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Steve,
For sure I think their is quite a bit of manipulation going on... but i think you have to
separate what I call 'structural manipulation' from just day trading manipulation. The
difference... for sure markets have a tendency to overshoot support and resistance levels...
markets are non-stationary so always changing. And for sure some big guys in the pit at
the CME, seeing a thin market will def. try and take the market under support or over
resistance to see who they can shake out (little guys like you and I - and banks who don't
want to hold too much risk)... Be aware, not all banks are huge risk takers. There are plenty
of traders at Merrill who's mandate is to run a tight ship risk wise... and they can also be
spooked out of legacy positions they may have taken while filling a client order.
'Structural manipulation' I have seen first hand many times... we used to sell certificated
products at a firm I worked at. They were like mini funds... you sell a 'high tech' certificate
to clients, milk them for about 5% in fees, sell $500m of the certificate, and it would be
priced off closing prices on a given date (e.g. July 8th)... no-one outside of the firm would
know... but we'd have $500m worth of stock, across say 30 names, to buy at the close...
we were the market effectively at that point... and anyone who stood in the way got
creamed. The certificates would be reconstituted (like an index) quarterly, when we'd have
a massive rebalancing trade to do... again we'd be the market at the close. Of course we'd
make even more money by the fact the certificate price that we sold to clients was 'calced'
off the closing price's of the relevant stocks... but we'd have been buying stock from a full
% or two lower (hence our fill was better than the clients got) and to top it off we might
only actually buy $450m of stock, effectively shorting the last $50m to clients at the
massively 'elevated' closing prices. It's not genius but it sure is an easy way of making
money!!! That kind of 'structural manipulation' goes on all the time - and it's often backed
by some invisible product that none of us have ever heard of.
Question 2... good question. Not sure I know the answer Steve. This is still very much in
development as we speak. I'd just be guessing. I think we'll have to sit tight and find out.
Love to hear your views if you have any...?
--- In amibroker@xxxxxxxxxxxxxxx, "Steve Dugas" <sjdugas@xxx> wrote:
>
> Hi - It is very nice to hear from someone who actually worked on the inside
> and knows firsthand how the "big boys" operate. I wonder if you would mind
> giving your opinion on a couple of other questions which seem to surface
> quite a bit on trading boards, etc.
>
> 1. To what extent would you say the markets are manipulated? I am always
> reading how the big boys will manipulate the markets to "steer the herd",
> etc, For example, spend a few million $$ ( pocket change for them I guess )
> on futures to move the markets where they want them to go, buy or sell at
> the price they want, then withdraw and let things collapse, etc. Or spin
> the news to drive the markets where they want them. Or they just plain
> lie...Or they work together to manipulate prices..etc, etc...I have heard
> many of these kinds of stories. Cramer seems to agree. But on the other
> hand, I can't help but wonder if we ( the little guys ) have enough money to
> be worth manipulating... What do you think?
>
> 2. I guess there are quite a few private platforms now where the big boys
> can trade directly with each other rather than on the open market. Do you
> see this having much of an effect on the markets.
>
> Thanks very much for your insights!
>
> Steve
>
> ----- Original Message -----
> From: "sidhartha70" <sidhartha70@xxx>
> To: <amibroker@xxxxxxxxxxxxxxx>
> Sent: Tuesday, July 08, 2008 9:23 AM
> Subject: [amibroker] Re: NEW USER - simple question.......
>
>
> > Just to give another viewpoint on this, and perhaps a slightly sunnier
> > assessment... I also
> > believe traders can often believe the opposite. i.e. that markets are
> > completely efficient
> > and therefore it's impossible to make money. My own experience has shown
> > again and
> > again that markets have pockets of inefficientcy and that continues,
> > albeit the form is
> > constantly in evolution.
> >
> > Take a simple, liquid stock like VOD.L. There are literally endless
> > strategies that could be
> > designed (billions)... it's my guess that no more than a few thousand are
> > actually
> > employed or 'scanned' at any one time. Actually I think a few thousand is
> > very generous. I
> > believe it could be considerably less than that. I used to work at the
> > proprietary trading
> > desks of Merrill Lynch, Barclays Capital and Nomura (all in London) over
> > the last 12 years.
> > I can assure any reader that notions of a supercomputer churning away
> > testing millions of
> > strategies is way off the mark. They trade a handful of tried and tested
> > strategies that are
> > constantly tweaked and improved... or even more than that, they trade off
> > proprietary
> > information about money flow that is not available to the open market.
> >
> > The point is, there is so much institutional money flowing through the
> > market... fund
> > managers, market makers filling client orders, options traders hedging,
> > index arbitragers,
> > portfolio traders trying to match VWAP... the list goes on an on... and in
> > my experience,
> > none of these guys give a stuff about technicals or the short to medium
> > term movement of
> > the stock. That's not their game. They are either hedging so want
> > immediate cover or they
> > are much longer term, or they are measured on a different benchmark to
> > individual
> > proprietary traders like you and I. We are a fraction of an enormous
> > marketplace, the vast
> > bulk of which isn't trying to do what we are.
> >
> > OF course that doesn't mean making money is easy... it's not... but I
> > believe the reason is
> > more fundamental to free markets rather than the idea that millions of
> > traders or a
> > supercomputer, is scanning millions & millions of strategies as we speak.
> > I believe free
> > markets have (for more than half the time, probably more like 80-90% of
> > the time) very
> > low signal to noise ratio's... and they therefore do approach random
> > behaviour most of the
> > time. This can give the impression that markets are efficient... but they
> > are not.
> >
> > Anyway, it is possible to consistently make money... it always will be, by
> > definition there
> > will always be opportunities in the market place. Don't be put off by talk
> > of super
> > computers scanning every possible market efficientcy. I'm still constantly
> > surprised at how
> > inefficient markets are.... Look at the recent countertrend rally we had
> > to 1440 in the S&P
> > in the middle of a bear market. ;-)
> >
> >
> > ------------------------------------
> >
> > Please note that this group is for discussion between users only.
> >
> > To get support from AmiBroker please send an e-mail directly to
> > SUPPORT {at} amibroker.com
> >
> > For NEW RELEASE ANNOUNCEMENTS and other news always check DEVLOG:
> > http://www.amibroker.com/devlog/
> >
> > For other support material please check also:
> > http://www.amibroker.com/support.html
> > Yahoo! Groups Links
> >
> >
> >
> >
>
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