As we near the close of 2017, we are not at a loss for corporate scandal, wrongdoings on the part of corporate CEOs and employees. The pharmaceutical industry has long been at the center of investigations, and lawmakers in 45 states are now taking action.
Perrigo Co. (NYSE: PRGO), Mylan (MYL) & Many Other Generic Drug Makers The largest maker of over-the-counter drugs in the world, Perrigo Co., was the focus of a corporate scandal in May when the Department of Justice raided their offices during an investigation into price collusion. The government was looking mainly at the price of drugs that Perrigo manufactures for skin conditions. Price collusion happens when companies conspire with each other to generate an unfair market advantage. Mylan NV (MYL) is one of the companies accused, and you might remember their involvement with the notorious price fixing scandal in 2016 involving the EpiPen. On October 31, 2017, investigations into price gouging of big pharma culminated into a large group of US states accusing key generic drug makers of participating in a far-reaching price fixing scheme. The investigation widened an existing lawsuit by adding many more drug makers and medicines, sending some drug maker company shares falling. Attorney Generals from 45 states and the District of Columbia are accusing 18 companies while naming 15 medicines in the lawsuit, which includes the president of Mylan NV and CEO of India’s Emcure Pharmaceuticals. The charges allege the company executives agreed in advance upon prices, price increases and the percentage of market share that each company would have. One Attorney General states in the suit that it is their belief that price fixing is pervasive, systematic and exists in a culture of collusion. For the most recent company information, trading or investment services you can trust, contact Great Point Capital today. Great Point Capital is a member of FINRA offering professional service, wealth management and execution to retail customers. We are a leader in the equity day trading community with more than 100 prop traders currently trading the firm’s capital with stock leverage. We provide the latest in technology including Takion trading software and our proprietary intra communication platform. Contact us today to learn how we can take your successful trading strategy to the next level.
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A new bill was just introduced by Representative Loudermilk (R-GA), which would amend the Securities and Exchange Act of 1934 to reduce or eliminate regulation overreach into business models of exchanges that do not involve either reporting or effecting a transaction on the exchange. This may have been prompted by the flurry of lawsuits following the publication of Michael Lewis’ Flash Boys. One such lawsuit was thrown out when the judge claimed the exchanges had immunity under quasi-government powers.
Since the filing of the combined lawsuits, the Securities and Exchange Committee (SEC) commented by saying that they had no authority to adjudicate the lawsuit, and that “immunity only applied when stock exchanges acted as a regulator, and not as an operator of a market”. This means that the SEC is stating that exchanges are NOT entitled to absolute immunity arising from commercial activities such as enriched data feeds or selling collocation. This could be weighing on the minds of the executives of the exchanges, prompting the proposal of HR3555. The bill must pass the House and Senate before becoming law and will most likely be reviewed by committee before it’s sent to the House. If passed, Loudermilk’s bill appears to give protection from investor lawsuits stemming from unfair advantages granted to HFT firms. The implied intent is to skirt the SEC’s role of protecting investors by finding a way around them in Congress. Just by adding one paragraph to the original Securities Exchange Act of 1934, the SEC could be prevented from acting as a regulator of stock exchanges for any issue surrounding the selling of speed. Potential Conflict? If HR3555 removes the non-execution portions of their business from regulation, wouldn’t that also remove those from their immunity? That would take it out from under SEC regulation, but it seems that it would also take it out from under the immunity umbrella afforded to “quasi-government” stock exchange activities. If they carve out those activities from those regulated under the SEC Act of 1934, how could they then claim immunity for the removed activities? They would have it both ways – not included under the Exchange umbrella for regulatory purposes, but included when courts look at immunity granted to Exchanges. We will be watching the progress on HR3555 as it moves through the legislative process. Great Point Capital has been serving the trading community since 2001, with 100+ prop traders actively trading the firm’s capital. Headquartered in Chicago with offices in Austin, TX, we specialize in equities and equity options. Contact us today to learn how we can successfully trade together with high performance results. We are one of the few firms able to offer access to Takion Software Platform, enhancing your online equity trading experience. Representative Loudermilk (R-GA) just introduced a new bill which would amend the Securities and Exchange Act of 1934 to eliminate or reduce regulation overreach into business practices of exchanges that do not involve either effecting or reporting a transaction on the exchange. As Representative Loudermilk put it in the following statement when introducing the bill, “Regulatory agencies have a tendency to expand their reach into areas they should not be regulating and engage in mission creep, which can stifle innovation”.
If the innovation referred to is the exchanges seizing the opportunity to create new revenue flows by selling speed, rather than effecting and recording transactions, then perhaps we need regulation overreach. The current unprecedented structure of exchanges and dark pools is drastically different than a decade ago. It seems that HR3555 would put safeguards in place to prevent agency over-regulation, or in other words would allow regulators to turn a blind eye to the new market structure by not addressing these issues. This is an issue that Day Traders everywhere have been dealing with for at least the last decade. HR3555, titled The Exchange Regulatory Improvement Act, aims to further define the term “facility” regarding regulatory purposes of an exchange, adding that the term does not refer to business activities with a purpose that is not intended to either report or effect a transaction on the exchange. What this means in simple terms is that this bill attempts to provide an exempt status, or altogether immunity, for an exchange’s business activities outside the core functions of effecting and reporting trades. Exchange Activities Receiving Immunity We need to understand the activities in question To understand the effect that passing HR3555 would have. Exchanges today make money in ways other than facilitating trades. The most recognized activities include colocation of servers, enhanced proprietary data feeds, and complex order types all designed to give an unfair advantage to high frequency traders (HFT). HFT firms currently make up at least 50% of all trading activity in US Markets. For more information on how stock exchanges earn revenue with business activities other than recording or effecting trades, check out this post on How Rising Costs of Stock Exchange Data Fees Affect Online Equity Trading. Great Point Capital has been serving the trading community since 2001, with 100+ prop traders actively trading the firm’s capital. Headquartered in Chicago with offices in Austin, TX, we specialize in equities and equity options. Contact us today to learn how we can successfully trade together with high performance results. We are one of the few firms able to offer access to Takion Software Platform, enhancing your online equity trading experience. Third party firms that are paying for orders under a Payment for Order Flow (POF) agreement do not enter into those arrangements to lose money, they are making money as well as the broker they are paying. Reg NMS says that your broker needs to provide you with the best execution available at the time. So how can two firms, your broker and the third-party firm paying for POF, manage to profit from your order, while still giving you to best possible price?
Maker Taker One instance where two firms can profit from your order is when they are getting paid for the liquidity you provide. If your order is not marketable immediately, they send it to the venue that will pay the most for adding liquidity. For example, providing liquidity on ARCA for a 1000-share order results in a rebate of about $3.00 that goes to the POF firm who paid your broker for the order. HFT The other instance is that the POF firm used your order as part of a profitable trading strategy. For instance, in heavily traded stocks, a good amount of trading is done at the midpoint of the NBBO (National Best Bid and Offer). If the market is 30.24x30.25, and you send your order to buy 1000 shares at 30.25, the POF firm sells you the stock at 30.25 (usually 30.24999, which allows them to jump in front of everyone at 30.25), then they sweep through the dark pools and midpoints on exchanges and buy the stock at 30.245. This nets a profit of about .005/share, or $5.00, on your order. The POF firm may also be aware that the market is just about ready to turn and go to 30.23x30.24. They know this through their sophisticated predictive algorithms based on trades and changes in quote sizes, combined with the direct market feeds that are faster than the feeds creating the NBBO. The faster direct feeds might show the market is already at 30.23x30.24, but the NBBO won’t show that for few milliseconds. This makes it easier – they can give you the “best execution” available on the current official source, the NBBO, at 30.25, then turn around and immediately buy the stock back at 30.24, which became the true offer in the market. It is vitally important for traders to have control of their orders. The amounts made from these orders is negligible for the retail customer that is only trading a couple times per month, but to the HFT firm doing this across thousands of accounts every day it adds up to millions of dollars. Contact Great Point Capital today to take control of your orders and seize additional profits per trade. We have the knowledge of the market, the experience and resources to assist you in routing your orders so that it is most profitable to you. If you need a broker with capital, and access to orders including those in dark pools, contact us today to see how we can work together to realize your true trading potential. Learn more about Great Point Capital today. Our 100+ prop traders actively trade the firm’s capital, increasing their leverage and returns. We are one of the select few firms able to offer access to Takion Software Platform, enhancing your trading performance. To take control of your orders and to capture additional profits, contact Great Point Capital today. Great Point Capital has discussed Payment for Order Flow (POF) and how High Frequency Trading (HFT) firms profit on your trades. We’ve shared how Maker-Taker affects the way that market participants execute trades. Now we would like to show you what you can do to improve your trading returns within this complex and often predatory environment.
Order Routing Options Limited with Traditional Broker If you are currently trading through a traditional retail broker, you probably have a limited number of ways for routing your order, if any. Routing your order is typically limited to a “smart” route, or perhaps a preference for NSDQ or ARCA. Some of the more advanced firms might let you choose IEX. These limited choices will not help much, as you do not see the pricing difference between the selections, and you cannot change them easily if something changes in the market. Traders use “smart” routes, which are simply computerized algorithms that aid traders in buying or selling stock, with the main goal of making the search for liquidity easier. Smart routes are not a trading system, but are instead a set of instructions that are based on certain conditions set by the trader, and are customized by the trader or pre-set by the broker or software. Thus, they are limited by the broker, or the software. In addition to limitation on orders, a trader’s ability to post bids and offers through ECNs is also limited to which venues your broker has subscriptions to use. Most retail brokers have agreements in place with third party firms where they get paid for sending orders to them for execution. This is the obviously the “smart” route if it is one of your choices. In the past, brokers had networks of people who would work together to execute your order. Your commission paid for that network and the cost to execute your order. Today, executing your order is no longer an expense for your broker, but has become a profit center. Who Profits on Your Order? The third-party firms that are paying for orders under a Payment for Order Flow arrangement obviously aren’t losing money on the transactions either, they are making money as well as the broker. Reg NMS states that your broker has to to provide you with the best execution available at the time. So how is it that two firms manage to profit from your order, while still giving you to best possible price? To take control of your orders and recognize additional profits per trade, contact Great Point Capital today. We have the experience, and the resources to help you route your orders so that it is most beneficial to you. Great Point Capital has been serving the trading community for almost two decades. Our 100+ prop traders actively trade the firm’s capital, specializing in equities and equity options. We are one of the very few firms able to offer access to Takion Software Platform, enhancing your trading performance. For control of your orders and to capture additional profits, contact Great Point Capital today. Reg NMS and the current fragmented market are obvious contributing factors to latency issues, although there a couple of additional reasons that stand out as to why not all firms receive the same information at the same time. One contributing factor to this latency disparity is of course the speed of the Securities Information Processor (SIP), and another is the fact that firms co-locate their equipment to the servers of the exchanges. This advantage of speed combined with a predatory computer algorithm for trading, gives a very unfair advantage of access to see the public NBBO data before trading firms with a slower connection. SIP The SIP is tasked with centralizing all stock market data, then disbursing that data at the same time to all market subscribers. the SIP has put much focus on improving its latency, although direct data feeds are historically faster than the consolidated feeds. Some are of the mindset that reducing the SIP latency will create a more fair and efficient market, the issue of latency arbitrage is much more complicated than just reducing the latency of the SIP. The SIP latency refers to the time that it takes to receive all stock information, compile it together, aggregate and assemble all data, and then dispense it out. The latency problem with the SIP is not the time that it takes to perform these functions, even if that time is improved, it is with the method of disbursing all data. The transportation of that data is where the challenges lie. There will always be a latency issue involved with consolidated data compared to direct data feeds, because there are various sources for the SIP information. For example, the NYSE houses their data center in Mahwah, NJ, while Nasdaq’s server center is in Cartaret, NJ. Just a slight different geographic location can make enough of a speed difference that a latency issue is created. Flash Trading by Co-Location Flash Trading refers to the practice of exchanges ‘flashing’ buy and sell order information to select premium subscribers, typically these are HFT firms, a fraction of a second prior to when they are publicly available. This is very controversial as HFT firms use this advantageous information to trade ahead of pending orders, which is also known as front-running. This predatory practice has been going on for quite a long time, as in 2009 Senator Charles Schumer requested that the SEC ban flash trading altogether, stating that it contributes to a two-tiered market, the privileged few and everyone else. Other factors such as computer algorithms, technology, regulations, and distance contribute to latency issues, however, these two main factors of consolidated feed vs. direct feed and flash trading, both lay the groundwork for the current two-tiered market structure. Great Point Capital has been serving the trading community since 2001 and our 100+ prop traders actively trade the firm’s capital, specializing in equities and equity options. We are headquartered in Chicago with a location in Austin, TX. Contact Great Point Capital LLC today, in either our Chicago Office, or our Austin Office, to learn more about how we can successfully trade together with high performance results. We are one of the very few firms able to offer access to Takion Software Platform, enhancing your online equity trading performance. Day Trading Book Recommendations | Great Point Capital
It may seem difficult to find books on market trading that seem ethical and trustworthy. It can be tricky finding a reliable source with values aligned with your own. There is a wealth of information available with many great books on day trading for new and experienced day traders alike. It’s important to keep up with changes and technological advances as things always happen fast on Wall Street, and technology is changing even faster. In spite of the rapid changes, some basic age-old philosophies still hold value and we would like to share with you some of the best educational and interesting material for traders from timeless classics to modern documentaries set in today’s fragmented market setting. The following day trading books are sure to enlighten an up and coming trader the experienced quantitative trader.
Douglas reveals three stages to becoming a successful day trader, and helps you understand how your very thoughts control your perception of the markets. Douglas helps us to reign in our emotions whether we’re experiencing some losses or having a profitable day. In this modern and ever-changing market environment, staying focused on the market can be challenging enough, focusing on and controlling your psychological composure can be even more challenging. While computerized algorithms are conducting quantitative trades, let’s not forget that the human factor drives those choices, even the automatic ones. Keeping control of your emotions can be the difference between profits or losses. We give The Disciplined Trader two thumbs up and recommend that you give it a read.
Kaufman gives details on each technique disclosed, and helps you to understand how to use them to your best advantage. Trading Systems and Methods provides more explanation on statistical and mathematical concepts of trading systems. In this updated Fifth Edition, Kaufman gives more information on systems in the current market environment and the risk associated with those systems than in prior versions. This new version also includes access to a website packed full of extra materials, and spreadsheet for an interactive experience. Trading Systems and Methods provides valuable reference material to current trading systems, revealing methods and techniques to use them advantageously as a successful day trader. We highly recommend adding this to your reading list. Contact Great Point Capital, LLC today, in either our Chicago Office, or our Austin Office, to learn more about how we can successfully trade together with high performance results. Great Point Capital, LLC offers buying power, access to Takion software platform with excellent IT support, and the benefits of working with an experienced team. Stock exchange data fees imposed upon brokers and traders are receiving a lot of attention these day, with very good reason. All of the stock exchanges in the United States which include the two largest exchanges in the world, the New York Stock Exchange (NYSE) and Nasdaq, are required to provide all market data through the Securities Information Processor, also referred to as the SIP. All securities data must flow through the SIP for consolidation in order to display the current pricing and provide an environment allowing traders to perform their obligatory duty of best execution.
Exchanges provide data in another way, through colocation of equipment, allowing outside firms to purchase connection to their own computer servers to access the exchange’s Premium Data Products. The rising costs of these connectivity fees are causing disbelief among those dependent upon that information, as they continue to skyrocket with an average annual increase of 20% per over for the last five years! Two Revenue Streams for Stock Exchanges Bringing Buyers and Sellers Together It is important to realize that exchanges make money two different ways. The fees charged for bringing together buyers and sellers is the traditional revenue stream for a stock exchange. Exchanges used to earn decent revenue stream strictly from trading. The market structure has changed drastically since those days, before the onset of electronic trading venues and the emergence of several dark pools. The combination of the speed that only a computer can provide carrying out strategically written algorithms, created a highly competitive marketplace like absolutely nothing anyone had ever seen before. This new environment opened up many more options available for buying and selling securities, creating a might tighter big-ask spread. Within the newly fragmented market place, exchanges that once dominated the market began to lose market share, and liquidity. Prior to the onset of electronic algorithms, for example, the NYSE dominated the marketplace by trading approximately 80% of all market trades. Since the late 90’s and the introduction of the various Alternative Trading Systems (ATS), and the more than 40 dark pools, the NYSE now trades less than 20% of all market trades. Premium Data Access Fees US Stock Exchanges have developed a second revenue stream, charging for access to their “Premium Data” with a proprietary line of communication other than the SIP. These direct feeds are installed right to the exchanges servers, connecting the broker or trader to the servers of the exchanges through collocated equipment. These direct connections provides a slightly different view of the market with what the exchanges call “Premium Data Products” or “Depth-of-Book” data. For example, in 2006 the NYSE acquired Arca, and began to charge for depth-of-book data that had been free of charge prior to the acquisition. These direct feeds may be providing the same information, although the way it is delivered, or more specifically the speed with which information is delivered, is the main competitive factor. In fact, these direct feeds are viewed as more than just a competitive factor, they are absolutely necessary for traders to conduct competitive trades. Market Makers are forced to pay the premium data connection feeds as there is no other choice if they want to conduct trades competitively. The premium data products provide information that is not only advantageous over the SIP, it is a matter of necessity. Market makers cannot compete without this premium data from direct feeds. The direct feeds will outperform the SIP, every time. Early in 2016, Larry Tabb published an article in the Bloomberg View entitled “Stock Exchanges are Eating Your Returns”, where he reveals the total quarterly revenue of exchanges in US equity markets increased by 16% from 2010 to 2015, while their data and technology revenues increased by 62%. In addition to this, the revenues of their customers, the market makers providing liquidity and trading on the exchanges, decreased by 75%. Great Point Capital, headquartered in Chicago, with offices in Austin, offers traders support and tools necessary to make the most of their trading careers. We are one of the few firms authorized to utilize the Takion Software platform for trading, giving full access and support to our traders in house as well as remotely located. Contact Great Point Capital, LLC today, in either our Chicago Office, or our Austin Office, to learn more about how we can successfully trade together with high performance results. If you’re looking for some good books to add to your knowledge of Day Trading or Trading Stocks, we have a couple that we give two thumbs up in review: Reminiscences of a Stock Operator by Edwin Lefévre, and Market Wizards, Updated – Interviews with Top Traders by Jack Schwager.
Basic age-old philosophies still have merit and we would love to share with you some of the best educational material for day traders from timeless classics to compelling documentaries set in today’s fragmented market structure. The following two day trading books are sure to enrich and enlighten a trader new to the business and even the experienced quantitative trader.
Jesse Livermore was born in 1877 into a farming family of Massachusetts. He left the life planned for him on the family farm to put his superb mathematical and analytical skills to use trading stocks. He is famous for making several multi-million dollar fortunes during the 1920’s, (over one billion dollars by today’s currencies), and then losing them several times over. Throughout his illustrious career, he amassed a wealth of knowledge that has been shared for decades through the writing of Edwin Lefévre, including the following quotation, one of many, that is shared in this book: “It was the change in my own attitude that was of supreme importance to me. It taught me little by little, the essential difference between betting on fluctuations and anticipating inevitable advances and declines, between gambling and speculating.” It may appear that some of these factors have been removed from the decision making process with the onslaught of computerized algorithms driving the stock market today. Edwin Lefèvre reminds us that in spite of the changes with technology, these human factors still drive the tools we use for trading today. Reminiscences of a Stock Operator has offered wisdom to investors and traders for generations, even Alan Greenspan is quoted as saying that it is “a font of investing wisdom”. An updated version was published in 2009 with insights into the life of Jesse Lauriston Livermore. We highly recommend this book, it is sure to please while adding to your understanding of stock trading.
Schwager showcases interviews with some well known money-makers like Paul Tudor Jones, founder of Tudor Investment Corporation, philanthropist and hedge fund manager. He also features and interview with Ed Seykota, a commodities trader with degrees in both Management and Electrical Engineering from MIT. Ed was an original pioneer of computerized systems trading. Bruce Kovner declined an interview to Fortune Magazine when they wanted to run a story called “The 11 Billion Dollar Man”, as he rarely gives interviews. Bruce graduated from Harvard College in 1966, then started trading commodities. He founded Caxton Associates in 1983, a well-known hedge fund. Jack Schwager reveals these industry leaders’ trading philosophies, thought processes and skills deemed necessary to be a successful trader on Wall Street. Schwager summarizes what he believes to be the biggest lessons learned from his interviews. Shwager offers a variety with different market outlooks, and each success story differing from the last. One thing stands out as a constant, however, that solid methodology combined with the right mental attitude are fundamental characteristics for trading success. Give Market Wizards a read, we’re sure you will find it as enjoyable as we do. Contact Great Point Capital, LLC today, in either our Chicago Office, or our Austin Office, to learn more about how we can successfully trade together with high performance results. Great Point Capital, LLC offers buying power, access to Takion software platform with excellent IT support, and the benefits of working with an experienced team. Flash Boys, a Wall Street Revolt
Michael Lewis is the author of Flash Boys, a Wall Street Revolt, written about a group of men that banded together to investigate the insidious happenings on Wall Street. Flash Boys was published in 2014, and is a non-fiction account of the rise in high frequency trading due to predatory new computer algorithms put in place by brokers and big Wall Street banks. Flash Boys reveals how, as the band of revolutionary new Wall Street friends claim, the market is rigged. Brad Katsuyama, and several of his colleagues walked away from million dollar employment offers to get to bottom of what was happening on Wall Street to inform the public, investors, and other traders of how predatory HFT firms were manipulating the market. The book starts out focusing on the new found love for speed in the marketplace. Not just timely, we’re talking microseconds (a microsecond is one millionth of a second)! Installing the newest and fastest high speed fiber optic cables, gave an advantage to only big Wall street banks and brokers, an advantage worth billions of dollars. Lewis reveals, in fact, how many of them were willing to pay millions of dollars simply to gain a few microseconds of an advantage. This book explains how electronic algorithms have replaced the human trader on the floor, and how this sweeping technological change has impacted the markets. Brad Katsuyama, and his colleagues went on to found IEX, the Investors Exchange, the newest Stock Exchange recently approved by the SEC, offering a solution to fix some of the broken areas they revealed in their quest. Brad set out on a mission to pursue the truth about what was happening in the markets since the onset of electronic trading. He never lost sight of his goal of informing investors of the truth, and maintaining his ethical values. Flash Boys is a very enlightening book for not only day traders, but for anyone with a retirement or investment account of any size. Michael Lewis grabs your attention with the first chapter and keeps you engaged and wanting to know what’s coming next until the very end. This one is definitely a worthwhile read. Read more about IEX, The Investor’s Exchange, in our recent blog. Contact Great Point Capital, LLC today, in either our Chicago Office, or our Austin Office, to learn more about how we can successfully trade together with high performance results. Great Point Capital, LLC offers buying power, access to Takion software platform with excellent IT support, and the benefits of working with an experienced team. |
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