discovery.

But as Tyler Durden points out, alot can happen in 11 seconds when the players are high-powered computers:

07-29-10 BATS "Flag Repeater". 15,000 quotes in 11 seconds, dropping the ASK price 1 penny each quote from $9.36 to $8.58 and back up again.


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Jon Stewart On The Humor In The High Frequency Signing Scandal

Jon Stewart On The Humor In The High Frequency Signing Scandal

Courtesy of Tyler Durden

Just because every radioactive cloud has a humorous lining, here is how the event that will take home prices another major leg lower is made funny, thanks to Jon Stewart.

The Daily Show With Jon Stewart Mon – Thurs 11p / 10c
Foreclosure Crisis
www.thedailyshow.com
Daily Show Full Episodes Political Humor Rally to Restore Sanity

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A Visual Case Study In HFT Accumulation Perfection

A Visual Case Study In HFT Accumulation Perfection

Courtesy of Zero Hedge 

Presenting the chart of AAPL: the stock, which has surged from $240 to $292 in less than a month, has done so without violating the 2 Std Dev upward channel once! In other words, nobody but programs which are designed to trade within the traditional technical upward channel of +/- 2 Std Devs are doing the trading in AAPL. And now that your confidence in a rational, non-binary market has returned, please buy, buy, buy. And pray none of these machines has a short circuit, and/or nobody decides to use the Stuxnet virus on the NYSE.

As for those carbon based lifeforms who are looking at this chart and are concerned by the increasing parabolic blowoff, which soon mean the stock will have to travel backward in time to rise as fast, one may say they have a good reason to be quite terrified.

 


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Rosenberg Joins Anti-HFT Crew: Notes Massive Equity Outflows, Blames Churning, No-Volume Melt Up On HFT

Rosenberg Joins Anti-HFT Crew: Notes Massive Equity Outflows, Blames Churning, No-Volume Melt Up On HFT

Courtesy of Tyler Durden of Zero Hedge 

One more man awake to the farce that are stocks. Although this being a man as realistic as David, it is not much of a conversion. We can only hope that by 2099 Mary Schapiro’s just as blatantly incompetent successor will finally dare to take on the Wall Street lobby and bring some normalcy to capital market topology, instead of nickel and diming micro prop shops which do nothing worse than what the biggest Supplementary Liquidity Providers do on a daily basis. Speaking of, it has been a while since Irene Aldridge was on CNBC defending the practice of small- and medium-investors scalping.

From Breakfast with Rosie (Gluskin Sheff)

Those who have continued to believe that the boomer demand for yield was a fad may have to go back to the drawing board because week after week, and month after month, all the data show that households are embarking on a deliberate move to redress their underweight in bonds and overweight in equities as it pertains to their desired asset allocation. So yet again, the ICI numbers showed that last week, bond funds took in a net $5.73 billion inflow while equity funds posed a net redemption of $1.1 billion (on top of a $9.7bln outflow the week before). Equities have not recorded a positive inflow for one week since early May! So it goes without saying that whoever is driving this market higher is not where the wealth and savings are in this society as much as the high-frequency traders, and rest assured, these guys move in both directions. 


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Why Nobody Trades During Regular Hours Any More (And How Prop Funds Just Stop Trading When Volatility Spikes)

Why Nobody Trades During Regular Hours Any More (And How Prop Funds Just Stop Trading When Volatility Spikes)

HFTCourtesy of Tyler Durden at Zero Hedge 

For those who follow our periodic updates on intraday stock volume, today’s article by the Wall Street Journal which focuses on the dramatic decline in activity during regular working hours will come as no surprise. In a piece looking at prop trading shop Briargate (oh so witty anagram of arbitrage), founded by several former NYSE specialists, we learn that at least one firm (and likely many more) now no longer does any trading during the hours of 11 to 2. As this creates a feedback loop of inactivity, pretty soon the core of daily stock market activity will merely be the half an hour of action at the open, and the dark pool-ETF-open exchange rebalance at the very close, with everything inbetween deemed obsolete.

Of course, what this will do, is create even more volatility in trading, force an even greater decline in stock trading volumes (and pain for Wall Street firms), and a further divergence between stocks and fundamentals, as momentum trading gains an even more prominent role in determine "price discovery."

From the WSJ:

On the day the "flash crash" bludgeoned the stock market and chaos swept over the floor of the New York Stock Exchange, the founders of Briargate Trading were at the movies.

Rick Oscher and Steven Rubinstein weren’t playing hooky. Briargate, a proprietary-trading firm that the two former NYSE floor "specialist" traders started in 2008, is mostly active at the stock market’s open and close.

In between, when market activity typically drops, the Wall Street veterans play tennis in Central Park, take leisurely lunches, visit their children’s schools and work out at the gym. Dress shoes have been replaced with flip-flops, slacks with cargo shorts. Once during market hours, they walked about five miles and crossed the Brooklyn Bridge to try Grimaldi’s pizza.

"We actually planned on working a full day," says Mr. Oscher, wearing a white polo shirt and blue-plaid shorts. "But from 11 to 2, the markets are pretty quiet—what’s the point? As a specialist, you have to stand in your spot all day and we did that for 20 years."

Briargate—an anagram of "arbitrage"—isn’t the only firm taking an extended recess during the 6½-hour U.S. trading day. Trading has become increasingly concentrated in the


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The Eerie Implications of Market Volume and Mutual Fund Flows

The Eerie Implications of Market Volume and Mutual Fund Flows 

Courtesy of Doug Short 

Once upon a time, market volume, in combination with price, was a useful indicator. Or make that indicators (plural), including Rate of Change, Volume Oscillator, On Balance Volume, Price and Volume Trend, Accumulation Distribution, Chaikin Oscillator, Money Flow Indicator, etc.

Even so, S&P 500 volume has been falling since early May with no sign yet of a post-summer seasonal increase. Of course, we’re still in the holiday shortened week following Labor Day. But look at the 2009 volume pattern on the chart. Where was the volume to confirm the market advance after a choppy October?

A recent WSJ article, SEC Is Looking at ‘Quote Stuffing’, mentioned in passing that high-frequency trading (HFT) accounts for about two-thirds of the market’s volume. 

Click to View
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I don’t know of a single comprehensive guide to what the retail investor is really up to, but the impression I get is that the equities are not high on the list of where to park money. The next two charts, covering the same timeframe, are based on data in a PDF file I downloaded from the Investment Company Institute. Since the chart above is a broad U.S. Index, the first chart below only measures fund flows for domestic equities. 

Click to View
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Click to View
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Naturally these charts are open to various interpretations. Bond Bubble Cassandras will see the last chart as a confirmation of their prophecy. Cheerleaders of ETFs and other alternatives to mutual funds may be inclined to disregard both fund-flow charts as largely irrelevant.

I used the wood "eerie" in the title to this piece primarily to convey my impression of a vague sense of disquiet about markets and the economy. Are retail investors sitting on the sidelines or scurrying to bonds because of anxiety about the market? If so, should we take this as a contrary indicator?

Here’s a more compelling question: If two-thirds or more of daily volume is a function of high-frequency trading, what are the implications for index prices over the long haul?

A year has passed since I posted some charts illustrating the incredible ratio of S&P 500 volume devoted to five financial stocks (see Gaming the Market). Today’s game is no doubt different…
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The Other 44 Percent Is Really Bernanke’s Jerk Off Hand

Why is market volume so low? Jr. Dep. has an interesting analogy. In theory, 56% of the volume is controlled by Bots, and the other 44% is Bernanke alone (but read the CNBC article for a contrary view). – Ilene  

The Other 44 Percent Is Really Bernanke’s Jerk Off Hand

Courtesy of Jr. Deputy Accountant 

As I already clearly stated, there are no investors left, just HFT robots getting jerked off by the Fed. If I wanted to see that I’d cash my paycheck in dollar bills and head to the Lusty Lady.

CNBC, however, needs to point out that volume is light. Don’t worry, that recovery should be here any day now, just keep jerking…

CNBC:

Volume was lighter than normal for August, and so far it is also lighter than normal for September. How much lighter? In the first 5 trading days, September consolidated trading volume at the NYSE was down 31 percent compared to the same period last year. August volume was also 31 percent below the same period last year.

Why? Look at who does the trading:

1 ) High frequency traders are 56 percent of all trades. This includes proprietary trading shops, market makers, and high-frequency trading hedge funds, according to Tabb Group. But as volume and volatility drops, this group gets less opportunity to profit from the statistical arbitrage trades most of them do.

You can almost hear the fapfapfap every time you look at a damn chart, careful not to get any in your eye. 


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Meredith Whitney Sees A 10% Drop In Wall Street Headcount And “Dramatic” Declines In Payouts In 18 Months

Meredith Whitney Sees A 10% Drop In Wall Street Headcount And "Dramatic" Declines In Payouts In 18 Months

Courtesy of Tyler Durden

And you were wondering why the SEC and certain politicians with extensive connections to the financial services lobby are starting to stir now that it is common knowledge that every single hedge fund and trading desk’s woes are a function of HFT run amok (which is exaggerated BS of course, but from Wall Street’s darling, HFT has now become the one thing everyone loves to hate, and blame their own underperformance on).

And as we suspected, there is a far more structural issue underlying the recent faux-move to restore confidence in markets, namely imminent pain for Wall Street headcounts… and bottom lines. According to Meredith Whitney, who had been relatively quite in recent weeks, Wall Street faces the departure of about 80,000 staffers, or 10% of all, within 18 months, not to mention a major drop in Wall Street compensation. The reason is the same as the one we pointed out earlier: slowing revenue growth, primarily due to the complete collapse in trading volumes, as computers have used their binary elbows to push everyone else out of the markets, and with Wall Street’s primary revenue model now being exclusively reliant on trading, this is equivalent to a partial extinction event as many trading firms will have to close. This also means that the New York City economy is facing another major solvency crisis as tax receipts are sure to plummet.

More from Bloomberg, citing Whitney:

“The key product drivers of Wall Street’s revenues and profits over the past decade have been in a structural decline over the past three years,” Whitney said in the report. “2010 marks the first year in many in which Wall Street-centric firms will go through structural changes.”

Barclays Plc, Credit Suisse Group AG and Royal Bank of Scotland Group Plc may lead a slowdown in hiring in Europe as the fixed-income trading boom fizzles out, recruiters said last month. Barclays Capital’s income from trading bonds and commodities fell 40 percent in the first half amid the sovereign debt crisis. Fixed-income, currencies and commodities trading was the biggest revenue contributor at investment banks from Deutsche Bank AG to Goldman Sachs Group Inc.

While regulatory reform, including higher capital requirements, will force some of these shifts, there will


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Zero Hedge

I'm Not Buying It - Not The Wall Street Rip, Nor The Keynesian Rap

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Submitted by David Stockman via Contra Corner blog,

First comes production. Then comes income. Spending and savings follow. All the rest is debt…….unless you believe in a magic Keynesian ether called “aggregate demand” and a blatant stab-in-the-dark called “potential GDP”.

I don’t.  So let’s start with a pretty startling contrast between two bellwether data trends since the pre-crisis peak in late 2007—debt versus production.

Not surprisingly, we have racked up a ...



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Phil's Favorites

Phil on Oil, Russia, the Fed, and the Trade of the Year

Must see: Phil visits with Money Talk's Kim Parlee on Business News Network. In this great interview, Phil talks about his target price range for oil and presents an options trade idea that he is calling the "Trade of 2015."    

?

Click on the links:

Segment 1 (Oil, Russia, and the Fed) : http://www.bnn.ca/Shows/Money-Talk.aspx?vid=515921

Segment 2 (Trade of the Year 2015) : http://www.bnn.ca/Shows/Money-Talk.aspx?vid=516607

In segment 2, Phil introduces the trade of the year for 2015 and discusses the s...



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All About Trends

Mid-Day Update

Reminder: David is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Insider Scoop

Oppenheimer Initiates Coverage On Twitter, Believes Stock Is Appropriately Priced At Current Levels

Courtesy of Benzinga.

Analysts at Oppenheimer initiated coverage of Twitter Inc (NYSE: TWTR) Friday by issuing a Perform rating and setting a $36.00 price target. Twitter is a global social networking platform with over 280 million active users.

The Numbers

While Oppenheimer analysts fully recognize the strength in Twitter as a company, they believe that Twitter’s stock is appropriately priced at current levels. “While TWTR is the best Internet platform for real-time content discovery, we believe that the stock’s current valuation of 10x 2015E sales, a 52% premium to peers, fully reflects future prospects based on current growth rates.”

Insider Dumping

Between November and December 2014, Twitter insiders have sold more than $...



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Chart School

Relief Bounce in Markets

Courtesy of Declan.

Those who took advantage of markets at Fib levels were rewarded.  However, this looked more a 'dead cat' style bounce than a genuine bottom forming low.  This can of course change, and one thing I will want to see is narrow action near today's high. Volume was a little light, but with Christmas fast approaching I would expect this trend to continue.

The S&P inched above 2,009, but I would like to see any subsequent weakness hold the 38.2% Fib level at 1,989.


The Nasdaq offered itself more as a support bounce, with a picture perfect play off its 38.2% Fib level. Unlike the S&P, volume did climb in confirmed accumulation. The next upside c...

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Digital Currencies

Chart o' the Day: Don't "Invest" in Stupid Sh*t

Joshua commented on the QZ article I posted a couple days ago and perfectly summarized the take-home message into an Investing Lesson. 

Chart o’ the Day: Don’t “Invest” in Stupid Sh*t

Courtesy of 

The chart above comes from Matt Phillips at Quartz and is a good reminder of why you shouldn’t invest in s...



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OpTrader

Swing trading portfolio - week of December 15th, 2014

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Sabrient

Sector Detector: Energy sector rains on bulls' parade, but skies may clear soon

Reminder: Sabrient is available to chat with Members, comments are found below each post.

Courtesy of Scott Martindale of Sabrient Systems and Gradient Analytics

Stocks have needed a reason to take a breather and pull back in this long-standing ultra-bullish climate, with strong economic data and seasonality providing impressive tailwinds -- and plummeting oil prices certainly have given it to them. But this minor pullback was fully expected and indeed desirable for market health. The future remains bright for the U.S. economy and corporate profits despite the collapse in oil, and now the overbought technical condition has been relieved. While most sectors are gathering fundamental support and our sector rotation model remains bullish, the Energy sector looks fundamentally weak and continues to ran...



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Stock World Weekly

Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

Here's this week's Stock World Weekly.

Click here and sign in with your user name and password. 

 

...

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Option Review

SPX Call Spread Eyes Fresh Record Highs By Year End

Stocks got off to a rocky start on the first trading day in December, with the S&P 500 Index slipping just below 2050 on Monday. Based on one large bullish SPX options trade executed on Wednesday, however, such price action is not likely to break the trend of strong gains observed in the benchmark index since mid-October. It looks like one options market participant purchased 25,000 of the 31Dec’14 2105/2115 call spreads at a net premium of $2.70 each. The trade cost $6.75mm to put on, and represents the maximum potential loss on the position should the 2105 calls expire worthless at the end of December. The call spread could reap profits of as much as $7.30 per spread, or $18.25mm, in the event that the SPX ends the year above 2115. The index would need to rally 2.0% over the current level...



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Market Shadows

Official Moves in the Market Shadows' Virtual Portfolio

By Ilene 

I officially bought 250 shares of EZCH at $18.76 and sold 300 shares of IGT at $17.09 in Market Shadows' Virtual Portfolio yesterday (Fri. 11-21).

Click here for Thursday's post where I was thinking about buying EZCH. After further reading, I decided to add it to the virtual portfolio and to sell IGT and several other stocks, which we'll be saying goodbye to next week.

Notes

1. th...



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Pharmboy

Biotechs & Bubbles

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

Well PSW Subscribers....I am still here, barely.  From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.

First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices.  Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment.  Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer.  For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...



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Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

Thank you for you time!




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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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