The Speed Traders. Ummm. Regulators hurry please…

Do a Google search for “high frequency trading articles”. Go ahead. Did you get sixteen versions of the same article, “The Speed Traders’ Author, Edgar Perez, Will Speak at High Frequency Trading Forum 2011” at the top of your search? We did. And apparently the book is a must read for anyone who wants to get the real inside scoop on the “high frequency phenomenon that is transforming the investing world.” The book costs $18.09 on Amazon. Manoj Narang is quoted early and often in the book. I think $18.09 is a small price to pay to know “everything there is to know about how high frequency traders make millions- one cent at a time.”

McGraw Hill actually asked us to write a “How-To” book on high frequency trading last year. When we explained that the book we would write is not what they had in mind, their interest was piqued. We explained our positions on market structure, and they asked us if we could write the book way we wanted. We started on the book, and after the first chapter they were asking us to make it more “how-to-high-frequency-trade”. The relationship ended quickly. And they found Edgar Perez, who, as the leader in organizing parties for high frequency traders in NYC bars ( is extremely qualified to write this book on “everything there is to know about high frequency traders make millions – one cent at a time.” Boy are the boys in Chicago going to be ticked off that their secrets are spilled in this $18.09 book.

Ok, why am I being so sarcastic? Because now is a dangerous time in our markets. HFT in cash markets has topped; this book seals it for me. HFT players have peaked (in my opinion), and their margins are squeezed. Big HFT is fighting Small HFT, not only in the shelled-out market place we operate in, but in Washington DC. Exchanges have their margins under pressure as well. They bend over backwards to please the very toppy HFT customers of theirs. They also are all scrambling to get bigger to improve their scale, and have the capital to move into the trading of more complex and leveraged securities.

There is a heightened stress in a marketplace that is built on catering to a highly leveraged, and increasingly less profitable ultra-high-speed group of players. We have witnessed a large increase in the number of mini flash crashes we see go on in the markets, in both stocks, as well as ETF’s. And the markets just keep getting more and more correlated and connected.

The rubber band is stretched, and we hope the SEC-CFTC Joint Advisory Recommendations are acted upon soon. It just feels funny out there. So if you are one of our regulators reading this note, please tell the lobbyists and their congressional pawns to pipe down, return the campaign checks, and let you do your jobs. Let’s shake a leg. And if you are an institutional trader, check twice and hit enter once. You are on your own. Really.

Where we left off 4:00pm EST:

INDU              12,512.04                                -130.78

SPX                 1,333.27                                  -15.90

CCMP             2,803.32                                  -44.42

Futures now at 7:30 am EST:

DJA                             +20

SPA                             +3.90

NDA                           +4.25

Key Data out today:


10:00:                          New Home Sales

10:00:                          Richmond Fed Index

Since the prior close, some key stories:


–       Goldman ups their oil target; commodities and stocks gain of course.

–       Goldman revises down China GDP estimates.

–       Goldman also bullish on other commodities.

–       The UK has been “Dagonged.” You’ve Been Dagonged UK Edition

–       Silicon Valley guessing that MSFT will offer a glimpse of Windows 8 next week.

–       GM Makes Bond Market Return To Fund Subprime Car Loans (Bloomberg). Wait… What??????

–       Bloomberg has an article on Greenwich CT homes above $10 million that are sitting on the market. Really.

–       More Icelandic Ash grounds planes.

–       Yemen. More Egypt Rumblings. More Syria Rumblings. More NATO bombing of Tripoli.

–       The low value of LSE’s stock puts its takeover of the Canadian TMX in jeopardy.

–       Bob Dylan turns 70. And he ain’t gonna work on Maggie’s Farm, because the farm is owned by huge corporation that has been laying off, and not hiring.

–       The world is now going to end on October 21st fyi.

–       Everyone eyeing AIG this week as well. Secondary today.




Pre-market:  AZO, MDT, CBRL, MDT, DSW, SAFM



Significant Movers This Morning:

HSFT + 17%, SOLR + 13%, PWRD +4%, CREE +5%, CBRL -2%, IM -2%