Tagged: IPO

Losing Facebook

What’s green and brown, and rolls? The terrain south of Santa Fe where we rode 103 miles on bikes Sunday, averaging 15.6 mph through 4,500 feet of climbing and insistent New Mexico winds. Icing: We saw the eclipse, glimpsed through a combination of my Droid and some passerby’s strip of roll-film. We were pleased.

Less pleased were buyers of Facebook shares. Another market-structure lesson, IR folks.

Remember the Infinite Monkey Theorem (now also a winery here in CO)? The notion was that infinite monkeys randomly clicking keys of infinite typewriters – dating the era from whence this theory arose – could reproduce our great literary works by accident.

Whether ‘twas to be or not, the Infinite Monkey Theorem tripped up trading at the Nasdaq in Facebook. With trades machinating through theoretically infinite combinations of data points, it was impossible for Nasdaq engineers to anticipate every erroneous outcome. Thus, hypothetical monkeys pounding figurative keys bumbled into an unanticipated event.

Part B. Confusion over who owned what when the music died shouts through a bullhorn at us about the way markets work. Most trades are intermediated using shares that, for lack of a better descriptor, are rented. The buying and selling is often (60%+) not real.

You’ve seen an auction, right? “Do I hear $42?” Somebody raises a finger, and the price of the thing up for auction becomes $42. Is that what the buyer pays? No. It’s a bid. (more…)

Did You Carry the One?

Suppose the chairperson of the national central bank strode from the organization’s Gothic façade on Maiden Lane and said, “Job growth is likely temporary, and folks are going to have to borrow money and buy stuff just to keep the economy running like a used Yugo.”

How would you expect stocks to react? Exactly. They would soar, as they did Monday March 26.

Speaking of bizarro-world, if you missed the BATS Exchange IPO drama Friday, you must have been on a monastic sojourn in the hinterlands. It showed several things. You can run a great business. You can raise money from investors. You can be quality folks who are nice to boot, as our friends at BATS are.

But if somebody forgets to carry the one in that mathematical equation for the opening auction, the incredible shrinkage occurring in the dollar can immediately translate to your shares, speeded up to nanoseconds.

Humor aside, we were asked by various members of the media (and quoted by the WSJ Saturday for the lead article on page one) and many clients about BATS. Should you worry about trading markets because the IPO for a technology-driven stock exchange failed?

Not for that reason. BATS will be fine. They will be back, and soon. Mark it.

But something should concern you. We’ll come to it in a moment. (more…)

Why Franklin Templeton Likes HFT

Last week in Miami, I took part in a panel discussion about modern trading realities. The weather Thursday was like it is in Denver now, about 60 degrees. Those of you south or north who need to warm up, come visit. I clocked some hours on the bike Saturday and Sunday. It wasn’t sunburn weather, but on bikes in December at 5,000 feet? Life’s good.

Getting back to trading, how come some investors rail at churn trading, while others love machine intermediation? Somebody must be wrong, right? (more…)