Themis Trading 2018 Market Structure Predictions


Most of the market structure debate in 2017 was dominated by four subjects: MIFID II, Cat Delays/Cybersecurity, the Access Fee Pilot, and Bitcoin/ICOs. Yesterday we detailed how those subjects dominated the market structure discussion throughout the past year.

Today we offer up our market structure predictions for 2018. Over the past eight years our prediction success has varied substantially – from 2/10 correct to 9/10 correct. As we are data-driven (at least as much as the dark-pool-toxicity-data used by many bulge dark pools), and as we believe in using robust data methodology, we will throw out the 2/10 result outlier and just say we have a 90% success rate.

Without further ado, here they are:

  1. SEC Will Okay Bitcoin ETFs. They have already set precedent in 2017 with the case of Dao Tokens, paving the way for ICOs to be treated as securities.  We believe they will further consult with the industry, particularly Goldman Sachs and Citadel, and with the advice of their crypto trading desk executives, approve ETFs. Liquidity will be encouraged, and the SEC will protect investors by issuing a 5 minute YouTube cartoon video, perhaps like this one.
  2. Crypto Exchanges will be exposed for engaging in the same shenanigans as US Equity Exchanges And Dark Pools over the past decade. These shenanigans include order types, special matching engine plumbing anomalies, affiliated trading partners with asymmetrical advantages, and wash trading.
  3. MIFIDII will cause disruption in our industry. Unintended Intended consequences will arise, including small broker dealers exiting the business, and large broker dealers becoming even larger. Competition will decrease.
  4. The Buyside will drastically alter the type of research they consume. Fundamental company research will be de-emphasized, and big data will be emphasized. The word “Quantamental” will be mainstreamed:
  5. A large hedge fund will employ a leveraged billion dollar trading strategy based on AI (artificial intelligence) which will tank the market. Despite the commencement of CAT implementation, the SEC will take 9 months to analyze what happened. Market Structure Gurus (you know who they are) will blame a Midwestern Mutual Fund.
  6. Class action lawsuit(s) will be introduced that test the theory of stock exchange immunity. The groundwork for these suits have been laid in December 2017.
  7. NASDAQ will issue a new suite of data products with a GUI based on Amazon Alexa which includes information on what exact algorithms the buyside is using to trade orders on its platform. Brokers will opt in to the data in exchange for a 66.6 mil rebate.
  8. NYSE will make a bid to buy IEX. IEX responds, “NYSE wants to buy me out? No, I buy them out, they don’t buy me out. I did them a favor and took Fredo in when they were having a bad time, and they try to push me out????”
  9. President Trump will sign executive orders eliminating the Exchange Act of 1934, Reg NMS, Reg ATS, Reg SCI, and any reference to the term MIFID. He will replace Jay Clayton as SEC Commissioner with Scott Garrett.
  10. Themis Trading will issue an ICO – ThemCoin. The CBOE will introduce futures trading on ThemCoin using a reference price obtained from the Chatham Farmers Market at the Chatham Train Station.

May you all have a prosperous and healthy New Year!