HFT Computers Go To Realm That Is Beyond Human Limits, Scouring The Sub-Second Regions For Our Weaknesses

Psychology is one of the most important factors in financial markets.  Psychology sets prices, enables aggressive discoveries of accurate prices, and we are all susceptible to it.  In college, many of us learned non-sense models, we learned how everyone does everything (bringing no real ingenuity to the market except for a handful of intelligent human beings).  Instead of focusing on P/E's and tax havens, what if you price a firm just based on perception?  Some the high-end HFT models are able to do just this.  These programs have a code line that clearly defines the human limitations.  We can only react so fast.  The signals in our brain travel at light speed and when the information flow is large enough, these signals can be slowed as we process and store and decipher what is happening.  Co-located machines can be enlarged and improved upon so as to enable the fast processing, storing, and deciphering of information.  Simply put, we can't beat HFT at their own game and this form a trading risks creating fractures within financial markets that when ignored (Normalcy Bias) will cause severe breakdowns in pricing and capital formation as trust vanishes and participants go elsewhere to compete.

ECB, FRBNY, and CME Inventory Update

Europe's bailout rumor mill is running again and the level of monies involved are growing each week.  For those who are unfamiliar with Central Bank measures or for those who have stumbled upon us through a search and are unaware of our obsession with these accounts, there is a strong demand overseas for the USD and the United States is giving it up like a drunk prom date.  Surprisingly, the one thing that seems to be maintaining value for the USD is the fact that the US has a sovereign bank.  In Europe, each country has its own sovereign bank but the big dog is a separately incorporated bank, the European Central Bank.  Sovereign nations have been deterred from drawing from the FRBNY and we suspect this is because their risk of default is so serious that FRBNY figures it doesn't need any more problems. 

Webcast Of The ECB Press Conference 9 February 2012

ECB Reaches Greek Deal

• Introductory statement by Mario Draghi, President of the ECB.
• Question and answer session. Registered journalists pose questions to Mario Draghi, President of the ECB, and to Vítor Constâncio, Vice-President of the ECB.

NBBO. What NBBO?

Extensively over the months we have highlighted the serious shortfalls associated with High Frequency Trading.  We've pointed to ridiculous claims made by those who are "in-the-know".  Most of us already know that the only reason we even have tight spreads is because of the rebates offered from the exchanges.  Nanex has just released 2 new reports which depict the lack of supporting evidence that the NBBO spread has tightened since 2007.  What's more, the findings reveal that the NBBO has decreased in stability.  For what its worth, government officials just don't know what they are talking about.

Fast and Furious Holder Hearing Draws Thousands

From House Oversight Committee:

WASHINGTON D.C. - Yesterday, the House Committee on Oversight and Government Reform pressed Attorney General Eric Holder to deliver accountability for Operation Fast and Furious and stop the Justice Department's year-long effort to stonewall Congress and the American people. More than 13,000 taxpayers watched the hearing via FastAndFuriousInvestigation.com, underscoring the broad public interest in the committee's work to expose and stop the Obama Administration's reckless law enforcement techniques.

Financial Markets: Down For The Count

The amazing wizards from Nanex, which are by far the best, has released an animated graph which shows the ever increasing levels of HFT churning with in the fragmented and broken financial markets.  Many of the trusted heads of banks and governments have defended HFT, claiming they add liquidity and tighten spreads.  We've highlighted a plethora of instances where this is simply not true and even the complete opposite in most instances.  Ever since the exchanges began selling enriched data feeds to co-located firms, the market has been tilted and the "fair" environment our President always talks about is non-existent.  We've seen the co-located machines front run Chicago PMI data (here), the Michigan Consumer Confidence index (here), RIMM errant news (here), and the list goes on.  The retail investor can not play in this market.  Should HFT be restricted, we would expect to see markets stop, enabling the evidence of a 100% computer driven market to be displayed in everyone's faces.