QE 2: not just another giant ocean liner

I remember several years ago, before they decided to dismantle her in Dubai, when the Queen Elizabeth II arrived in San Francisco to much fan fare. People lined the bay all the way from the Golden Gate Bridge to her berth over by Pier 29. I happened to be crossing the Bay Bridge after she had berthed and caught a glimpse of her transom. It was massive. It almost dwarfed the impressive west-looking view of the San Francisco skyline. But that was the old QE 2. The new QE 2, even bigger and more impressive than the last, was christened in Southampton earlier this month. Ironically, this is happening at the same time that the markets are widely speculating that the Fed will announce the details of its own version of QE 2 at the conclusion of their meeting on 3-NOV. 

Top 10 Things I Hate Most About Trading

On a lighter note, but with a heaping teaspoon of truthiness...
Courtesy of The Dopey Cowboy

DARK POOLS are the one thing that keeps me up scratching my head at night. Regulators in all their genius, decided that your every day Joe Schmo investor was being treated unfairly and needed more market transparency.  So what did we do?  We created “dark pools” of super secret hidden liquidity. So much for transparency and disclosure.

VWAPS also helped to destroy the industry.  Market data that started out as a way to analyze daily stock activity has become a way of life.  How pathetic. Being average has now become the bogie.  There went all the creativity and differentiation amongst market makers, sell-side and buy-side traders.  It’s no longer about getting the best price for your customers or not impacting the tape.  It’s about being within a penny or two from the VWAP.

ALGOS- Screw them too. If I had my way, they’d be plucked off everybody’s desk like chickens. Stretch this! We are traders – not monkeys. We are supposed to prove how good we can trade based on information, levels, conviction and “feel”.  It's not trading when you throw your order in some algo and watch the micro-reports come back.

Flash Crash

Last Friday the SEC released the much anticipated report on the "Flash Crash" that occurred 6-MAY-2010 when the Dow sold off 700 points in a matter of minutes then recouped much of the losses almost as quickly to close down 347 for the day. The report found that a single market sell order of 75,000 SPX e-Mini futures contracts with a notional value of $4.1bil caused the sell off. To put that in perspective, 1 e-mini contract is equal to 500 SPY shares. That's the equivalent of sending 37,500,000 SPY to sell at the mkt with absolutely no regard to price. One can't blame the market for treating a mkt order like a mkt order. That's about 1/6th of the avg daily volume for the SPY. Although not officially named in the report, it has been revealed that a trader at the firm Waddell & Reed Financial in Kansas was responsible for the order. That's not exactly "adding alpha" to performance, which is the end goal of every trader.