05-06-2010
, 05:36 PM
Trading error blamed for market plunge: CNBC
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PLUNGE! 1987 Style - Sudden Drop in US Stocks Driven by Program Trading and a Ponzi Market Structure
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(Reuters) - A trading error at a major firm was to blame for the day's market plunge, CNBC reported on Thursday.
PLUNGE! 1987 Style - Sudden Drop in US Stocks Driven by Program Trading and a Ponzi Market Structure
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US equities were gripped by panic selling as the Dow plunged almost 1,000 points driven by a cascade of 100 share high frequency program trading, estimated to have been about 80% of volume. Gold rocketed higher to $1,210.
The stock exchange circuit breakers do not apply after 2:30 PM NY time.
This was highly reminiscent of the 1987 crash driven by a flawed market structure. The entire rally off the February lows resembled a low volume Ponzi scheme, and had formed a huge air pocket under prices.
As so many have pointed out, this rally was driven by the Banks and the hedge funds. There was and still is deep shortage of legitimate buying at these price levels. This was machine driven speculation enabled by the lack of reform in a system riddled with corruption, from the bottom to the top.
This is yet another indication that the US regulatory and market oversight organizations, especially the SEC and CFTC, continue to be disconnected from and remarkably ineffective in their responsibilities in guarding the public against gross market imbalances, price manipulation, and abuses from insiders playing with cheap money supplied by the NY Fed.
And as you might expect, the anchors on financial television are trying to excuse and blame the sell off on a 'fat finger' order that caused Proctor and Gamble to drop 20 points in 45 seconds. Or a typist inputting an order to sell 16 million e-mini SP futures, and typing "B" instead of "M." Oops. Crashed the free world.
Even if any of this was true, it was just the spark that caused the market to plummet because of its highly unstable, artificial, and inherently manipulative operational structure. There is no longer any price discovery. The US financial system is a casino, dominated by a few big Banks and hedge funds, the gangs of New York.
The stock exchange circuit breakers do not apply after 2:30 PM NY time.
This was highly reminiscent of the 1987 crash driven by a flawed market structure. The entire rally off the February lows resembled a low volume Ponzi scheme, and had formed a huge air pocket under prices.
As so many have pointed out, this rally was driven by the Banks and the hedge funds. There was and still is deep shortage of legitimate buying at these price levels. This was machine driven speculation enabled by the lack of reform in a system riddled with corruption, from the bottom to the top.
This is yet another indication that the US regulatory and market oversight organizations, especially the SEC and CFTC, continue to be disconnected from and remarkably ineffective in their responsibilities in guarding the public against gross market imbalances, price manipulation, and abuses from insiders playing with cheap money supplied by the NY Fed.
And as you might expect, the anchors on financial television are trying to excuse and blame the sell off on a 'fat finger' order that caused Proctor and Gamble to drop 20 points in 45 seconds. Or a typist inputting an order to sell 16 million e-mini SP futures, and typing "B" instead of "M." Oops. Crashed the free world.
Even if any of this was true, it was just the spark that caused the market to plummet because of its highly unstable, artificial, and inherently manipulative operational structure. There is no longer any price discovery. The US financial system is a casino, dominated by a few big Banks and hedge funds, the gangs of New York.
06-08-2010
, 04:58 PM
GFI Group Is All About Not Leaking Block Orders To The Algos During Melt Ups
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With JPM doing the ritualistic gold slaughter in the hour before the close, it was all systems go. The SPY IOIA in the last 20 minutes of the meltup is nothing short of a work of art, with every single ETF desk going nuts doing their best to telegraph to whatever HFT algos are left that massive blocks are on the bidside and that it is safe to lift every offer. We wish we could present them all but we will limit ourselves to the hundred or so "trades" at 3:49 PM EST by GFI Group. Because this is precisely the best way to split a massive order block into "unobtrusive" child algorithms.
07-06-2010
, 07:02 PM
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What exactly are they saying GFI Group is doing? For what purpose again?
It seems like they're flooding the market with lots of small share amounts? These are buys or sells?
What does this accomplish again?
Thanks to any trader who could help explain.
08-17-2010
, 12:24 PM
NEW YORK (AP) -- Stocks rose Tuesday after the Federal Reserve finished monetizing government debt, putting freshly minted cash in the hands of primary dealers.
The Fed had previously published a schedule enabling the primary dealers to front run today's debt monetization, which accounted for the massive rally in treasuries the past week.
sarcasm off
The Tradition Of Mindless Stock Ramping On Fed POMO Days Is Back
POMO = permanent open market operations
http://www.newyorkfed.org/markets/po...play/index.cfm
The Fed had previously published a schedule enabling the primary dealers to front run today's debt monetization, which accounted for the massive rally in treasuries the past week.
sarcasm off
The Tradition Of Mindless Stock Ramping On Fed POMO Days Is Back
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One of the most beloved phenomena of Fed intervention is the "miraculous" ramp in stocks on days in which the Fed's Permanent Open Market Operations (POMO) occurred: while this was a requisite in 2009 when the Fed monetized $700 billion in Treasurys, it had gradually disappeared from the public consciousness after the termination of the Treasury portion of QE1 in October 2009. Well, now that POMO is back courtesy of QE Lite, and with the help of various sellside analysts, Primary Dealers knew precisely which Treasury CUSIPs to purchase in advance of the auction for a quick leveraged pick up of a few hundred bps. And now that the money is funded back to the PDs, as of the end of the POMO operation at 11am Eastern, it needs to find a new home. And with the PDs providing the initial impetus for a risk asset (read stock) ramp, and momo quants picking up the sloppy seconds as they jump over each other to send the momentum driven ramp ever higher, the result is presented below.
POMO = permanent open market operations
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Permanent OMOs: Treasury
The purchase or sale of Treasury securities on an outright basis adds or drains reserves available in the banking system. Such transactions are arranged on a routine basis to offset other changes in the Federal Reserve’s balance sheet in conjunction with efforts to maintain conditions in the market for reserves consistent with the federal funds target rate set by the Federal Open Market Committee (FOMC).
The purchase or sale of Treasury securities on an outright basis adds or drains reserves available in the banking system. Such transactions are arranged on a routine basis to offset other changes in the Federal Reserve’s balance sheet in conjunction with efforts to maintain conditions in the market for reserves consistent with the federal funds target rate set by the Federal Open Market Committee (FOMC).
09-29-2010
, 12:11 AM
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the Fed has continued to monetize Wall Street’s debts EVERY options expiration week since QE 1 ended
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You’ll note that the Fed ALWAYS made its largest capital contributions during options expiration weeks. Heck it pumped $31 BILLION into the system in April 2010, just ONE MONTH after it claimed QE 1 ended!
However, since that time the Fed has pumped a total of over $65 billion into Wall Street on options expiration weeks. On non-expiration weeks the Fed either withdraws money or makes small money pumps.
...
You’ll note that the Fed ALWAYS made its largest capital contributions during options expiration weeks. Heck it pumped $31 BILLION into the system in April 2010, just ONE MONTH after it claimed QE 1 ended!
However, since that time the Fed has pumped a total of over $65 billion into Wall Street on options expiration weeks. On non-expiration weeks the Fed either withdraws money or makes small money pumps.
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So let me explain how this new QE Lite Program works before we continue.
During Treasury auctions there are 18 banks, called Primary Dealers, who are given unprecedented access to US Debt (Treasuries) in terms of pricing and control. These are the BIG BOYS of finance including firms like Goldman Sachs, JP Morgan, Bank of America, Credit Suisse, and others.
During its QE 1 Program, the Fed bought over $1.0 trillion in securities from these firms. Its new QE lite program consists of it using the interest and proceeds from the securities in its portfolio that are maturing to buy Treasuries from the Primary Dealers via Permanent Open Market Operations (POMO).
In simple terms, the POMO actions allow the Fed to pump money into Wall Street (by buying Treasuries from the Primary Dealers) without DIRECTLY monetizing Treasury debt (the Treasuries had already been issued). The Primary Dealers then take this fresh capital from the Fed and plow into stocks, forcing the sort of ramp job we saw last week on Friday.
During Treasury auctions there are 18 banks, called Primary Dealers, who are given unprecedented access to US Debt (Treasuries) in terms of pricing and control. These are the BIG BOYS of finance including firms like Goldman Sachs, JP Morgan, Bank of America, Credit Suisse, and others.
During its QE 1 Program, the Fed bought over $1.0 trillion in securities from these firms. Its new QE lite program consists of it using the interest and proceeds from the securities in its portfolio that are maturing to buy Treasuries from the Primary Dealers via Permanent Open Market Operations (POMO).
In simple terms, the POMO actions allow the Fed to pump money into Wall Street (by buying Treasuries from the Primary Dealers) without DIRECTLY monetizing Treasury debt (the Treasuries had already been issued). The Primary Dealers then take this fresh capital from the Fed and plow into stocks, forcing the sort of ramp job we saw last week on Friday.
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Unbeknownst to most investors, last week Ben Bernanke pumped an additional $11.05 BILLION into the system ON TOP of the $11.15 pumped via the POMOs. In plain terms, the Fed juiced the system by $20+ billion in a single week, bringing its liquidity pumps RIGHT BACK QE 1 LEVELS.
If you want to know why stocks have rallied in the last month, this is THE reason. The economy isn’t improving and the European Crisis isn’t over. Nothing has improved. All that has happened is the Fed funneled money into the Primary Dealers who ramped the market.
This is also the reason why the latest rally has almost entirely consisted of gap ups: the Primary Dealers ramp the market and then the computer trading programs take care of the rest.
If you want to know why stocks have rallied in the last month, this is THE reason. The economy isn’t improving and the European Crisis isn’t over. Nothing has improved. All that has happened is the Fed funneled money into the Primary Dealers who ramped the market.
This is also the reason why the latest rally has almost entirely consisted of gap ups: the Primary Dealers ramp the market and then the computer trading programs take care of the rest.
link
09-29-2010
, 12:40 PM
Volcker rule reference??
this didn't happen:
This did happen---->
http://www.reuters.com/article/idUSLNE67800N20100809
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link
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JPMorgan Pretends To Shut Down All Prop Trading Desks, In Latest Smoke Screen Act Of Volcker Rule "Compliance"
this didn't happen:
This did happen---->
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But despite recent moves by Bank of America (BAC.N), Morgan Stanley (MS.N) and Goldman Sachs (GS.N) on that front, most banks will be able to pare back investments in risky ventures without making dramatic changes to their structure.
The new Volcker rule, named for former Federal Reserve Chairman Paul Volcker, restricts banks from proprietary trading and sets new limits on the size of private equity or hedge fund investments.
It means they cannot hold more than 3 percent of their Tier 1 capital in private equity or hedge fund investments. Tier 1 capital is a measure of a company's financial strength.
Some, like Bank of America (BAC.N), hover near their 3 percent cap, and will need to make only minor adjustments to comply. Others, like Goldman Sachs (GS.N), will need to be more aggressive.
Still, banks have several years to reduce their holdings -- meaning that even institutions with significant private equity holdings are likely to be able to keep units.
"They (financial institutions) have time to adjust," said Mark Nuccio, partner at Ropes & Gray in Boston. "I don't think there's any intention on behalf of the regulators to create economic dislocation at financial institutions."
The new Volcker rule, named for former Federal Reserve Chairman Paul Volcker, restricts banks from proprietary trading and sets new limits on the size of private equity or hedge fund investments.
It means they cannot hold more than 3 percent of their Tier 1 capital in private equity or hedge fund investments. Tier 1 capital is a measure of a company's financial strength.
Some, like Bank of America (BAC.N), hover near their 3 percent cap, and will need to make only minor adjustments to comply. Others, like Goldman Sachs (GS.N), will need to be more aggressive.
Still, banks have several years to reduce their holdings -- meaning that even institutions with significant private equity holdings are likely to be able to keep units.
"They (financial institutions) have time to adjust," said Mark Nuccio, partner at Ropes & Gray in Boston. "I don't think there's any intention on behalf of the regulators to create economic dislocation at financial institutions."
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On how Goldman Sachs is evading the Volcker rule:
“Goldman Sachs is essentially taking traders from the Proprietary Trading desk and thinking about moving them to different parts of the firm, including Asset Management. We understand they already moved about half of their Proprietary Trading desk to Asset Management.”
On how companies are able to work around the regulations:
“If you deal with a client you are able to get around this [Volcker Rule]. And that’s what Goldman Sachs is trying to do and what the rest of the street will try to do. If you do a trade that’s known as a “client trade” you don’t have to worry about the Volcker rule. You can evade it. And that’s what Goldman Sachs is doing. It just shows you how this rule despite the fact that initially it scared the hell out Wall Street and everybody thought they couldn’t do proprietary trading, that means trading with your own money with your own ideas. Paul Volcker, the Presidential Economics Advisor, believed that was one of the causes of the financial crisis, all the risk taking.”
“Goldman Sachs is essentially taking traders from the Proprietary Trading desk and thinking about moving them to different parts of the firm, including Asset Management. We understand they already moved about half of their Proprietary Trading desk to Asset Management.”
On how companies are able to work around the regulations:
“If you deal with a client you are able to get around this [Volcker Rule]. And that’s what Goldman Sachs is trying to do and what the rest of the street will try to do. If you do a trade that’s known as a “client trade” you don’t have to worry about the Volcker rule. You can evade it. And that’s what Goldman Sachs is doing. It just shows you how this rule despite the fact that initially it scared the hell out Wall Street and everybody thought they couldn’t do proprietary trading, that means trading with your own money with your own ideas. Paul Volcker, the Presidential Economics Advisor, believed that was one of the causes of the financial crisis, all the risk taking.”
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On the ineffectiveness of the Volcker rule:
“At the end of the day, all these firms are going to figure out ways around this. All these rules- they will be evaded by these banks- they employ smart people. They could have passed one rule and say: too big to fail is over. You screw up you’re dead. We aren’t going to insure your customer deposits on your bank side if you do trading on the other side. Instead they have created this thing which firms have figured out how to get around. Goldman Sachs are the smartest guys in the world.”
“At the end of the day, all these firms are going to figure out ways around this. All these rules- they will be evaded by these banks- they employ smart people. They could have passed one rule and say: too big to fail is over. You screw up you’re dead. We aren’t going to insure your customer deposits on your bank side if you do trading on the other side. Instead they have created this thing which firms have figured out how to get around. Goldman Sachs are the smartest guys in the world.”
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So JPMorgan fires 20 people in its commodity prop book. What about Sempra Energy, which Dimon purchased recently? Is that getting spun off too? Or are all the 20 whopping newly unemployed advised to seek employment at Sempra? One wonders why JP Morgan named a new global head of commodity strategy today. But yes, let's wave the white flag in the face of the dumb public and pretend we are complying with Volcker. But first, let's have the corpulent Frank in charge of the finreg abortion lisp something on TV about what a great success his capture by Wall Street is proving to be.
10-05-2010
, 11:41 AM
10-05-2010
, 12:05 PM
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more importantly the fed sees about a half trillion in stimulus as equivalent to just over a half point IR reduction, and any estimate of the taylor rule or other keynsian analysis of unemployment and inflation will lead to a deep negative rate which can only be dealt with by QE. One that would technically require at least over a trillion to "overcome".
10-06-2010
, 10:07 AM
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In sum, the Sack & Company have POMOed the market on 203 of the 1,334 trading days since (as of October 5, 2010). As this is well more than the number of observations necessary for statistical significance (approximately 30) in order to draw conclusions about reality from a sample, we can draw some conclusions as to just how much the Fed is artificially chumming price levels in what was once a free market.
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Now, I’m sure this is just coincidence. It just so happens that POMO funds received by primary dealers “appear” to be ramping stocks and causing (dare I say short) selling in gold. Only The Onion would post something as preposterous. It’s also interesting to note the doucherious impact the Fed is having on yields.
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Brian P. Sack
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Brian P. Sack is the executive vice president of the Markets Group at the Federal Reserve Bank of New York. He is also the Manager of the System Open Market Account for the Federal Open Market Committee (FOMC). The Markets Group oversees domestic open market and foreign exchange trading operations and the provisions of account services to foreign central banks.
10-06-2010
, 11:11 AM
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10-06-2010
, 01:48 PM