More on Early Trades

June 12th, 2013 at 11:57 am

I’ll have more to say about this later, and to be clear, I’m not intimating anything about leaks here, but CNBC’s Eamon Javers continues to dig up extremely compelling evidence of problems in the uneven dissemination of key pieces of market information, this time involving the University of MI’s survey of consumers.  In the U of MI case, it’s above board, but I certainly didn’t know about the special release arrangements Eamon describes and I’ll bet no one else did either.

What I’m reading here sounds like a) an unfair market advantage and b) nothing at all like efficient capital allocation.

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7 comments in reply to "More on Early Trades"

  1. Mike Wagner says:

    Jared, where have you been???

    This is old news.
    Rick Santelli is correct.
    This is an HFT story. Are you not aware that US Stock Exchanges that have their data-centers based in New Jersey have been selling “snap-shots” called Flash Orders to high-frequency trading firms for YEARS… which allows these firms to see orders and order-flow 30 milliseconds before everyone else?

    Ultra-Low Latency Direct Market Access allows the HFT crowd to take advantage of other market participants that are unable to spend the money for such access. Moreover, the Exchanges are in the business of SELLING THIS ACCESS.

    Do some homework about how HFT works and how the Exchanges give them the opportunity to “see” orders before other (retail) market participants.


    • Mike Wagner says:

      PS. Under an exception to Rule 602 of Regulation NMS flash orders are currently allowed. These orders are “flashed” to recipients (HFT) of the venue’s proprietary data-feed to see if any of those firms want to take the other side of the order. This is a huge advantage to those who have the money and budget to spend on such “access” and technology.

      In August of 2009, some venues voluntarily discontinued this practice; such as Nasdaq and Bats. However, Direct Edge still continues to offer this kind of data and access. It’s downright mind-boggling that the SEC (and the Obama Administration) continue to ignore this incredible advantage and the TWO-TIERED MARKET that currently exists today.


    • Jared Bernstein says:

      This ain’t that! (IE, Eamon’s story.) This is about the tiered release of the MI cons conf survey, which as you heard, too few of us knew about, including Cramer, who’s pretty knowledgable about such things.

      I agree re HTF and thought Rick agreed with me…they arbritrage off of this stuff and it has nothing that I can see to do with financial markets efficiently allocating capital. How’s about a financial transaction tax to throw a little sand in these inefficient wheels!?


      • Mike Wagner says:

        No, a financial transaction tax is a terrible idea. The regulators just need to do their job for a change, and be pro-active, instead of always REACTING to what has already occurred.

        They didn’t completely think through Reg. NMS very well in my opinion. And this two-tiered “market” exists because they put an emphasis on liquidity, rather than price. A financial transaction tax will simply pass costs along to everyone, not just the HFT crowd.


  2. rjs says:

    more manipulation in the FX markets broke yesterday…according to Bloomberg, employees have been front-running client orders and rigging WM/Reuters rates by pushing through trades before and during the 60-second windows when the benchmarks are set…

    felix has more: http://blogs.reuters.com/felix-salmon/2013/06/12/annals-of-market-manipulation-fx-edition/


  3. Mike Wagner says:

    Don’t look now, but the Nat-Gas Inventory Report that was released this morning (Thursday) via the US Energy Department showed a big SPIKE in trading 7-whole seconds BEFORE the report came out. During those 7 seconds, a total of $17 million dollars in natural gas contracts traded, ahead of the number. Talk about having an “edge”.


    • Mike Wagner says:

      Consumer Sentiment came out this morning (Friday) at 9:55am Eastern time and their was a spike of activity 2 seconds before the data came out. Again, this is an “HFT” issue and the SEC continues to decline to comment. The Obama Administration is clueless.


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