U.S. regulators' $14 million settlement with high-frequency trading firm
Optiver over oil price manipulation in 2007 is a "milestone" victory in
their toughening stance on market malfeasance which is being...
By Pauline Skypala
High-frequency traders and commodity speculators are bad for markets,
according to Finance Watch, which is backing a proposed clampdown on such
market participants across Europe under the revised...
By Philip Stafford in London
Two telecom companies have claimed they will build the fastest trading
connection between London and New York, a development that highlights
growing demand from investors for...
By David Sheppard and Jonathan Stempel
U.S. regulators claimed their first victory in a four-year old effort to
crack down on oil market manipulation on Thursday, announcing a $14 million
By David Sheppard
U.S. President Barack Obama's bid to dampen the influence of oil
speculators by having regulators set trading margins could backfire,
potentially making prices even more volatile and leaving...
Leo Melamed, former chairman of the Chicago Mercantile Exchange, said on
Tuesday that large, privately negotiated trades that sparked a protest in
CME Group's Eurodollar options are critical to the...
BOE's Andy Haldane Channels Zero Hedge, Reveals The Liquidity Mirage And The Collateral Crunch
It's not as if this should come as a major surprise to ZeroHedge readers, but to hear officials from the Bank of England pointing out the sub-optimal nature of the financial system's information asymmetries is refreshing. Be it via any one of Andrew Haldane's three so-called arms-races (Returns - the past, Speed - the present, and Safety - the future), analogizing to the winner-takes-all 'sex-fest' blubberiest-optima of elephant seals and their 'extinction' implications, these socially 'bad' financial system outcomes are channeled superbly by the comedic Brit.
Returns to financial capital and financial labor rose to extraordinary levels by historical context in the lead-up to the crisis and were a key driver or propagator of the market's financial instability. Forget "keeping-up-with-the-Jones", this was "keeping-up-with-the-Goldmans" as the returns-race was achieved by leverage.
The current Speed-race, specifically trade-execution times and high-frequency-trading, where he crushes the hopes of every quote-stuffing algo's dreams of 'helping' the financial markets pointing to the mirage of liquidity that is provided as well as the fact that it removes bandwidth from the slower 'rest' of the market and warns "The Flash Crash was no one-off".
Finally he shifts to the future noting that we have seen since the crisis morph to a quest for safety, as opposed to risk/return, as, for example, bank debt investors increasingly seek security or collateral as "everyone wants to be senior or first in the queue" and just as we noted, the central banks have been willing and self-fulfilling participants in this safety race via their loan, purchase, and QE programs and its implicit subordination of everyone else as banks balance sheets become more and more encumbered.
Focusing on macro-prudential (as opposed to micro-based focus) solutions, he suggest capping leverage (and maybe bonuses), enforce order-cancellation rules to end quote-stuffing, and finally a limit on how much a central bank can encumber bank assets may be needed. A must-watch to reassure one's self that some central bankers really get it as unlike before, when nobody would touch on topics covered by ZeroHedge with a ten-foot-pole, at least they do now, if with a one-year delay.
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