WSJ Discovers How Algos Broke The Market

Wednesday, December 26, 2018
By Paul Martin

by Tyler Durden
ZeroHedge.com
Wed, 12/26/2018

For years, as the market rose in seemingly uninterrupted fashion buoyed by trillions in excess central bank liquidity and algos programmed to buy any dip while frontrunning each and every buy order, virtually nobody – except for a few “fringe”, “fake news” blogs – complained about the threat posed by algo trading and the quiet but dire deterioration in market liquidity.

Now that the S&P has finally suffered its first bear market in a decade, the mass media is out in full force looking for scapegoats and, predictably, in an attempt to deflect attention from the biggest, and only, culprit behind each and every bull-bust cycle namely the US central bank, has focused on “computerized trading.”

In a front page article, the WSJ is out today with “Behind the Market Swoon: The Herdlike Behavior of Computerized Trading”, in which a bevy of WSJ authors, among which the paper’s new ‘Fed whisperer’ Nick Timiraos (who may or may not have been tasked with delivering a piece drawing attention from the inhabitants of the Marriner Eccles building), write that “behind the broad, swift market slide of 2018 is an underlying new reality: Roughly 85% of all trading is on autopilot—controlled by machines, models, or passive investing formulas, creating an unprecedented trading herd that moves in unison and is blazingly fast.”

A quick note: 85% of this “autopilot” trading also took place on the upside, yet the WSJ – and all the other bulls – were oddly quiet for years and years. Of course, to Zero Hedge readers, the story is all too familiar: after all we have covered all of this not just when the market snapped lower, but more importantly, during its levitation phase, setting up the inevitable crash:

Today, quantitative hedge funds, or those that rely on computer models rather than research and intuition, account for 28.7% of trading in the stock market, according to data from Tabb Group–a share that’s more than doubled since 2013. They now trade more than retail investors, and everyone else.

Add to that passive funds, index investors, high-frequency traders, market makers, and others who aren’t buying because they have a fundamental view of a company’s prospects, and you get to around 85% of trading volume, according to Marko Kolanovic of JP Morgan.

The Rest…HERE

Leave a Reply

Join the revolution in 2018. Revolution Radio is 100% volunteer ran. Any contributions are greatly appreciated. God bless!

Follow us on Twitter