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ronin


Total Posts: 679
Joined: May 2006
 
Posted: 2021-01-30 14:39
> Finally, I'd expect that the HFTs, and HFT-ish stat arb desks are trading between each other like crazy

So you're thinking, 10 yard of real money == 100 yard of flow? Maybe. It's a bit more than what I would expect, but not ridiculously more. And these are weird times.


> As for Robinhood (basically a shitty website feeding flow to Citadel)

Hm - if Citadel was on the other side of all thiis flow, the cash they have with Melvin is the least of their concerns.

"There is a SIX am?" -- Arthur

ronin


Total Posts: 679
Joined: May 2006
 
Posted: 2021-01-30 14:42
> I find it hilarious Stevie Cohen, the world's most obviously crooked inside trader, and his worm creature Plotkin, is whining about this.


"I most strenuously object to these allegations. The worm creature was set free years ago. He is no longer 'my' worm creature. He is just, you know, 'worm creature'."

-- SAC


"Yeah, whatever he said."

-- GP

"There is a SIX am?" -- Arthur

prikolno


Total Posts: 94
Joined: Jul 2018
 
Posted: 2021-01-30 16:23
I actually believe Vlad's side of the story. I've lived long enough to remember the spectacular FXCM implosion. RH doesn't self-clear from what I remember, so it's more likely that Apex - who are toeing the line with their regulatory capital requirements for these deep discount retail brokers - gave no heads up. Seems like a case of rather sloppy risk management and PR.

Maggette


Total Posts: 1307
Joined: Jun 2007
 
Posted: 2021-01-30 17:09



@jslade
">The stock is owned by Blackrock, Vanguard and the usual suspects.

Erm, no, I'm pretty sure that's not how my 401k works. Vanguard gets paid no matter what their portfolio selections do."

I am just quoting what is public knowledge. That BlackRock and FMR owned almost a fifth of GME company before the crazy stuff started...and still do (to my information).

@ES
"Finally, I'd expect that the HFTs, and HFT-ish stat arb desks are trading between each other like crazy. There's a lot of money to be made for everyone. This isn't like normal market conditions, where the low-latency kings scrape rebates at the front of the queue. A lot of chaos in the microstructure will cause a lot of disagreement between even slightly different models and parameterizations. Disagreement creates volume."
That confuses me. I obviously don't know shit about HFT MM operations. But if I would run such an operation, I guess I have a fine low risk income flow out of a lot of products I make markets in? Why should I ruin anything by taking the risk trading in a bat-shit environment where all my models are probably worth shit? Just black-list that stock and it Options chain and don't make markets for it ? No?

Ich kam hierher und sah dich und deine Leute lächeln, und sagte mir: Maggette, scheiss auf den small talk, lass lieber deine Fäuste sprechen...

Maggette


Total Posts: 1307
Joined: Jun 2007
 
Posted: 2021-01-30 17:17
"RH doesn't self-clear from what I remember, so it's more likely that Apex - who are toeing the line with their regulatory capital requirements for these deep discount retail brokers - gave no heads up. Seems like a case of rather sloppy risk management and PR.
"

That, IMHO, sounds much more plausible than Cohen, Gates, Bezoz, Thiel and..of course....Soros getting on the phone and bullying IB and RH out of trading :). Less cool. But more plausible.

I could have traded that stock through my IB UK account whenever I wanted by the way. With an normal retail account. All day. Not my EU account though. So whoever did rig the market against the little guy (me)....did a shitty job:).

Ich kam hierher und sah dich und deine Leute lächeln, und sagte mir: Maggette, scheiss auf den small talk, lass lieber deine Fäuste sprechen...

tbretagn


Total Posts: 297
Joined: Oct 2004
 
Posted: 2021-01-30 17:28
There has been an explosion of retail volume which means the T+2 settlement started to go hawwire and DTC raising the margining meant drastic action needed to be done.
Plus most RH accounts are on margin.
RH seems to have called credit lines which makes complete sense (if you suddenly have 10bn extra collateral to settle above your normal daily biz then maybe you need outside help - and that's exactly what credit lines are there for - think of it as AWS load charge).

Et meme si ce n'est pas vrai, il faut croire en l'histoire ancienne

jslade


Total Posts: 1243
Joined: Feb 2007
 
Posted: 2021-01-31 14:04
> BlackRock and FMR owned almost a fifth of GME company before the crazy stuff started...and still do (to my information).

Those are all ETF positions in someone's 401k (including presumably mine; full disclosure, lol). I don't know why the financial reporters muddy the waters with "look, those foolish redditors are making blackrock rich" -probably the same reason they fuck everything else up.

People are polarizing on the clearing houses as the point of failure here that caused the entire US establishment, from Discord to NYSE, to chimp out at a bunch of redditors with $600 stimmy checks. Probably because nobody knows what happens when the DTCC explodes (and yes DTCC clears for the EU as well -not for London). I think they failed to deliver around 2 million gamestonk shares in December. It's going to be a much larger number as of tomorrow. What happens when the clearing house can't deliver that many naked shorts? It's happened before, but not to this extent. DTCC has been involved in lawsuits for decades over this shady business, but as naked shorts usually resolved themselves, they were never held accountable for it.

https://web.archive.org/web/20160401175715/http://www.euromoney.com/article/1001047/naked-shorting-the-curious-incident-of-the-shares-that-didnt-.html
https://web.archive.org/web/20090302054831/http://www.dtcc.com/news/press/releases/2007/wsj_response.php?lpos=3&lid=3

There's a fairly simple solution which actually does something constructive: Gamestonk's board should issue new shares and sell them to whoever is on the hook for the naked shorts. Gamestonk could raise 20 billion even selling at a discount to present market prices, using that in some way that at least provides local jobs to regular Americans for a few more years; even if it's not used for anything otherwise helpful. I'm pretty sure they can start their own line of games this way; build local gaming cafes, etc. Plotkin and Cohen (and whoever else) will have to suffer the towering indignity of foregoing their usual 100 Lambos, jewel encrusted skulls, stuffed sharks and they'll have to make do with a lower than average number of new sex slaves. Of course we all know this isn't going to happen; rebuilding American companies that provide jobs to regular joes is tantamount to communism, especially when the money is raised via the free market.

Leinweber and Khan suggested a similarly constructive alternative to TARP back in 2008, which was similarly ignored.

http://radar.oreilly.com/nabi-Nov11.pdf

"Learning, n. The kind of ignorance distinguishing the studious."

Maggette


Total Posts: 1307
Joined: Jun 2007
 
Posted: 2021-01-31 14:32
"rebuilding American companies that provide jobs to regular joes is tantamount to communism"

Yep. Go back to North-Korea, you fucking Commi! :).

Jokes aside, issuing stocks is kind of an neat idea. The Reddit gang won't like it though.It will look like the "little guy" got screwed over again.






Ich kam hierher und sah dich und deine Leute lächeln, und sagte mir: Maggette, scheiss auf den small talk, lass lieber deine Fäuste sprechen...

jslade


Total Posts: 1243
Joined: Feb 2007
 
Posted: 2021-01-31 14:48
What's not to like? They can go back to normal trading and they're holding shares in a stonk which has 20b in cash value. It's arguably a better play than Tesla or Twitter. Maybe new Gamestonk will bring ethics to gaming journalism.

Gamestop isn't a terrible company if you dig around in their financials. Obviously they're in trouble, but they could conceivably do a lot of things with the money.

"Learning, n. The kind of ignorance distinguishing the studious."

chiral3
Founding Member

Total Posts: 5212
Joined: Mar 2004
 
Posted: 2021-01-31 16:12
You guys brought up 2008... so, being one of the old-timers around here, I'll mention VW. Rather than re-hashing here's a note from the EQD sales guys at JPM who summarized it quite well:

Those juniors are also probably too young to remember that a couple of years ago, in another troubled period (the GFC) , we-the old guard, also went through our GME episode…back then it was called VolksWagen. Let’s go back in time. The year is 2008, the world is falling apart and demand for cars plummets … autos are filing for bankruptcy left and right but VW manages, despite being saddled with debt and lacking business prospects, to salvage a couple quarters and post better-than-expect earnings making its stock the best outperformer of the sector but also the best short candidate.. Flagship HFs start smelling blood and initiate short position in a name supposedly poised for bankruptcy. In reality Porsche , at the time frequent but unrelated business partner, had decided to seek more voting rights and control of the VW board and embarked on a buying program a couple years back . VW continued to inch up through 2006 and 2007, going from about €30 in 2005 to over €150 by 2007, seemingly absent any outside reason ….and as the stock continued to grind “inexplicably” in the midst of the GFC , shorts intensified to balloon to 12% of outstanding shares (yes, I know it sounds ridiculous now). The trigger came on a Sunday night of October 2008 (it’s always on a Sunday night!) when Porsche disclosed owning 43% of VW and 32% via calls. Minor detail was that the German gov’t also owned another 20% leaving the true available float to basically close to 0. When they woke up on Monday (don’t know if they slept though having had the entire Sunday to mull over their position ), short-sellers caught off guard by this new supply/demand imbalance had no choice but to cover. VW rocketed to €900 in a matter of days, becoming the world largest mkt cap almost overnight (300b at the time, it also sound ridiculous now) with veteran HFs losing some $30b in the process. At a time when autos were at the brink of extinction , Porsche had effectively made more money trading stocks than selling cars. We are not talking about a forgotten video-games mall name that a crowd of retail day-traders decided to magically bring back to life .. VW was THE jewel of the German crown , a 17% percent weight in the DAX ( the equivalent of AAPL , MSFT, AMZN and FB combined in today’s SPX). Ask any market participant what he was doing the day of the VW infinity-squeeze … he will tell you without blinking. And then ? Once the last short got covered , the stock retreated back to its 2008-fundamental reality , lost 90% of its value ….and never really recovered ( still 80% off its ATH today).

Nonius is Satoshi Nakamoto. 物の哀れ

nikol


Total Posts: 1352
Joined: Jun 2005
 
Posted: 2021-01-31 19:58
We were not exposed, but I had to write short investigation report to managers about this "accident". Main thing by then was hidden info about ownership structure, which effectively reduced free float to none.

Here, is a bit different flavour - nobody believed that retail will dare to hit "sacre" "Too big to fall".

... What is a man
If his chief good and market of his time
Be but to sleep and feed? (c)

NIP247


Total Posts: 553
Joined: Feb 2005
 
Posted: 2021-01-31 23:19
As someone sitting on the jpm ldn eqd floor at that time, I remember clearly the eery silence of the place. There were no sounds from either sales or traders that day as VOW kept pushing higher and higher...

On your straddle, done on the puts, working the calls...

prikolno


Total Posts: 94
Joined: Jul 2018
 
Posted: 2021-02-01 00:25
> RH doesn't self-clear from what I remember, so it's more likely that Apex

Came to my attention that RH stopped using Apex in 2020 and appears to self-clear now. Poor risk management from their own clearing entity?

hftpm


Total Posts: 9
Joined: Oct 2013
 
Posted: 2021-02-01 01:11
This is the hilarious part

https://www.dw.com/en/hedge-funds-claims-against-porsche-dismissed/a-18344097

EspressoLover


Total Posts: 478
Joined: Jan 2015
 
Posted: 2021-02-01 04:03
[Warning ahead of time. This post is a long tangent only loosely related to the topic. Please skip if not of interest]

> Why should I ruin anything by taking the risk trading in a bat-shit environment where all my models are probably worth shit?

That's definitely what I originally thought. But experience has largely proved otherwise. (Caveat, other people's experience may be different than mine, HFT can mean different things to different people, not all strategies are the same, yada, yada, yada.)

A disproportionately high amount of HFT PnL comes from a sliver of highly turbulent periods. Like surprisingly so. If you back out the flash crashes and the volatility spikes and the halts and so on, my guess is a lot desks would barely be profitable. (Another caveat. A lot of my experience is in trading unusually volatile and unstable markets. Again YMMV.)

The biggest risk for most HFT operations is failing to generate enough to cover the fixed costs. For every one HFT that blows up from market losses, at least ten fail because they can't pay the bills. Going dark introduces a risk all of its own. Intraday PnL drawdowns are pretty small. HFTs keep really tiny inventories relative to their revenues. So even if the vol on the underlying goes haywire, do you really care if your 30 Sharpe strategy goes to 15 Sharpe?

(That being said, the one reason to avoid turbulent conditions is lack of confidence in the ability of the IT systems to operate correctly. Knight-style operational failure is much more of a real risk than actual market exposure on a correctly working strategy.)

I can't speak for GME, but in similar conditions, you'd really be surprised just how non-toxic the order flow turns out to be. Especially on a short-term basis. A lot of the real flow winds up being near random and totally insensitive to the spread, unaware of its own impact, and uncorrelated with microstructure alpha. Obviously, that's all great for market makers.

My theory is that the vast majority of non-HFT participants, simply can't keep up with the market. Either their normal refresh times are too slow or they can't handle the volume of the data. In orderly markets the execution algos used by big institutions are pretty good about managing their realized t-costs. But I think they break down under stress. A lot of participants are shooting orders off stale or even corrupt prices. For a market maker that can keep up in realtime it's almost like having a last-look advantage.

Good questions outrank easy answers. -Paul Samuelson

Maggette


Total Posts: 1307
Joined: Jun 2007
 
Posted: 2021-02-01 07:43
@ES
Insightful as always. Thx.

Ich kam hierher und sah dich und deine Leute lächeln, und sagte mir: Maggette, scheiss auf den small talk, lass lieber deine Fäuste sprechen...

nikol


Total Posts: 1352
Joined: Jun 2005
 
Posted: 2021-02-01 12:10
Long ago (~2010) I heard rumors that ANN-driven strategies implemented by some institutions in late 1990s suffered during 2000 crash. Those rumors remained rumors without any documental substantiation (or maybe I missed that?).

Today we witness re-emergency of these technologies in form of AI and ML on top. I would be curious to hear if there is any similar situation here.

... What is a man
If his chief good and market of his time
Be but to sleep and feed? (c)

EspressoLover


Total Posts: 478
Joined: Jan 2015
 
Posted: 2021-02-01 17:44
> They can go back to normal trading and they're holding shares in a stonk which has 20b in cash value.

Raising $20 billion seems optimistic. The entire capitalization of the stock is only $20 billion right now. They'd have to attract significantly more than the cumulative inflows that has already arrived from WSB. A lot of the WSB holders bought in at much cheaper prices at the beginning, so we're actually talking about even more than the cumulative inflows. Doubling the float overnight, without impacting the price seems unlikely.

I could see maybe raising $5 billion in a secondary. Assuming the fundamental value of GME is about $1 billion, shareholders would wind up paying a buck for twenty cents of assets. To be honest, that might actually still be a better value than TSLA, or even AMZN. But at the very least there's a possibility that those Tesla and Amazon are overvalued, but ridiculously dynamic and innovative companies. It's a long shot but they may actually grow into their valuations. However, George Sherman is never going to be Jeff Bezos no matter how much cash WSB throws at him.

It's probably all moot thought, because the SEC is likely to block them from selling new shares at the current price. The same way they did with Hertz.

Good questions outrank easy answers. -Paul Samuelson

pj


Total Posts: 3604
Joined: Jun 2004
 
Posted: 2021-02-03 09:43
There is song about that

The older I grow, the more I distrust the familiar doctrine that age brings wisdom Henry L. Mencken

nikol


Total Posts: 1352
Joined: Jun 2005
 
Posted: 2021-02-03 10:55
while stock deflates the story will get monetized

WSJ: GameStop Saga Heads to Netflix and the Big Screen

... What is a man
If his chief good and market of his time
Be but to sleep and feed? (c)

ronin


Total Posts: 679
Joined: May 2006
 
Posted: 2021-02-08 16:08
2sigma got hammered in January.

Reddit-led market turmoil hits big quant hedge funds

They didn't have good 2020 either.

"There is a SIX am?" -- Arthur

rogueman


Total Posts: 44
Joined: Feb 2008
 
Posted: 2021-02-27 22:52
I guess they didn’t take any possible >2 sigma events into account Big Smile

ronin


Total Posts: 679
Joined: May 2006
 
Posted: 2021-03-01 12:03
"We are called 2 sigma. It sounds like you are looking for the fund called 25 sigma. Down the corridor, room B-2-1."


"There is a SIX am?" -- Arthur

hftpm


Total Posts: 9
Joined: Oct 2013
 
Posted: 2021-04-11 01:57
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