I think as traders are giving algorithmic trading programs too much credit. not a day goes by that a price move in the market is attributed to algo’s in some form or other as being responsible. This is especially true in quiet markets.

From my perspective, the algo’s add ZERO value. Strategies they use, whether it be quote stuffing (placing and then immediately cancelling orders), and layering (using hidden orders on one side and visible orders on the other) can potentially be used to manipulate prices. Not that stuff like that hasn’t always been possible, for example, I remember, years ago, clearly overhearing a broker receive instructions to sell 100 hard, as if he had 500 to sell, in an effort to drive prices lower.

But deterministic algorithmic trading such as VWAP (volume weighted average price) strategies can be front-run by other algorithms programmed to recognize such trading. Momentum ignition strategies, which essentially induce algorithms to compete with other algorithms, can push prices away from fundamental values. All of that is not good, since the market is no longer trading legitimately based upon its own merits. The result is people lose confidence from the user producers, for whom these markets were created. Seems to me we are seeing thinner markets as those users and producers avoid participation, thus harming the consumer and increasing volatility.

Anyway, those are some thoughts. What I don’t like is that this new approach is becoming the norm and creating an even increasingly thinner market. If it weren’t for convergence, they would appear even more worthless.

Just my 2 cents.

The industry is shrinking. The trading floor, where I spent my career, used to be home to 2,700 workers, now fewer than 250 remain. And that’s just the ICE trading floor. Two floors below in the same building a similar loss of workers is nearly as visual on the NY markets of the CME. I am not sure about Chicago. And with the collapse of MF Global, 1,066 employees there have been fired about two weeks ago.

I keep hearing that more and more upstairs people are being let go and firms scale down their workforce. Occupy Wall Street? Or is it un-occupy?

Has anyone listened to me about the spreading of the debt crisis overseas? For two years now I have been saying this will not go away and it will spread to the other countries. It is not that they will not get bailed out it is just that they cannot get bailed out at the same time.  Private investors and companies are not going to put money into failing governments! They would rather park their cash in the bank and get ready for another recession which could be rather deep.

There is a good system moving NNE from central OK and KS. The rains over the eastern halves of both states will help tremendously while the western third of KS and OK as well as most of TX miss out on beneficial rains. According to Intellicast estimates, West of Manhattan KS will remain dry while 70% of OK is covered with .50-2.5″. After this big system, look for a dry spell to move into the region for the next 10-14 days. Temps will cool but nothing dramatic to scare producers. Overall a good start in the eastern regions but that is not where they grow the high protein wheat in KS.

The above map is the Intellicast 30-day precipitation versus normal forecast. After the current system hits eastern KS, NE, OK and CO there is little seen for the next 10-days for the western half of the HRW region. I agree that the eastern, especially the NE region will look good after this system but the SW region is another story. The 30-day estimates point to no help for TX and into SW KS making the HRW crop questionable still.