SPY Low Volume Breakout Rejected

First time in over a month where 1-2pm intraday low volume breakout has been rejected by the market.



The high/low beta pair trade is not working out too well either: IWM underperforming SPY substantially. Hey Credit Suisse, how is that $20 bn+ ETF basis trade working out for you today?

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Intraday SPY and IWM Indications Of Interest

JPM trading nearly 50% of advertised SPY volume; MS trading over 60% of advertised IWM.





Indicative snapshot of SPY trades.

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Proudly Gunning Every Market Upswing Since TARP

Update: Just as the SPY is about to drop, guess who start gobbling up 5-10k blocks of SPY. $10 in TARP money to the first who guesses.

JPM making sure that no Dow dip goes unpunished.

Update 2: And just in case there is ANY CONFUSION AT ALL LEFT, here is who gunned the last ramp up.

Here is a good SAT-type mnemonic:

Akeem is to garbage, as [ blank ] is to gunning the market.

or

R Kelly is to underage girls, as [ blank ] is to SPY.

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Morning Market Ramp, Simi Valley Edition

DUDE: Terrific, JPM SPY Trader. But you haven't told me how we run the market up as it looks weak this morning?

JPM SPY TRADER: That's the simple part, Dude. I start buying the SPYs, I grab shorty and beat his shares out of him.

JPM SPY Trader: ...Huh?

DUDE: Yeah. That's a great plan, JPM SPY Trader. That's fucking ingenious, if I understand it correctly. That's a Swiss fucking watch.

JPM SPY Trader: Thaaat's right, Dude. The beauty of this is its simplicity. If the plan gets too complex something always goes wrong. If there's one thing I learned in Nam--

etc.

***

Here come the usual market gunning suspects, in 5,000 share lots traded every 50 miliseconds.

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FINRA Concerned With Manipulated Indications Of Interest

Everyone's favorite Indications Of Interest (IOIA function in BBerg) is about to come under some serious regulatory fire. Tradermagazine reporting that Finra has issued Notice 09-28 in which "FINRA reminds firms of their obligation to provide accurate information in disseminating, or using services to disseminate, indications of interest." The notice also includes this nice and cryptic notice: "FINRA also reminds firms that advertising a firm’s trading activity or interest in contexts other than indications of interest is also subject to FINRA rules and the anti-fraud provisions of the federal securities laws. See NASD Notice to Members 06-50 (Sept. 2006)." We all know which of Zero Hedge's readers is more than proud of their fat, unmanipulated "pipes."

From Tradermag:

The issue of accuracy in IOIs is as old as the tool itself, which is used by upstairs desks to seek out contra-side flow. Broker-dealers send out IOIs through their own systems or those of vendors such as Tradeweb's Autex, Bloomberg and NYFIX. FINRA warned member firms that, "to the extent that they disseminate or use such services to communicate indications of interest, such indications must be truthful, accurate and not misleading."

FINRA's warning focused, in particular, on firms' use of "natural" IOIs. The concern is that brokers, to elicit phone calls from buyside traders, may be playing fast and loose with the description of the flow they're pitching as natural IOIs. [5 million share SPY blocks for sale anyone, anyone??] Naturals historically are intended to represent agency orders a broker-dealer is working, although some sellside firms also include riskless principal trades and proprietary positions taken on to facilitate a customer order that the broker is now unwinding.

Perone noted that IOIs have gained more attention recently as buyside firms seek "to execute in size and the average execution size on the exchange markets and ATSs alike have generally decreased." He added that "the less reliable the information is in IOIs broadcast by firms themselves or through vendors, the less useful it is to those seeking to execute orders." Perone also noted that FINRA's Office of the Whistleblower, which was established in March, has an "open matter" that "includes alleged potential misrepresentations by a firm with respect to the use of IOIs." [Hey Jamie, you may want to slow down a little before you pay off that TARP in full].

IOIs have been a liquidity-sourcing tool for decades. But the search for the other side, as well as the quest for color, has increasingly resulted in a more elastic approach to IOIs. As a result, all "naturals" are not always natural. Brokers may not have the order behind the indication or it may be for a much smaller size. Some brokers may be fishing for information. [Ahem] However, by the time the buyside firm discovers this, it's too late because the trader has already picked up the phone and exposed his intentions. None of the IOI service providers police brokers' use of the naturals tag on IOIs.

Rounding out Regulatory Notice 09-28 on IOIs, FINRA alerted member firms that they could land into hot water if they run afoul of its guidance. False or misleading IOIs, FINRA said, could violate NASD Rule 3310 (Publication of Transactions and Quotations) and IM-3310 (Manipulative and Deceptive Quotations). It could also violate FINRA Rule 2020 (Use of Manipulative, Deceptive or Other Fraudulent Devices), NASD Rule 2210 (Communications with the Public) and the anti-fraud provisions of the federal securities laws.

And when you are talking about IOIs for 10-15 million share blocks of SPY, there is always absolutely nothing wrong with that... Ever. Hopefully, the pattern of why ZH loves IOIs is starting to emerge. Bear with us for a few more months as we indulge exposing all the chicanery out there.

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SPY Block Trading Update

Everyone's favorite Prime Brokers were working overtime today, chomping at the bits for those 3.1 and 3.9 million SPY blocks. Amusingly, JPM which today hopes to have met and exceeded Tiny Tim's capital needs (surprisingly Morgan Stanley thought the same before it was told it needs to raise more and more), had its CEO say the following yesterday:

“Dear Timmy, we are happy to be able to pay back the $25 billion you lent us. We hope you enjoyed the experience as much as we did.”

When you are singlehandedly the market in the biggest index hedge, we hope short-biased investors had as much fun if not more fun as Jamie Dimon had while paying off his TARP.

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Will The Real IWM Axe Please Stand Up

The IWM unwind is getting more and more desperate, and as the IOIA chart below demonstrates, some brokers seem to be nicely axed with a solid inventory in the name: note the indicating broker and the constant barrage of trades (times are PST). One wouldn't really call it domination, but if the word fits. Readers who wish to catch up on the Indications Of Interest (IOIA) Bloomberg function and its implications, please click here...





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Clogged Pipes

Today's SPY advertised volume presented without much commentary, merely with the observation that, while Morgan Stanley is nowhere to be found in the top SPY IOIA advertised brokers (in a bizarro market, normal things make no sense, and vice versa), DB (together with JPM, RIEF's PBs) is scarfing up SPYs and having seconds.. and thirds... Without representing (and warranting) anything, is it not odd that those very respectable MS "pipes" which were humming and buzzing with efficiency a mere two weeks ago by orders of magnitude, have gotten completely clogged up?

The rotation at the top continues.



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The Madness Of King Market

Daily "market" summary presented in easy to digest format.

First, the quants. The churning in ye olde HSKAX continueth, compliments of fund manager JP Morgan. The index has hit the year low. Some investors are asking themselves, why keep on paying a 5.25% Front End Load and 1.96% in total expense for a 0.25 sharpe ratio? And the kicker: an inflation adjusted 10 year expense projection of $4,336 for a $10,000 investment.







Next, the heat map. As expected - garbage up, non garbage down. For implications: see above.



And lastly, of course, SPY advertised volume, presented without comment. We are still waiting for a response to our previous inquiry.



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The Mystery That Is SPY Advertised Volume

Not surprisingly in today's (or more appropriately, insert x calendar period) increasingly odd trading action, the total advertised SPY volume was gobs (this is not a DeMarkian technical term) lower than Friday's. And oddest of all... Morgan Stanley is not anywhere in the top 12 advertised brokers. Has the accumulation/deleveraging passed? But oddness is the theme de jour. Anyone who tries to make sense of it is ridiculed or receives outright motivational calls from assorted Czarist departments.

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A Glitch In The MStrix?

For the first time in many days, MS has dropped a major block from their advertised SPY trading report. In what could be turning point for the "second derivative" of after hours weirdness, today Morgan Stanley advertised "only" two 10 million blocks at 6:41pm, unlike the 30 million SPYs traded by MS day after day. Could this be i) the end of the deleveraging of PDT, ii) the end of deleveraging of (insert favorite Quant here), iii) the decline in ETF creation or iv) who the hell knows...

Regardless, there might have been a significant disturbance in the force today. We shall see if it persists.

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Morgan Stanley Turns On Hoovermatic AH In SPYs Today

The jolly folks at Morgan Stanley sure pulled a fast one today, trading 10% of the SPY volume at 6:40 pm, way after most people's bed time. At least they got their league table brownie points. 30 million shares in three well dispersed blocks is nothing to sneeze at. The question arises was this for the benefit of their in house PDT boys, which as was announced recently, are likely to be spun off and thus aggressively releveraging after a day like today when nothing could shake the market's optimism (and momentum) may have seemed like a good idea. Or did some external fund benefit from MS' prime broker generosity to accept humongous long blocks of SPY. One will likely never know, especially with the workaholics from the SEC at the helm. Sphere: Related Content

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