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Miami Vice!

28

April, 2011

 

You all remember the 1980’s? Life was sweet, back then! I remember when Joey (that’s what we called Joe Saluzzi back then; just plain old Joey) would drive out to Bay Ridge and pick up Pauli, Vic, and myself for our Saturday night assault on Bensonhurst and Sheepshead Bay. I remember Glen Frey’s Smuggler’s Blues blaring out of the Blaupunkt in his shiny black Mercury Cougar (the Cougah). Smuggler’s Blues? You remember that song from TV as well? It was featured often on one of our favorite shows back then, Miami Vice.

Miami Vice was all about unbridled speed: fast cars, fast boats, and fast women! Not to mention tight white pants and sleeveless purple t-shirts, but let’s leave Joey’s wardrobe out of this. Speed man! Donzi’s, Bajas, Ferraris, Porsches, Lamborghinis!

Oh, those were the days, alright. And as we all know, life moves in circles! What is old becomes new again. A case in point: have you been to the mall and seen the 80’s colors and styles all back in vogue? And just try and convince me that Lady Gaga isn’t a direct rip-off of Madonna. Puhleeze!

This is why we are not in the least bit surprised to see a new stock exchange being launched in the United States! You can read about it in this Bloomberg article written by Nina Mehta and Jeff Kearns: Miami International to Introduce 10th US Exchange. It will start out trading options and derivatives, of course.

(An aside: duh… of course it will start out trading derivatives; why would anyone care about trading cash equities, which come to market in the form of IPO’s, and provide capital for startup companies that grow and benefit the economy. As a matter of fact we are wondering when our exchanges will skip the whole cash equities thing, and just randomly pick any darn objects, such as sponges, old Chryslers, or Pauli’s too-short t-shirts, and trade contracts on those).

This exchange is named… come on… guess. OK, I’ll tell you. The Miami International Securities Exchange! MISE! Which rhymes with VICE! As in MIAMI VICE. Yeah! This Miami Vice (MISE) is likely all about the speed too, just like Miami Vice was in the 1980’s.  However, the names associated with this MISE’s speed will likely not bee Lamborghini or Donzi, rather they will be Cisco and Juniper. Well, MISE better be about the speed, lest why would any high frequency trading firm spend millions to collocate their servers there?

So get ready, y’all. Routers everywhere will have to be reprogrammed and optimized. And our broken vase of a market structure now has a new piece!

There is nothing faster than our markets. Just ask NASDAQ, who just earlier this week probably lost a lot of money because of 84 flash crashes resulting from erroneous code in its own market-making innovation that it provides to HFT firms. (FYI, that “innovation” is a service where NASDAQ can manage “the other side” of the “two-sided quote” required for NASDAQ market-makers to receive all the perks, rebates, and benefits that HFT market-makers receive. That “innovation” allows HFT’s to be compliant with the SEC’s ban on stub quotes and penny-bids, by NASDAQ auto-generating the other side of the HFT’s “market”, priced 10% away, that has no intention of ever being traded, and will be cancelled and replaced a gazillion times).

 

Also, just ask traders in JAZZ yesterday about how fast our markets are. (JAZZ is a biotech company which experienced its own flash crash yesterday morning).

Incidentally, we got no notices from any venue or exchange about any “clearly erroneous” JAZZ transactions yesterday, despite a move of 30%. No circuit breaker was tripped, as this stock is not in the current pilot program. And while 84 stocks flash crashed on Monday, and were “clearly erroneous”, all those JAZZ trades yesterday were somehow not. I think “clearly erroneous” should be redefined so that it reflects what it really is: an obvious error, where we, the for-profit exchange, or our largest HFT clients that we need to keep happy, screwed up and stand to lose big bucks. If a trader or buy-side institution makes an error like what we saw yesterday in JAZZ, then that is simply “tough luck Chuck”. Let’s call a spade a spade, shall we?

Now, is all speed bad? Of course not! It’s just that at some point, we have to measure the marginal benefit we get from any improvement in speed against the marginal costs and risks. So for example, trading in hundredths of a second was so much better than trading in seconds, which was better than waiting for two minutes for a report from the floor. But given the daily occurrences of flash crashes, the potential for manipulation, and gasp, even financial terrorism, is trading in nanoseconds (billionths of a second) worth those risks? And if “market makers” need those speeds to provide liquidity, then perhaps someone should be asking what kind of liquidity these players are even providing?

Anyway, back to your morning enjoyment! Have some Smuggler’s Blues courtesy of Sally, Joey, Pauli, Vic, Lina, Anna, and Aviva:

Smuggler’s Blues by Glen Frey; Miami Vice!

Where we left off 4:00pm EST:

INDU              12,690.96                                +95.69

SPX                 1,355.66                                  +8.42

CCMP             2,869.88                                  +22.34

Futures now at 7:00 am EST:

DJA                             -3 

SPA                             -1.00

NDA                           -3.75

Key Data out today:

 

08:30:              Chicago Fed

08:30:              GDP

08:30:              Personal Consumption

08:30:              Jobless Claims (delivered in machine readable format by MNI and TradeTheNews promptly at 8:30am, as they get it a full 30 minutes earlier, and have time to prepare the files to deliver to your friendly neighborhood HFT’s)

10:00:              Pending Home Sales

 

Since the prior close, some key stories:

 

-       Dollar weak. Stocks, Gold climb.

-       Greek yields hit 25%.

-       Ben analyzed a lot today. Handled numerous softballs swimmingly.

-       Will and Kate tomorrow.

-       Charlie quiet today.

-       Barack Birth Certificate issue put to rest? Please?

-       Excelon/Constellation $7.9 billion

-       Sokol/Buffet saga re Lubrizoil continues. Buffet a liar?

-       P&G Misses

-       CFTC tries to write SWAP and Derivatives rules without loopholes (what a novel idea!). Given the lobbyists for the HFT’s and Exchanges, we are not optimistic. You wait and see.

-       Headline of the Day: Bodybuilding Mexican Academic Woos Edinburgh With Robot Fund (Bloomberg)

-       Apple’s JOBS tries to calm iPhone location tracking controversy. States that they do not track your location! And that they will issue a new fix that addresses their not tracking your location! Not making that up folks. 

-       Sony falls because of PlayStation Privacy Breach.

-       Carl Lewis will not be allowed to run for Senate in his home state of NJ because he didn’t meet the residency requirement. Apparently, the NJ courts uphold laws. (courtesy of Craig Cummings)

 

Earnings:

 

Pre-market:  ABC, AET, APA, AVT, AXN, BEN, BG, BLL, BMY, BRKR, BWA, CAH, CAM, CCE, CELG, CL, CMS, CNX, D, DOW, EK, EME, FMX, HMC, IP, IPG, KBR, MHS, MJN, MMI, MSI, OCR, OMX, OXY, PEP, PG, POT, RCL, RTN, S, SAP, SNY, SWY, TRI, TSM, VIAB, XOM

After the Close: EEP, EMN, IM, SMFT, RSG

 

Significant Movers This Morning:

INSP + 17%, NTRI +11%, FTNT +7%, CEG +6%, AET +6%, S +4%, CTXS +5%, NSC +3%, ESLR – 17%, AKAM -12%, ARRS -8%, ITMN -5% FLEX -7%, IDCC -5%, SKX -5%, NVLS -5%, CYH -3%, TER 3%

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