Joe and I have been getting into an occasional argument or two with industry colleagues, mostly about fairness, right and wrong, patriotism, and what is just plain good or bad for America. Some days we hold our own, and some days we get all dizzy when our opposition brings up numbers and data and equations that have symbols in them that are not the following: (=, +, or -). On those days, oh how we wish we had either the HFSTOP button, or maybe a JetBlue slide for us to make a surgical, neat, and hasty exit.

Of course I refer to the JetBlue flight attendant who “had it” yesterday at JFK airport.  Apparently, he got upset that an unruly passenger was getting his bag before the plane came to a complete stop, and went postal. He hurled profanities through the planes public address system, screamed that he had “had it”, pulled the cord, and slid away down the slide. That is just awesome. He is a hero!

Nanex is out with some more “crop circles” (remember we brought this up after Zerohedge posted the first link a month ago?). We bookmark their “crop circle of the day” section, and it is just updated again:

http://www.nanex.net/FlashCrash/CCircleDay.html

Besides the great names that they assign to the quote stuffing patterns (Nasdaq Broken Highway, Nasdaq The Waste Pool), it illustrates that there are things going on in the market microstructure that the regulators have to get their hands around. Why are these algos sending in thousands of orders and cancellations, affecting the BBO and more? We think it is not only for gaming Spy vs Spy (think the front line in volleyball, where several players try to “sell” the opposition on a coming spike), but also that the perps are doing this for market data revenue purposes. We remarked a year ago how we would find evidence of thousands of quote changes in a small cap we traded for a client, in the first 15 minutes of trading, accompanied by no volume. Back then we surmised it was done for market data revenue purposes, or to demonstrate that the originator was contributing to the NBBO in its universe a certain % of the time, and therefore worthy of perks and special rates by the exchanges for certain “liquidity providers” (Again we can not help but laugh at the like of TABB, etc., who continue to discuss how market makers need the ability to generate and cancel these very quotes to manage their risks and give retail tight spreads and $8 trades). Sad. And Kudos to Nanex for adding to the debate.

Well anyways, back to the Jetblue story… we have no HFSTOP button, and we actually don’t like slides, be they 8% slides in HP stock, 10% slides in the general market within minutes. Which is why all of us are thinking through intelligent fixes in the aftermath of May 6^th. Are circuit breakers the fix? One of several coming? We have been outspoken that May 6^th, and all these mini single stock anomalies (like CSCO a few weeks ago, or MU last week), are symptomatic of a flawed market structure, which has at its heart and soul rampant conflicts of interest that fly at odds with what is fair for long term investors, and what is good for capital formation and our economy going forward. To really fix things, we can’t help but wonder if we have to get to the nitty gritty and the guts, rather than patchwork, piecemeal, reactive jerry-rigs. After all do we want our market structure to look like this?

Where we left off 4:00pm EST:

INDU                      10,698.75                              +45.19

SPX                        1,127.79                                +6.15

CCMP                    2,305.69                                +17.22

Futures now at 7:30am EST:

DJA                         -68.00

SPA                        -8.40

NDA                        -11.25

Key Data out today:

08:30:                     Productivity (estimate 0.0%)

10:00:                     Wholesale Inventories (estimate +0.4%)

02:15:                     FOMC Fed Funds Target Rate (estimate 0% to 0.25%)

Since yesterday’s close, some key stories:

–          CME’s OTC business may get overhaul.

–          Ambac post $57.6 million loss.

–          MBIA posts Q2 profit on its widening spread.

–          Qiagen beats forecast, eyes big acquisitions.

–          Lions Gate post Q1 loss.

–          Icahn bets big on energy stocks after Gulf spill.

–          Endo Pharma to buy Penwest for about $168 million.

–          The 10 – year yield is down 2 basis points at 2.81%.

Significant Movers This Morning:

MBI +5.60% (earnings), FOSL +8.30% (earnings), APKT +1.50% (Cramer positive), NUAN -8.60% (earnings), LOPE -5.90% (earnings), RAX -5.50% (earnings)