All Markets Are Rigged

HFT means high frequency trading which is run by super power and fast computers able to execute. Photo by Kevin Hutchinson via Wikimedia Commons.

Is it still working? Mario Draghi has just explained what ECB board council was discussing and markets jumped on this verbal game. ECB let basic rates unchanged and board have just had a discussion about unconventional measures of QE. Draghi also explained that it does not mean that it will be used only in a short term period but they are also at hand in the mid-term period. He stressed the phrase “also used” which means that they are still prepared to use conventional measures such as interest rates. The press conference was quite successful because peripheral bond yields in Europe have collapsed once again. It also means that the longer relatively low inflation in the eurozone continues, the higher probability of using similar QE program as those in the US.

HFT means high frequency trading which is run by super power and fast computers able to execute. Photo by Kevin Hutchinson via Wikimedia Commons.

Somebody could consider it a Prima Aprilis joke but eurozone finance ministers agreed to pay out €8.3 billion of Greece’s bailout package. Greece will receive a first tranche at the end of April. So things have changed once again, because Greece declared just two months earlier that they shall not need any new rescue packages. Greece shall therefore have no cash-flow problems for the rest of 2014. However, as usual, we never know what will happen. We saw such claims many times before and some of us consider them some king of folklore.

How should you deal with secessionists? Arrest them. Italian special operations forces arrested 24 suspected secessionists who were allegedly planning a violent independence campaign for the northeastern Veneto region. They had built up an armored vehicle and wanted to deploy on the eve of European Parliamentary elections in May.

Just a few days after the reconstruction of the government of France due to the leftist fiasco in local government election is France calling for more time to reduce its deficit to three percent of GDP. Last year, the European Commission granted Paris an extra two years to do so – until 2015 – and expected serious reforms of labour markets, pensions and the welfare state. As we can see it is not so easy and rules are not the same for all eurozone members. The French budget deficit was up to 4.3 percent of GDP compared to 4.1 percent planned.

Politicians always try to blame and beat the market. The government in Venezuela is rolling out a new ID system to track families’ purchases on groceries. Devaluation of currency caused for Venezuelans increasing difficulties in finding imported basic products such as milk, flour, toilet paper or cooking oil. Price controls do not help either and only cause shortage of these products. The most interesting for me is the fact that poor people still support these measures. They do not understand that it is the governmental policy in the field of money, capital controls and regulation of prices which caused the problem. It is not the problem of business.

China is buying not only gold US treasuries but is also active on the US real estate market where it buys land and houses. According to some analysts, China is on the way to become the dominant land owner in the US. The Chinese are quite active in undervalued areas as/such as those in Detroit or New Jersey. This is connected with the increasing number of the US green card applicants from China who are willing to move from China abroad. It is possible due to the investor immigrant visa program which is conditioned by the investment commitment of at least $500,000 and creation of 10 job places in the US.

Are all markets rigged by HFT? The SEC and FBI are going to try to find an answer to this question. Both agencies opened some probes against HFT companies which allegedly rigged markets. HFT means high frequency trading which is run by super power and fast computers able to execute many transactions within milliseconds. A big dispute starts in the US about using HFTs. To understand the problem we have to state that the speed itself is not a problem. These companies based their business model solely on the fact that they are always able to execute or cancel some orders faster than competitors. It shall be mentioned that probably not all markets are rigged by such behavior. HFTs are concerned mostly with high volume markets. So we shall see what exactly happens. Both agencies will be looking into the ties between high-speed traders and major exchanges, examining whether the companies are getting preferential treatment that puts other investors in a disadvantage.