Jester and Friends at Jester’s Place Thurs. PM Part 1
Jester: YOU GUYS SURE ARE IMPATIENT… HERE I AM PLAYING JAMES BOND AND I HAD TO STOP FOR ALL THE CALLS… LOL
Jester: HI FRIENDS! GOOD TO SEE EVERYONE…. INTERESTING DAY TO SAY THE LEAST…
jester: I LEARNED ANOTHER HARD LESSON IN THIS DANG INTEL GAME TODAY… DON’T BLOW OFF STUFF FROM GOOD SOURCES NO MATTER HOW SILLY IT SOUNDS…
Jester: THE SIMPLE FACT WE WERE TOLD YESTERDAY THAT THE MARKET WOULD SHUT DOWN IN THE MIDDLE OF THE DAY AND IT DID IS HUGE!
Jester: NOW… IT WOULD HAVE BEEN BETTER IF WE HAD BELIEVED IT I GUESS… LOL
seveneleven: Lets hear more silly intel
….
Read More Link on Right
Jester: seveneleven WE DIDN’T BELIEVE IT… DID NOT SEEM POSSIBLE… SO WE WERE LIKE YEAH OKAY WHATEVER…
Jester: SO REDWOLF AND I HAD ALREDY BEEN TRYING TO RUN DOWN INFORMATION ON THE DARK LIQUIDITY ISSUE… AND WE THINK IT MAY HAVE A LOT TO DO WITH THAT…
Jester: FROM REDWOLF JUST A LITTLE WHILE AGO… TODAY’S EVENT WITH NASDAQ WAS RESET RELATED. THE DARK LIQUIDITY WE DISCUSSED EARLIER FITS PERFECTLY WITH THE NEARLY THREE HOUR SHUT DOWN. NOW I AM NOT SURE IF IT WAS TO CATCH TRADERS DOING BAD THINGS OR WAS IT TO ALLOW A CLEAN UP TO HUSTLE IN THE REST? EITHER WAY IT WAS NEEDED TO MOVE THINGS FORWARD.
Jester: INTERESTINGLY ENOUGH WE HAD ALREADY BEEN LOOKING AT THAT AND I RAN ACROSS THIS ARTICLE IN THE WALL STREET JOURNAL A LITTLE WHILE AGO…
http://online.wsj.com/article/SB10001424127887324619504579028873794227410.html
Jester: BEAR WITH ME… OKAY?
Jester: COUPLE INTERESTING POINTS IN THAT ARTICLE…
FLPatriot59: The dark liquidity pool gets its name because details of these trades are concealed from the public, clouding the transactions like murky water. Some traders that use a strategy based on liquidity feel that dark pool liquidity should be publicized, in order to make trading more “fair” for all parties involved.
Jester: Nasdaq officials internally pointed to a “connectivity” problem with rival NYSE Arca, according to people familiar with the matter, that led to price quotes not being reported. Nasdaq officials say their technicians should have been able to manage the problems and avoid the halt. A person close to NYSE Euronext said the exchange was confident that regulators will review the outage thoroughly.
Jester: AND THEN FURTHER DOWN….
Jester: Several “dark pool” trading platforms, electronic venues set up to facilitate private stock transactions, shut down altogether in the wake of Nasdaq’s outage. Goldman Sachs Group Inc. shut down its Sigma X dark pool from early afternoon through the rest of the trading day, traders and others familiar with the matter said. Dark pool platforms run by Wells Fargo & Co., BIDS Trading LP and Citadel LLC shut down for varying amounts of time after Nasdaq forced a halt to trading in its listed securities, people with direct knowledge of the decisions said.
Jester: NOW THE PERTINENT POINT IS STILL… THE SIMPLE FACT WE WERE TOLD YESTERDAY THAT THE MARKET WOULD SHUT DOWN IN THE MIDDLE OF THE DAY AND IT DID…
Jester: THERE ARE THREE MAJOR TYPES OF DARK POOLS. THE FIRST TYPE IS INDEPENDENT COMPANIES SET UP TO OFFER A UNIQUE DIFFERENTIATED BASIS FOR TRADING.
THE SECOND TYPE IS BROKER-OWNED DARK POOLS WHERE CLIENTS OF THE BROKER INTERACT, MOST COMMONLY WITH OTHER CLIENTS OF THE BROKER (POSSIBLY INCLUDING ITS OWN PROPRIETARY TRADERS) IN CONDITIONS OF ANONYMITY.
FINALLY, SOME PUBLIC EXCHANGES ARE CREATING THEIR OWN DARK POOLS TO ALLOW THEIR CLIENTS THE BENEFITS OF ANONYMITY AND NON-DISPLAY OF ORDERS WHILE OFFERING AN EXCHANGE “INFRASTRUCTURE”. DEPENDING ON THE PRECISE WAY IN WHICH A “DARK” POOL OPERATES AND INTERACTS WITH OTHER VENUES IT MAY BE CONSIDERED, AND INDEED REFERRED TO BY SOME VENDORS AS A “GREY” POOL.
Jester: THEN THERE IS THE ‘THEY NEEDED TO DO IT IN PREPARATION FOR THE RESET TO CONFIRM SOME INTERCONNECTIVITY ISSUES’… AND MAYBE THEY HAD TO DO IT WHILE THE SYSTEM IS WORKING…
Jester: AND THE THEORY THAT IT WAS TO CATCH SOMEONE DOING SOMETHING THAT THEY KNEW WSA GOIGN ON AND THAT WAS THE ONLY WAY TO VATCH THEM DOING IT… TO STOP THE SYSTEM IN THE MIDDLE OF IT HAPPENING…
Jester: AND THE THEORY THAT SOMEONE WAS DOING A TRADE SO HUGE THAT IT SPIKED THE SYSTEM AND SHUT THINGS DOWN…
Jester: THEN THERE IS THE SHOT OVER THE BOW THEORY. GET IT DONE… OR ELSE… LOOK WHAT WE CAN DO… JUST TO PROVE THE POINT…
Grunt0311: Jester OOOOOOOH… I LIKE THAT ONE.
Jester: ALL THEORIES THERE… WE ARE WORKING ON IT… I AM SURE GURU CUBBY WILL BE GETTING AN ANSWER ON IT… WHEN HE FIGURES IT OUT THEN WE WILL REPORT IT BACK AS SOON AS WE CAN…
Jester: THE MAIN POINT IS WE NOW KNOW IT WAS PLANNED… WHATEVER THE REASON IS IT WAS DEFINITELY SET UP AHEAD OF TIME..
Iank1978: well if people knew ahead of time this was going to happen either it was to catch peeps with their pants down or a system test or integration IMO or both
Jester: AND LIKE REDWOLF AND I DISCUSSED… IT CAME FROM ONE OF MY INTEL SOURCES IN THE RESET WORLD… SO WE KNOW IT WAS THEM DOING SOMETHING TO PREP THE RESET… JUST NOT SURE WHICH SIDE RIGHT AT THIS PARTICULAR MOMENT…
Jester: AND WE NOW ARE PRETTY SURE IT HAS TO DO WITH THE DARK LIQUIDITY SITUATION… SOOOO… I AM GUESSING THEY HAVE A PROBLEM WITH THAT SCENARIO…
Jester: SO ANYWAY… THE END OF THE ARTICLE IS ALSO INTERESTING…
Jester: ITG’s traders learned about the halt within minutes and scrambled to manually stop trading Nasdaq stocks, eventually shutting down the entire dark pool. The electronic messages officially alerting ITG of the halt didn’t reach the firm until about 2:08 p.m., almost two hours after the shutdown, said the person familiar with the firm’s operations.
Jester: WE UNDERSTAND THAT USING DARK POOLS IS IN A SENSE A MANIPULATION OF THE MARKET…
Jester: Truly dark liquidity can be collected off-market in dark pools. Dark pools are generally very similar to standard markets with similar order types, pricing rules and prioritization rules. However, the liquidity is deliberately not advertised—there is no market depth feed. Such markets have no need of an iceberg-order type. In addition, they prefer not to print the trades to any public data feed, or if legally required to do so, will do so with as large a delay as legally possible—all to reduce the market impact of any trade. Dark pools are often formed from brokers’ order books and other off-market liquidity. When comparing pools, careful checks should be made as to how liquidity numbers were calculated—some venues count both sides of the trade, or even count liquidity that was posted but not filled.+
Jester: Dark liquidity pools offer institutional investors many of the efficiencies associated with trading on the exchanges’ public limit order books but without showing their actions to others. Dark liquidity pools avoid this risk because neither the price nor the identity of the trading company is displayed.
Jester: Dark pools are recorded to the national consolidated tape. However, they are recorded as over-the-counter transactions. Therefore, detailed information about the volumes and types of transactions is left to the crossing network to report to clients if they desire and are contractually obligated.
Jester: Dark pools allow funds to line up and move large blocks of equities without tipping their hands as to what they are up to. Modern trading platforms and the lack of human interaction have reduced the time scale on market movements. This increased responsiveness of the price of an equity to market pressures has made it more difficult to move large blocks of stock without affecting the price.
Jester: Dark pools are run by private brokerages which operate under fewer regulatory and public disclosure requirements than public exchanges. Tabb Group estimates trading on the dark pools accounts for 32% of trades in 2012 vs 26% in 2008.
Jester: For an asset that can be only publicly traded, the standard price discovery process is generally assumed to ensure that at any given time the price is approximately “correct” or “fair”. However, very few assets are in this category since most can be traded off market without printing the trade to a publicly accessible data source. As the proportion of the daily volume of the asset that is traded in such a hidden manner increases, the public price might still be considered fair. However, if public trading continues to decrease as hidden trading increases, it can be seen that the public price does not take into account all information about the asset (in particular, it does not take into account what was traded but hidden) and thus the public price may no longer be “fair”.
Jester: Yet when trades executed in dark pools are incorporated into a post-trade transparency regime, investors have access to them as a part of a consolidated tape. This can aid price discovery because institutional investors who are reluctant to tip their hands in lit market still have to trade and thus a dark pool with post-trade transparency improves price discovery by increasing the amount of trading taking place.
Jester: AND THERE IS MORE BUT THAT IS PRETTY MUCH THE GIST OF IT ALL… THE SYSTEM OUTSIDE THE SYSTEM USED TO MANIPULATE THE SYSTEM…
