On Monday we brought to you proof of a 15 millisecond frontrunning of the Mfg ISM number by what turned out to be HFT clients of Reuters which admitted subsequently it had “inadvertently” leaked the number to select clients. However, that was child’s play compared to the absolute market farce that happened today which we can visualize courtesy of Nanex, and which impacted gold, ES, and Treasury Futures altogether.
In sequential order: 62 milliseconds before the NFP number a massive dump of gold took place in what can merely be described as yet another of the infamous gold take downs we know so well which however take place just around the time of the London fixing. That it happened right before the NFP number is either an indication of an early NFP data leak reaching “some” HFT traders, or merely an attempt to set the “mood” for further selling by someone who decided that the NFP print would be negative for gold no matter what it was…
August 2013 Gold Futures trades and quote spread.
However, manipulated gold markets are nothing new, and frankly we would have been surprised if they did not happen.
What was more amusing was the action after the NFP release in both the eMini and the T-Bond futures, all of which had to be halted for a whopping 5 seconds until the algos, selling everything at first, got the memo out that good news today was in fact good news, and promptly ramped risk to the moon. Either that, or someone called in a code Red, made it so all selling was literally prohibited, and with the only path of no resistance up, resulted in today’s epic melt up on what was initially a very bearish kneejerk response to the NFP print.
First: September 2013 T-Bond Futures trades and quote spread. The deluge of selling hits 482 milliseconds before the NFP release, leading to a 5 second circuit breaker and halting the OTR future contract of the world’s largest bond market. Abe would be proud.
Meanwhile in equities, all liquidity disappeared. All of it.
June 2013 ES Futures (eMini) trades and quote spread: the first appearance of the trading halt:
Zoomed in: no trades.
But despite the trading circuit breaker, quotes flooded the system in the 5 second period in which trading was halted:
And zoomed in some more: trades, or lack thereof:
* * *
Thank you Central Planners: not even in 1955 Stalingrad did they manage to break the capital markets (assuming they ever had one) as effectively as you have done.
And now, we look forward to Sunday night in Japan, where we anticipate at least 1-2 bond trading halts on what is sure to be an upside explosion in the Nikkei225, if only until the selloff resumes once again as central banks are increasingly more and more cornered with a dilemma of either breaking the bond market, or stocks.
Finally, if this millisecond response is a glimpse of what happens when not even all the central banks (because now it is a coordinated effort) can hold the market together, then we wish all the best to those who will “sell ahead” of everyone else when the time to sell comes.