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Awesome analysis. Keep in mind that while it tells a very compelling story, that it isn't necessarily proof that there was a leak. All it would take is for one

Awesome analysis. Keep in mind that while it tells a very compelling story, that it isn't necessarily proof that there was a leak. All it would take is for one major player to take a view on what was going to happen without hearing the fed data in an attempt to beat the market. Other algos then see that and act on it, playing the other players instead of the data, as algos are known to do frequently. All of this could happen in the time it takes for the actual data to get there. There were tons of people who expected yesterday's announcement to turn out just as it did. I'm not saying that's what happened, just that it's a possibility to keep in mind before jumping to conclusions.

mcphilip 13y ago
The Fed's decision was a very big surprise to most, from what I've read. Just google "taper surprise" to see for yourself. Also, this was a massive move upwards, so the argument is that over a billion dollars of bullish bets made at the exact same milliseconds is hard to explain away as another contrarian play that payed off well. Still, skepticism is healthy, and it's possible that no scandal is involved.
- CrunchyJams 13y ago
  The mainstream financial headlines generally regurgitate what the Fed wants to message. While certainly 'most' were surprised, many weren't. Tapering was dependent on econ data, which simply hasn't been there to support it. I know plenty of people who were betting that it wouldn't happen, myself included. Good overview of why from before the announcement here: http://www.moneyweb.co.za/moneyweb-safm-market-update/r-1805 http://www.moneyweb.co.za/moneyweb-safm-market-update/r-1805
  - strongvigilance 13y ago
    Yes - most journalists/analysts prefer to be wrong together than wrong alone, so there is usually a lot of groupthink. The previous fed minutes suggested that most members wanted to wait to taper, unless data improved, and data didn't improve. It seemed obvious to me that the taper was nowhere near a done deal.
murbard2 13y ago
You're right to be skeptical but your alternative does not stand up to scrutiny. If a player indeed had a strong bite, milliseconds after the announcement would be the worst time to execute. This is a time where almost all the liquidity goes away as market participants stand pat. If you had such a view, you would build your position over time, and certainly not incur the huge cost of making large trades at the lowest point in liquidity.
- CrunchyJams 13y ago
  Not if your goal is to make other traders (algos) think that you're acting on market data
pintglass 13y ago
> All it would take is for one major player to take a view on what was going to happen without hearing the fed data in an attempt to beat the market. But why would they wait then? "Guessing" or working with known public information is perfectly legal. They should act upon that data immediately. A leak is much more likely, as they would be afraid of an investigation when they "guessed right". They were almost certainly trying to trade as if there were no leak, but they forgot to add the slight delay.

mcphilip 13y ago

The Fed's decision was a very big surprise to most, from what I've read. Just google "taper surprise" to see for yourself. Also, this was a massive move upwards, so the argument is that over a billion dollars of bullish bets made at the exact same milliseconds is hard to explain away as another contrarian play that payed off well. Still, skepticism is healthy, and it's possible that no scandal is involved.

CrunchyJams 13y ago
The mainstream financial headlines generally regurgitate what the Fed wants to message. While certainly 'most' were surprised, many weren't. Tapering was dependent on econ data, which simply hasn't been there to support it. I know plenty of people who were betting that it wouldn't happen, myself included. Good overview of why from before the announcement here: http://www.moneyweb.co.za/moneyweb-safm-market-update/r-1805 http://www.moneyweb.co.za/moneyweb-safm-market-update/r-1805
- strongvigilance 13y ago
  Yes - most journalists/analysts prefer to be wrong together than wrong alone, so there is usually a lot of groupthink. The previous fed minutes suggested that most members wanted to wait to taper, unless data improved, and data didn't improve. It seemed obvious to me that the taper was nowhere near a done deal.

murbard2 13y ago

You're right to be skeptical but your alternative does not stand up to scrutiny. If a player indeed had a strong bite, milliseconds after the announcement would be the worst time to execute. This is a time where almost all the liquidity goes away as market participants stand pat. If you had such a view, you would build your position over time, and certainly not incur the huge cost of making large trades at the lowest point in liquidity.

CrunchyJams 13y ago
Not if your goal is to make other traders (algos) think that you're acting on market data

pintglass 13y ago

> All it would take is for one major player to take a view on what was going to happen without hearing the fed data in an attempt to beat the market. But why would they wait then? "Guessing" or working with known public information is perfectly legal. They should act upon that data immediately. A leak is much more likely, as they would be afraid of an investigation when they "guessed right". They were almost certainly trying to trade as if there were no leak, but they forgot to add the slight delay.