The Ides of October is not as famous as the Ides of March.
For those of you not into the ides, it’s the 15th of the month (save for shorter Roman months where the Ides was the 13th). The Ides of April is well known as Tax Day.
This Ides of October could be marking a turn. Look, nobody knows! Save God. We just measure data.
By the way, I’m slated to join CNBC’s Brian Sullivan in the 2-3p ET hour Friday Oct 17 (I’m also scheduled on Schwab Trading 360 at 1130a ET Friday). I observed to Brian Sullivan that Friday Oct 10 was among the most volatile days ever in the stock market as measured by the “volatility of volatility” in SPY the ETF S&P 500 tracker.
Why does that matter?
Elementary, Sherlock Holmes would declaim to John Watson, for those who read Arthur Conan Doyle. It’s market structure.
It’s been a long time since anyone cared about market structure. Michael Lewis wrote Flash Boys about it. Joe Saluzzi was on 60 Minutes about it after the 2010 Flash Crash.
And 15 years passed and people forgot.
“Tim,” you say. “Are you talking about the trade war with China? The TACO Trade (Trump always chickens out)? China and the USA going toe-to-toe on trade rattles people.”
News flash: Tariffs don’t trade stocks. Machines do. What motivates machines?
The spread. So long as it’s not too wide. Stocks must have spreads. Gaps between prices. It’s the law, weird as that is.
We bought two Moots Express e-bikes this week. Moots is an American manufacturer of custom bikes that’s been around since the early 1980s. Swing by the corporate headquarters in Steamboat Springs sometime and have a look at the vintage bikes in the showroom.
Like automobile manufacturers, Moots has slowed its high-end roll into e-bikes so we negotiated the price. They’re lightweight, fast, state-the-art Shimano powertrains, even an automatic transmission if you want to shift out of manual mode.
There’s no trading firm sitting between Moots and me taking a piece of the action.
Yet on every trade there is. That’s the bid to buy, the offer to sell. The stock market is governed by the “Trade Through Rule,” a requirement that all stocks trade at a best price, the NBBO (national best bid or offer).
Of course that’s crazy. Why should one stock market be forced to trade at a price determined by another stock market? The point of Amazon as a comparative (besides convenience) is you might get a better deal.
Should you buy it on Amazon or go to the store? Or why go look for skis at Ski Haus if the price is the same at One Stop Ski and Bike Shop, by law?
Then, one of those stores would need to offer incentives to get me to come in.
So do stock exchanges. The incentives offered by the Nasdaq, CBOE, NYSE are called rebates. Citadel et al can earn 30 cents per hundred shares being the best offer to sell – which is the best price (the bid is by law always lower than the offer).
Trading firms build algorithms to do it.
The Nasdaq paid over $2 billion in trading rebates in fiscal 2024 (probably similar at the others), incentives for high-speed firms to set bids and offers to help the exchange attract trades (because they must occur between the NBBO.
For perspective, NVDA trades over two million times a day, SPY trades over a million times a day, AVGO, over 500,000 times per day.
Throw volatility of 2-3% into the market (it’s 2.7% now in SPX stocks), and the delicate balance of calculations for setting the NBBO is disrupted. I don’t know how long it takes to restore order.
In 2022 it took most of a year. In April 2025 it appeared to happen fast but April was a culmination:
It started with a lit central-bank match in December 2024, spread through January, into February options-expirations, into “new month, new month” tumult in March, through the March quarterly options expirations and index rebalances, and then blew up spectacularly in the April “new month, new money” trade.
So.
Are we at the beginning of another one this Ides of October? Dunno. I do know that the market depends for stability on a predictable spread. And the spread just doubled in SPY from a 50-day average of 0.7% to a five-day average of 1.4%.
Trading firms running automated algorithms that capture spreads and incentives depend on predictable volatility. We had it from May to October. Now it’s broken. I don’t know how long it’ll take to fix.
We’ll talk about it Thursday at the weekly session for EDGE users. Feel free to join us.
