Themis Trading is an independent, no-conflict, institutional agency brokerage firm specializing in equities. The purpose of our blog is for a discussion of market structure issues as well as general market commentary.
Please note that third-party posts do not reflect the views of the Company and have not been reviewed by the Company for completeness or accuracy.
MICHAEL LEWIS says:
“The principals of Themis Trading, have done more than anyone to explain and publicize the predation in the new stock market. They deserve more lines in this book than they receive but have written their own book on the subject, Broken Markets.”
“When the last history of high-frequency trading is written, Hunsader and Themis Trading deserve a prominent place in it.”
-MICHAEL LEWIS, Flash Boys
BOSTON GLOBE: "Did you read something for Flash Boys you would recommend?"
LEWIS: "Scott Patterson’s Dark Pools, which overlaps with my own book some. What he does really well is tell the early history of automated electronic trading. I’d also recommend Broken Markets and the 1923 novel Reminiscences of a Stock Operator by Edwin Lefèvre."
-The Boston Globe, "Bibliophiles: Best-selling author Michael Lewis", March 21, 2015
19
May, 2009
Volume. Charts. Levels. Phantom Volume.
Here is what is keeping me up at night. Ok. Maybe up during the day:
So many of our traditional, historical perspectives of the market, and charts, and % moves, and predictive tools, use volume somewhere in the analytical equation. I guess the simplest example is that we are used to seeing the market advance on increasing volume, and decline (correct healthily) on decreasing volume. Somewhere in these little rules of thumb that we have accumulated over time, is the intiuitively appealing notion that individuals and mutual funds buy stocks at $10, with the hope (or fear in case they are short) of a move to $15. Our way of analyzing market internals, and predicting future moves, is dependent on this simple assumption in many ways. We assume that buying takes place to make a profit, or limit a loss, based on the price of the stock.
But what if all the volume we are seeing no longer is volume with that motive, or backdrop? What if the players/traders/automated traders in the market are making money, not on price moves, but by just simply creating phantom volume. What if the money is being made by designing systems to garnish liquidity rebates as close to risklessly as possible? What if money is being made by creating instances of trades on the tape on specific venues in order to garnish “tape revenue”? If this is so, then is the volume we are all seeing, and the corresponding price action that goes with it, relevant?