What words can I use to describe Friday? Cathartic? Decimation? Ugly? Frightening? Capitulation?
I will continue to argue ALL markets have been completely co-opted by high frequency trading.
I found it noteworthy that late Friday afternoon, US beef producers want the CME Group to curb high frequency trading of livestock contracts after “surging volatility” has made them more of a “liability than a benefit.”
The beef association hosted a meeting where traders, economists and hedgers “delivered evidence and fist hand accounts” to support taking action.
Many times I have quoted a SEC commissioner stating that HFT have created an “unleveled playing field,” an imbalance further amplified by the “untested regulations of Dodd Frank.”
What will it take to institute curbs? Something more than a flash crash or a longer term spike in yields that bankrupts a HFT firm causing a liquidity crisis for one of the 21 primary dealers?
Outlandish thought? Absolutely not. Drexel Burnham. LTCM. Enron. Lehman. AIG. MF Global, etc.
Many have been slaughtered since January 1 with many names down 25%-35% for no apparent reason. There is massive selling and no buyers. In some instances the total number of shares traded amount to 10% to 15% outstanding with no one holder owning more than 3%. Is this bona fide selling or outright manipulation?
What will happen this week? The economic calendar is filled with housing statistics.
Last night the foreign markets were up. London was up 2.16%, Paris up 2.47% and Frankfurt up 2.12%. China was up 3.22%, Japan up 0.55% and Hang Sang up 2.07%.
The Dow should open significantly higher as perhaps the despondency had gone too far. Commodities and credit markets strengthened as Chinese growth exceeded the most pessimistic forecasts. The 10-year is off 11/32 to yield 2.08%.
WILL THE SEC LOOK CLOSER AT HIGH FREQUENCY TRADING?
Ken Engelke
Chief Economic Strategist Managing Director
The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.
