Markets in Risk Off mode as people slowly wake up to reality
Finally we are getting some action going into the close. Remember, 1220 area is the short term support. The big triangle formation we have been outlining over the past days could be breaking down. Financials are leading us lower. Don’t be too surprised when Spain starts acknowledging the problems it is facing. Maybe some more hidden debt? And yes, Rambus is down 60%….FYI Markets go up on below average volume, and down on healthy volume.
Mid Day Update as market (still) stuck in a range
Equities markets are giving the illusion of something happening. We are actually just bouncing in a range, getting tighter by the day. With Eurozone news driving HFT in a random no trend market, we are still awaiting the break out of this formation built over the past days. Let’s see what Santa brings to the market?
HFT soon regulated?
Our readers know that we have been writing extensively on the HFT theme. Regulators are slowly waking up. Over the weekend, Nanex presented their conclusions on HFT at 10 Downing Street.
France is talking about imposing a tax on all canceled orders. The HFT bashing has reached pathetic levels. Algorithmic trading is good, but must be regulated, so we don’t end up with a market where liquidity dries up, as investors simply can’t hedge their positions accordingly, while the HFT predatory strategies create a “vacuum”. Financial News reports;
The French Senate will vote this week on a draft proposal designed to curb automated trading in what marks the strongest and most direct attack yet on the high frequency trading phenomenon.
The French Senate’s finance committee last week adopted a proposal to impose a 0.1% tax on “automated orders” executed in France in a move designed to directly target the controversial trading practice. The tax would be levied on firms that cancel more than 50% of their orders per day with the 0.1% rate applied to the automated orders sent to the exchange.
Central Planners part 2-BOE kills the squeeze
BOE coming out with rather bearish comments on the Economy. The initial reaction is a “healthy” sell off. All trading is only conducted by HFT, and liquidity is absolutely pathetic. BOE’s biggest concern is that “EU lacks a credible plan of dealiong with the crisis“. Well, we couldn’t have out it better ourselves.
European Union soon a memory? Charts below.
HFT Definition
Many talk of HFT and refer to those Algos, but we still don’t have a definition of what HFT actually is. O’Malia, who chairs the CFTC’s Technology Advisory Committee, called his definition a “seven-part test for what constitutes an HFT,” and asked the committee to consider it before a Dec. 13 meeting:
The use of extraordinarily high-speed order submission/cancellation/modification systems with speeds in excess of five milliseconds or generally very close to minimal latency of a trade. The use of computer programs or algorithms for automated decision making where order initiation, generating, routing, and execution are determined by the system without human direction for each individual trade or order. The use of co-location services, direct market access or individual data feeds offered by exchanges and others to minimize network and other types of latencies. Very short time-frames for establishing and liquidating positions. High daily portfolio turnover and/or a high order-to-trade ratio intraday. The submission of numerous orders that are canceled immediately or within milliseconds after submission.
Ending the trading day in as close to a flat position as possible (not carrying significant, un-hedged positions overnight)
Full article here.
Chart Update as Risk On Dominates
Markets gapped lower this morning, but as the Central banks of the World have decided, there is a huge put, assets will not go down. ECB is seen actively buying all the PIIGS crap nobody wants to buy, pushing yields lower, and creating that false sense of security. When central banking has become central planning, you can only join them, until the bubble is too big. European futures spiking, Euro soaring, and the shorts are yet again squeezed in this no volume melt up. Charts below.
News That Matters
Ft.com
Authorities around the world have begun moving against anti-capitalist protesters, with police in the US and Switzerland clearing camps from their cities, reports the FT. In the UK, the City of London Corporation relaunched legal action against protesters camped outside St Paul’s Cathedral. http://ftalphaville.ft.com/thecut/2011/11/16/748721/authorities-move-against-occupy-protests-2/
Negotiators for Greek debt holders have offered to swap their bonds for new ones worth half their current face value, but only if the new bonds contain high interest rates and have extra incentives, including annual payments if Greece’s economy recovers. http://ftalphaville.ft.com/thecut/2011/11/16/748681/greek-debt-holders-in-bond-swap-offer/
(A familiar headline but…) George Osborne is to set out in mid-December detailed plans to shake up Britain’s banking sector, setting in train what is likely to be a detailed consultation with banks over the erection of a firewall between retail and investment operations. http://ftalphaville.ft.com/thecut/2011/11/16/748641/osborne-to-set-out-bank-reform-plans/
German frustration over Britain’s approach to the eurozone crisis erupted on Tuesday after a close ally of Angela Merkel accused the UK of selfishness just days before a meeting between the two countries’ leaders in Berlin, http://ftalphaville.ft.com/thecut/2011/11/16/748601/germany-attacks-uk-over-ftt/
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