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. 

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. 

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

Iran Commemorates "Captured US Sailors"-Day With Massive Billboard

Courtesy of ZeroHedge. View original post here.

Just over a year since Iran captured 10 US sailors - and detained them for around 15 hours - for entering Iranian waters "illegally," it appears America's nuclear-deal-partner wants to make sure its citizenry do not forget...

Huge billboard in Tehran commemorates the capture of the US sailors...

h/t @potkazar...



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ValueWalk

RMB Interventions Paving Way for Reforms

By Dan Steinbock. Originally published at ValueWalk.

By Dan Steinbock
Recently, Chinese renminbi has depreciated substantially. In the short-term, interventions will prevail; in the longer-term, the currency will stabilize.
In the past quarter, Chinese renminbi (RMB) decreased by 4%, which is significantly faster than anticipated, due to rising tensions in foreign-exchange markets over China’s rising debt and bubbling property markets. China has managed to stabilize growth, but not without capital controls, hefty lending and decisive interventions.
Recently, the RMB soared against the US dollar. By encouraging Chinese banks to withhold funds from other banks, the People’s Bank of China (PBoC) tightened liquidity in Hong Kong, which led the overnight lending market to surge from 17% to 61% in 2 days – which, in turn, cause...



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Phil's Favorites

Ridiculous Central Bank Non-Revelation: BOE Says Rates Can Move "Either Direction"

Courtesy of Mish

On the “duh” side of non-revelations, Bank of England says Rates Could Rise or Fall.

That actually made headline news on the BBC. There was one curious detail.

The next move in UK interest rates could be up or down, Bank of England governor Mark Carney has again warned.

At present, UK households appeared to be “entirely looking through Brexit-related uncertainties”, he said in a speech at the London School of Economics.

However, the country was “entering a period of somewhat higher consumer price inflation”, he added.

...

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Market News

News You Can Use From Phil's Stock World

 

Financial Markets and Economy

Oil Up on Saudi Commitment to Cut; U.S. Output Seen Rising (Reuters)

Oil prices settled up on Monday, as Saudi Arabia's commitments to reducing production offset a report forecasting U.S. output would again rise this year.

Italy will be the next big problem in Europe (Business Insider)

As a new year begins, we look at a key forecast that will bridge 2016 and 2017: the Italian banking crisis. In Geopolitical Futures’ 2016 forecast, we said ...



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OpTrader

Swing trading portfolio - week of January 16th, 2017

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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Chart School

Weekly Market Recap Jan 15, 2016

Courtesy of Blain.

The week that was…

Bullish action continues as the market alternates between periods of rallying with periods of quiet consolidation.  This past week was a period of the latter.  It was a relatively quiet week other than a bit of a selloff right at the open Thursday.  Friday we saw some of the major U.S. banks report. There were a lot of Federal Reserve speakers trotted out – but markets are in more of a Trump Trance right now so most of it was ignored.  Still no close on the Dow Jones Industrial Average over 20K, although that level was tickled Monday.

That said we have seen a rotation from the winners of November & December (S&P 500 + Russell 2000), into areas that lagged ...



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Digital Currencies

China's Bitcoin Exchanges Suspend Margin Trading

Courtesy of Zero Hedge

China's bitcoin traders who use the most popular bitcoin exchange not only in China, but also the entire world, BTCChina, were met with an unexpected warning on Friday:

Starting from January 12th, 2017, BTCChina has suspended margin loan service. If you have any questions, please contact Customer Service: support@btcc.com.

BTCChina, which commands over 37% of global bitcoin trading...

... wasn't alone.

Fo...



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Kimble Charting Solutions

Regional banks; Breakout test in play, says Joe Friday

Courtesy of Chris Kimble.

Over the past 60-days, financial stocks have done well. Over the past 60-days, regional banks have been stellar performers, out producing larger banks and the broad market, by a large percentage. From a risk on stock perspective, seeing large and regional banks do well, has historically been a positive sign.

Below looks at regional bank ETF (KRE)_

CLICK ON CHART TO ENLARGE

K...



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Members' Corner

How To Poop On A Date?

Courtesy of Nattering Naybob.

Back for a brief respite, it's "in the Toilet Thursday" or "Thursday in the Loo". Our last episode The Best Thing To Happen To Pooping, Since Your Butt, laid down a historical perspective.  

This week in How To Poop on a Date? we are graced with a delicate shituation: when your finally back at her place, snuggling in for a little "brown chicken brown cow" and you get hit with "Love Potion #2".  Oh what to do...


...

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Mapping The Market

If we try it enough, it will work.

Via Jean-Luc

Brownback wants Trump to emulate what he did in Kansas because it worked so well:

Sam Brownback Calls on Donald Trump to Mimic His Kansas Tax Plan

By RICHARD RUBIN and  WILL CONNORS

Sam Brownback, the Kansas governor whose tax cuts brought him political turmoil, recurring budget holes and sparse evidence of economic success, has a message for President-elect Donald Trump: Do what I did.

In 2013, Mr. Brownback set out to create a lean, business-friendly government in his state that other Republicans could replicate. He now faces a $350 million deficit when the Kansas legislature convenes in January and projections of a larger one in 2018. The state’s economy is flat and his party is fractured...

...

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Biotech

The Medicines Company: Insider Buying

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

I'm seeing huge insider buying in the biotech company The Medicines Company (MDCO). The price has already moved up around 7%, but these buys are significant, in the millions of dollars range. ~ Ilene

 

 

 

Insider transaction table and buying vs. selling graphic above from insidercow.com.

Chart below from Yahoo.com

...

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Promotions

Phil's Stock World's Las Vegas Conference!

 

Come join us for the Phil's Stock World's Conference in Las Vegas!

Date:  Sunday, Feb 12, 2017 and Monday Feb 13, 2017.            

Beginning Time:  8:00 am Sunday morning

Location: Caesar's Palace in Las Vegas

Notes

Caesar's has tentatively offered us rooms for $189 on Saturday night and $129 for Sunday night. However, we have to sign the contract ASAP. We need at least 10 people to pay me via Paypal or we may lose the best rate for the rooms. (Once we are guaranteed ten attendees, I will put up instructions to call the hotel for individual rooms.)

The more people who sign up,...



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All About Trends

Mid-Day Update

Reminder: Harlan 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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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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