If you are an Investor Relations Officer or a company executive for a Nasdaq or NYSE traded company, then ModernIR's Market Structure Map will assist you in seeing the entire picture.
Each week, we provide timely analysis on the effects of electronic trading, options expiration and many other changing facets in investor relations. Feel free to browse some of the recent newsletters. If you find our insights to be a relevant tool in your IR efforts, be sure to sign up for the Market Structure Map.
Nov 3-7: How Equity Swaps Affect IR
Speaking of screwy things, let’s talk equity swaps today. We’d also like to preview equity markets regulation under the Obama regime, and offer a couple sentences on why proprietary trading desks at JP Morgan and Merrill Lynch closed last week...but perhaps one eye-glazing topic at a time is enough. So we’ll save these last two.
Oct 27-31: Asset Allocation Institutions Assessing Rebalances
TRAVEL: Catch you at the NIRI Capital Area luncheon in Washington DC Nov 12. See link to calendar below for details.
We must point out how the October 21 edition of the Market Structure Map said to expect a good finish last month, with counterparty obligations less than thought, thus fueling equity inflows. This was simply a function of considering market structure.
Oct 20-24: Why Trading and Financial News Don’t Synchronize Anymore
TRAVEL: Come out to the Cleveland NIRI luncheon November 6, where we’ll discuss the current crazed state of equity markets. Same in Washington DC Nov 12. Hope to meet you there!
Let’s talk about the lack of correlation between daily financial news and hourly equity trading. Today, among other things, we had word that corporate bond rates continue to rise, hinting at more failures ahead. Mitsubishi, fresh off its Morgan Stanley cash infusion, is now seeking an infusion itself. Fidelity apparently has joined the raft of Wall Street firms cutting staff. The Fed wrote down its Bear Stearns bailout by over $2 billion. And benchmarking yesterday, $2.8 trillion of equity value has gone the way of the dodo since the Fed injected that life-saving $750 billion into the economy.
Oct 13-17: Mixing Options Expirations & Gov’t Intervention
In the past week, the leaves on the aspens and birches and elms and maples and ornamental plums festooning Reno here at ModernIR HQ have turned all manner of autumn awesome.
Which stands in stark contrast to equity markets last week. We warned of high volatility during options expirations. We were not disappointed, were we. New 2011 LEAPs were added October 13, and stock, exchange-traded-fund, index, treasury, interest-rate and currency options expired from there to Friday afternoon, 10/17. Volatility derivatives expire tomorrow, 10/22, and maybe then we’ll get a better rational read on things.
Oct 6-10: Rational Thought, Risk Management, Speculation
While there’s no point in remonstration, as it’s de facto, government intervention is no friend of public equities, no matter what you hear in financial media. It will devalue currencies, which harms buying power, which destroys growth and employment.
Oct 6-10: Rational Thought, Risk Management, Speculation
While there’s no point in remonstration, as it’s de facto, government intervention is no friend of public equities, no matter what you hear in financial media. It will devalue currencies, which harms buying power, which destroys growth and employment.
Sep 29-Oct 3: What Does The Money Say?
First, no matter the lip service paid to policies, money disfavors intervention. How can we prove that? For one, our internal look at the top ten platforms trading the most issues in our sample pool last week had desks ranging from the Chicago Board Options Exchange (equity trading related to derivatives), to Millenco (Millennium Capital, a high-frequency derivates strategist), to Automated Trading Desk (a Citigroup facility that automatically matches algorithmic volumes in multiple asset categories) to EBX (dark pool trading system owned by Fidelity, Credit Suisse, Citigroup, and Lehman/Merrill). It’s the interaction that bleated about how speculators were in full control. No rational money. Not even much risk management.
Sep 22-26: What Little Black Monday Means to IR
Before we get to Little Black Monday 2008 and what it means to liquidity and the IR job, we note that alert reader Walt Schuplak at Market Intelligence Group LLC drew us last week to big drops in volumes.
Sep 15-19: What's Next for IR Folks The Morning After
We’re prompted by vigilant reader Scott Wylie (no subscriber to our services, be ye advised) to say more about actions IR folks can take when armed with market structure knowledge. This past week offers a smorgasbord of such opportunity.
Sept 8-12: What Lehman’s Demise Means to Your Stock
We wrapped last week’s ‘Map’ saying we expected equilibrium by Wednesday Sep 10 ahead of this week’s spate of options expirations concluding Sep 19.
Sept 2-5: Back to Reality with a Big Bang
For Wall Street, summer ends on the last trading day of August. Boy, was that apparent in the data. It was like somebody whistled loud and barked, “All right, everybody, out of the pool.”
Aug 25-29: Prioritize September Sellside Conferences With Trading
It’s a slimmer schedule today than in times past, with quantitative trading and commodities and derivatives reducing fundamental investment, and regulations restricting connections between banking and equity research. But still, it’s an important stretch on the IR calendar. How do you pick and choose which conferences to attend? Time is precious and so are budgeted dollars (with airfares and hotels both pricier now, you probably have to limit the lineup).
Aug 18-22: Why Are Equity Markets So Volatile?
To preface our audacious question, let’s look back at trading last week. August 18 brought bad Fannie/Freddie credit news, the 20th marked expiration of volatility index options, and the 22nd was a quantitative up-day that pushed the Dow 250 points higher (which promptly disappeared yesterday, the 25th).
Aug 11-15: Helping Execs and Shareholders Alike
The August 18 Wall Street Journal “Heard on the Street” column by David Reilly used data from Q3 2007 to illustrate how insider buying at financial firms wasn’t a good barometer for the sector’s market bottom.
Aug 4-8: How Program Trading Works
With big honchos from trading firms now at the Hamptons enjoying warm summer sun and chilled unbruised gin, we observed a broad program-trading reset in the equity markets on August 4. Basically, program trading moved assets into less risky securities and head traders gave their underlings defined and controlled avenues to pursue alpha (divergences from norms).
July 28-Aug 1: “Rational Price” – Measuring Your Stock’s Real Value
A word on trading last week as July transitioned to August (which means you folks in Gunnison Colo. will need your Parkas and ice axes in about two weeks): Speculative volume declined several points from norms to roughly 20% of order flow, while broker-dealers like Goldman Sachs out-traded the high-frequency shops getting paid by exchanges and market centers for liquidity. That doesn’t happen often, actually.
July 21-25: What’s Your Monetary Policy, IROs?
Popping by the US Bureau of Labor Statistics, we see that the Consumer Price Index inflation rate for all items was 7.9% over the past year through June 2008. Energy inflation was 53.6%. Transportation, 22%. Food, 8.5%. Excluding food and energy from all items put inflation at 2.5%.
July 14-18: Which Exchange is Best?
Our thanks to alert reader Walt Schuplak at the Market Intelligence Group for commentary yesterday on last week’s escalating battle of bragging rights between NYSE Euronext and Nasdaq OMX. Before we tiptoe by with whispered thoughts (we won’t, to borrow words from King Solomon, grab a dog by the ears), let’s look back at trading last week.
July 7-11: Primary Dealers, Naked Shorting and Cash Equities
First, a word on trading last week: We saw big banks (the Citigroups and Lehmans and JP Morgans for instance) in particular cutting equity positions – probably getting back in line with federal capital-ratio requirements specific to primary-dealer status. These efforts not only fostered selling pressure in equity markets, but also meant fewer managed dollars flowing back into equities.
June 23-Jul 3: Russell Rebalance and Retreating International Money
Speaking of bargains, on June 20 we observed a tectonic shift of international money away from US equity markets. How do we know? We don’t absolutely…but the data evidence was pretty overwhelming. The symmetry and function of order-flow execution bespoke massive asset-allocated money and churned out through Deutsche Bank and Goldman Sachs in particular, firms that have made solid inroads with sovereign wealth funds. Deutsche Bank took eighteen floors in China’s Kowloon district (Hong Kong) for its capital-markets outreach to China, and Dubai’s wealth fund is a serious Deutsche Bank shareholder. Goldman Sachs has been in China for two decades, represents with its Gao Hua relationship the largest international investment banking operation in China, and opened a Dubai office in March 2007 to support what it called “a major client base across the entire Middle East region.”
June 16-20: Options Away…and What of Regional Broker Dealers?
Speaking of risks, June 16-20 is festooned every single day with expiring options (but no triple or quad witching, because expirations web the week). So last week, we saw the markets turn much shorter-term once again as traders and institutions jockeyed to lock down risks and squeeze a buck or two from every little divergence from norms. If you think we’re full of crap, look at Goldman Sachs’s Q1 2008 results. Though its trading results lagged last year’s, they still tendered $5.6 billion in principal trading and investing revenues (investment banking was a distant third place in Goldman’s revenue pancake stack).
June 9-13: Risk Is a Four-Letter Word
Lest you grow weary of hearing about options expirations, we’ll say only that trading last week (June 16-20) reflected little fundamental investment and lots of speculation, with expirations running Monday (S&P 500 long-dated) through Friday (p.m. stock and index futures). It was a Rugby scrum back there behind the data. Goldman’s SigmaX dark pool traded more issues than its agency desk (due to algorithms hitting liquidity pools) and so did Citigroup’s automated market maker, formerly called Automated Trading Desk. Electronic order flow –automatically matched buying and selling – dominated. The big Primes dropped to the lowest level of the quarter, it appeared to us, which reflects how direct-access trading by speculators was the big force. What were they doing? We think lots of folks were just adjusting equity assets while gambling in derivatives and commodities.
May 27-30: See Us at NIRI in San Diego Next Week
If you’re attending the annual NIRI conference in San Diego, stop by booth 222 and see us! We’re not giving away, oh, flights on the space shuttle. But in sharp contrast to politicians whose promise of change is the same old re-packaged crap that got us in this mess to begin, our service is truly different. Different technology, data – new tools for new rules, we like to say. And worry ye not, we don’t take ourselves too seriously.
May 19-23: Just What Do You Mean…Arbitrage?
We’re out Wednesday due to Memorial Day on Monday. For those new to the Market Structure Map, holidays delay clearing processes, so data at the Nasdaq and NYSEnet was a day later this week.
May 12-16: New ModernIR.com Look – And Changes in Order Flow Too
We’re two days late this week because it’s been busy-busy. So let’s catch you IR folks and execs up. We’d warned of market volatility through 5/21, thanks to a spate of options expirations ranging from the 2009 LEAPS conversion (“Long-term Equity AnticiPation Securities, a derivative originated by the Chicago Board Options Exchange) on 5/12, to Wednesday’s ETF volatility-measure expirations and the usual index, stock, currency and interest-rate expirations on 5/15 and 5/16.
May 5-9: Plot Your Sellside Outreach By Following Order Flow
We're coming round to the last spate of sellside conferences before summer in Nantucket. When weighing where and how you spend sellside time, don't forget to measure order flow.
April 28-May 2: Program Trading Strategies Changing Sooner Now
Before we get to program-trading resets and why you should care about them, IR folks and execs reporting to shareholders and boards, have you looked at your "liquidity fundamentals" lately? They're way less accounting-department nasty than the phrase suggests.
April 21-25: Portfolio Transition Management Goes Electronic
The Nasdaq Composite and Dow Jones indices both abruptly changed courses April 21-22, reversing gains the three preceding days during monthly options expirations. Related to the end of another expirations period? Or the equity markets impact of New York Giants quarterback Eli Manning tying the knot in Mexico on April 21?
April 14-18: You Know CDOs - Ever Heard of CFDs?
Last week (4/14-18) gave us dwellers at the Sierra foothills a batch of chilly coastal air and dragged the equity markets through a gaggle of monthly options expirations (as most of you know who read here regularly) and the first wave of Q107 earnings reports.
April 7-11: Taxing Markets Ahead of Options Expirations
With tax season expiring today (ah, for the original Constitutional language declaring that Congress shall impose no direct tax or capitation), and monthly ETF, index and equity options expiring tomorrow through Friday, let's talk data.
Mar 31-April 4: The Institutions Behind Sophisticated Trading
My friend Marge Wyrwas, head of investor relations at Knight Securities and a stalwart in our trade association, NIRI, the other day sent me the agenda for TradeTechUSA the US version of the investment industry's premier confab on equity trading held in New York last month. There's a European edition in Paris later this month, and one in Asia each year too.
Mar 24-28: Mad March Passes Ball Softly to April
Does it seem as surreal to you as it does me that we should be a quarter finished with 2008 already? Amidst mutters of "and thank goodness for that" let's grab a couple lessons here on April Fool's Day.
Mar 17-20: Hopping Past Quad-Witching
Before we turn for a look over the shoulder at the Easter week just past, a quick current investor-relations word: We said last time that stronger markets this week would be far more meaningful than what happened last week around options expirations. So far, so good…but the data continue to suggest that inflows are massively hedged and managed for risk.
Mar 10-14: Why IROs Need to Meet Traders Too
We skip a week with the Market Structure Map and a venerable Prime goes under? That'll teach us.
Speaking of Bear Stearns, our purpose is to help IR folks understand the nature of today's markets-not to opine about the Street. But we wrote before about expecting a big failure, and how it would be good for the system to flush out detritus. We've long called Bear Stearns the Prime Broker for the Semi-Nefarious (just a little humor there) because of its deliberate focus on serving aggressive hedge funds. It's only an opinion and we could be wrong, but we think the problem for Bear was its book, not its balance sheet per se. After all, JP Morgan Chase was far more exposed to subprime mortgages than was Bear Stearns.
Margaret E. Wyrwas - Knight Capital Group, Inc. (Nasdaq: NITE)
Senior Managing Director, Corporate Communications & Investor Relations
Equity Analysis™ subscriber since March 2007
"In global markets driven by automation, changing market structure regulation and dynamic investment objectives, today's investor relations professionals require new data points in order to remain relevant and add value in their company's quest to reduce its cost of capital."
