Themis Trading 2012 Market Structure Predictions!


OK. We hope this year we surpass the one-for-ten performance of 2011. The shame was unbearable! Here goes:


1) A major stock exchange will introduce options that expire in one hour.

2) Sal and Joe will publish a book about “how to HFT” from one’s own home. Algorithms on Amazon will get caught in a predatory feedback loop and bid the price of the book up to $23,698,656.9301, beating the price those same algos set back in 2011 for The Making of the Fly by one hundredth of a penny.

3) The SEC will finalize its dark pool proposal, and mandate that all orders must be price improved by at least THREE thousandths of a penny, or otherwise be sent within a one-second time period through a smart order router eventually to the exchanges.

4) A major exchange will propose a SEC rule that will require corporate issuers to rebate and subsidize HFT market makers for making markets in ETF’s that contain their company’s stock. Oh wait…Nasdaq did this in 2011.

5) Exchanges will lower the price of co-location, trying to expand the appeal to retail traders, however they will also institute rules that automatically allow Liquidity Partners to be at the top of book a set percentage of the time, kind of like a “lifeline” that the LP’s can utilize, rendering colocation useless, and that percentage at the top of book will be directly related to the frequency the Liquidity Partners were within 25% of the NBBO over a trailing 3 month period with those statistics calculated every three weeks and published monthly in physical form in the SEC’s Public Reference Room.

6) A new product, called the Mutual Fund, will revolutionize investing by pooling investor’s money into a fund operated by a portfolio manager, who will then turn around and invest those funds for the long term into equity shares. Funding/redemption will take place once/day.

7) “Liquidity” will be added to the FCC’s list of dirty words you can’t say on TV.

8 ) An ETF will be created that tracks the differential between the performance of VWAP strategies and Steve Cohen’s gut, as well as options on those ETF’s.

9) The Deutsche Bourse and the NYSE will finally merge, and after a long contest, will be renamed Sprocket Exchange. Touch my monkey.

10) Nasdaq OMX, not to be outdone, will propose a merger with the newly-formed Sprocket Exchange, but will fail, as a major Chicago HFT firm will swoop in and take over the two parties.