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Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

Virtu Delays IPO Amid "Flash Boys" Furor; FBI Investigates Legality of High Frequency Trading; Reader HFT Anecdotes

Posted: 01 Apr 2014 06:13 PM PDT

The bloom is about to come off the High Frequency Trading bloom, but only after billions and billions of dollars were skimmed off trades.

With everyone now looking the same direction and seeing the same thing, HFT trading firm Virtu Will Delay IPO, amid furor spurred by Michael Lewis Book "Flash Boys".
Virtu Financial Inc., the high-frequency trader that announced plans last month to sell shares, has delayed the deal, two people with knowledge of the matter said.

Virtu's bankers won't start marketing the initial public offering until after April 20, delaying the process from this week, according to the people, who asked not to be named because the decision is private.

The delay comes amid unprecedented scrutiny of high-frequency traders. "Flash Boys," the Michael Lewis book released yesterday, argues that high-speed traders, Wall Street brokerages and exchanges have rigged the $23 trillion U.S. stock market. New York Attorney General Eric Schneiderman is examining privileges such as enhanced data feeds marketed to high-speed firms, while the Federal Bureau of Investigation is looking into whether those traders are breaking U.S. laws by acting on nonpublic information.

Virtu said it doesn't believe it broke the law, "but we cannot predict the outcome of the inquiry."
Reader Anecdotes

In response to High Frequency Trading Hits 60-Minutes Scrutiny; Trading or Skimming? Reader Sam writes ...
Hey Mish,

We don't have regular TV anymore but enjoy many other types of programming for much less than the cost of cable TV etc. So I appreciate the link to 60 Minutes as it was fantastic. High Frequency Trading is something I watch and experience daily. 

On Friday I was selling a sizable quantity of shares in a small company and from the seller side I watch a million shares trade above my sell price.  My shares were being picked off bit by bit and only a partial fill by the end of the day. It was unreal and very obviously being manipulated. The exchanges were ignoring my order to sell and matching orders at higher prices. I've also had the same buy side happen as in the 60 Minutes video with my buy price ignored as well.

This is most frustrating. I didn't get my buy price even though it was in the money and with lots of shares trading. I also see data on the screen that's in conflict with other similar data which seems to be hang-ups in the threads of information.

Thanks
Sam
Something Stinks

Reader PTB with whom I shared the above email responded ...
I have experienced the same thing your correspondent mentions. For example, I put in a limit sell order for a thinly traded micro-cap, and saw 100ds of thousands of shares trade ABOVE my limit sell price, and still got no execution. The broker explained that since my price was above the official bid, I had no right to an execution, which is of course technically correct.

But why were those trades ABOVE my limit about? Shouldn't the buyers have been interested in buying my lower priced shares? Something clearly stinks.
Looks Like Fraud, Smells Like Fraud

If it smells like fraud, it's because it is fraud. Trades should go to the best execution price. It's clear they don't and HFT firms are in the middle of it, skimming billions of dollars in the process. That is the only way these companies can go for years with no trading losses.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Gazprom Raises Price of Gas for Ukraine 44%, Rationing Coming Up

Posted: 01 Apr 2014 10:51 AM PDT

In an obvious move to pressure Ukraine, Gazprom Raises Gas Export Price.
Russia's natural-gas export monopoly raised prices for Ukraine 44 percent after a discount deal expired, heaping financial pressure on the government in Kiev as it negotiates international bailouts.

OAO Gazprom (GAZP) said Ukraine is losing its right to pay less because it has piled up a debt of more than $1.7 billion since 2013. Ousted President Viktor Yanukovych won a lower price at the end of last year as he grappled with protests after ditching an association agreement with the European Union, on top of a previous discount in April 2010. That may also be overturned, according to Russia's government.

The move raises the prospect that state-run Gazprom may threaten to halt sales to Ukraine, which relies on Russia for about half its gas.

Ukraine has a "very low" 7.2 billion cubic meters of gas in underground storage, Andriy Kobolyev, chief executive officer of state-owned NAK Naftogaz Ukrainy, told reporters in Kiev today. Naftogaz has asked regional governors to limit utilities' gas consumption this month, he said.
Notice how talk of sanctions is winding down. They didn't work and won't work. Russia has the upper hand.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com  
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

France Criticizes European Commission as "Totally Useless", Wants More Time on Budget Deficits

Posted: 01 Apr 2014 10:11 AM PDT

The latest numbers from Insee, the national statistics institute show France missed its deficit target of 4.2% in 2013 by 0.1 percentage points. Public spending is also up. Spending now amounts to over 57% of GDP with debt reaching 93.5% of GDP.

The debt and deficit numbers are despite the fact that France's overall tax burden is 46% among the highest in Europe. France is collecting money, but what is it doing with it? The answer of course is wasting it on socialist dreams.

François Hollande's Deficit Plea Sets up Clash with Brussels

Today, France is pleading for more time to hit its deficit targets. Amusingly, Interior Minster Arnaud Montebourg, claims the European Commission is "totally useless on the question of growth".

This puts president François Hollande on a Major Clash Path with Brussels.
President François Hollande has made clear he wants Brussels to give his new French government more time to hit its already delayed budget deficit targets, setting up a potential clash with the European Commission and hardline partners such as Germany and Finland.

Announcing the appointment of Manuel Valls as prime minister on Monday night following a heavy local election defeat for his ruling Socialist party, Mr Hollande said the new government "will have to convince" Brussels that its plans to boost growth "must be taken into account" in terms of its budget targets.

Arnaud Montebourg, the leftist industry minister who is expected to continue to occupy a key role in the new government, weighed in on Tuesday, saying the commission was "totally useless on the question of growth".

He added: "With the choice of Manuel Valls and a fighting government, we have the chance of reorienting Europe. At the moment it is Europe that reorients us towards austerity and dogma when what we need is pragmatism."

The line from Paris echoes the stance taken by Matteo Renzi, Italy's prime minister, whose government has also set growth and jobs as its top priority. Both France and Italy are currently under a Brussels regime of "specific monitoring" of their public finances because of slippage in their efforts to cut their budget deficits and reduce public debt.

Germany and Finland recently issued a strong rebuke to the commission for giving France and Spain more time to meet the EU's deficit limit of 3 per cent of gross domestic product.

France was last year granted an extra two years to 2015 to meet the 3 per cent target. But the commission has already estimated that Paris will not achieve this.
In Rare Agreement with Montebourg

For the first time ever, I find myself in agreement with Montebourg. Yet, I propose a truncation of his statement to make it more accurate. The EC is not just "totally useless on the question of growth" but rather, the EC is "totally useless" period.

Of course Montebourg is totally useless as well, and so is Hollande's entire administration. Actually, they are worse than useless, and proof is in the negative results.

Finally, please note the irony in Montebourg's praise of Manuel Valls.

Manuel Valls stands on the right of the party and his appointment comes despite strong leftwing pressure for Valls to abandon his recent pro-business policy shift according to the Financial Times. 

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com 
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
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