Wednesday, 26 August 2015

Blackpool Is The Only Valid Dark Pool (A Flashback Post)

With the latest phase of the Great Recession upon us, time for a post from July 2009.

Dark Pools and many other forms of "Shadow Markets" are entirely non-regulated. 
Utilised for the trading of huge blocks of institutional, and often inside, knowledge, Dark Pools allow an array of benefits for big investors.
As if being able to trade inside information in a private non-regulated environment were not enough of an advantage, market participants are assured of no price scalping, anonymity, and the ability to trade on the 'highest platform' - always the dominant level in any market structure.

The whole Dark Pool edifice is self-supporting in its self-generated protective bubble.
The broker-dealers and exchanges offering Dark Poolery are in a privileged position, which is why they are able to offer such generous terms to institutional investors in the first place.
They are first in the line for highly influential market information - primary level cloned trading is a good place to be.
This knowledge is very valuable and is immediately traded around the Dark Pool network - there are currently 40 operators in the US and 9% of market activity is located in these private environments.

By 2010, it is projected that there will be around one hundred Dark Pools worldwide which is not a sustainable number. The Dark Pool sector will consolidate and mature. Due to the nature of this sector, players will disappear apace when the chips are down. 
The dynamic to evolve to maturity at speed is also paramount for this sector due to the Depression. The market cannot sustain 100 platforms. Primary level advantage in a mature market sector in a Depression era is an ultimate market locus. 
Securing advantage in route to market and, crucially, a temporal edge in order to jump-start the next wave of the Depression to proprietary advantage, this sector exists simply to optimise the trading environment and performance of a 'financial elite'.

These constructs are the future of financial markets.
These structures are highly regressive.

Non-regulated private markets allow a Pandora's box of market abuse away from the glare of oversight. Co-ordinated market strategies may be orchestrated to corner a particular market to the detriment of the selected victims, entirely controlled market entities may be developed, fake market momentum generated etc etc.

There are so many loopholes in Dark Pools that the fabric of regulation crumbles to pieces - there is not enough 'solidity' to allow the holes to be looped!
But, insider trading opportunities are surely the most pernicious.

Company officers are being allowed a massive perk here - the ability to privately back or lay their company (or other companies in which they hold directorships or primary level inside information) without such positioning being reported to any regulatory body nor, obviously, any public place.

This creates a very tilted marketplace to the benefit of the elite and the disadvantage of everybody else, including the lower tiers of financial capitalism.
By taking advantage of private markets to trade their information, insiders are severely hampering price transparency.
Without price transparency, free market capitalism works even less well than is already the case.
So, the global economic well-being deteriorates just to allow the Chosen Few to trade yet another poker table of our existences.

Of course, eventually, the private trading reaches the public space, but only after it has visited numerous other private spaces on the way. 
Repeated cloned trading by brokers announces the neohyperreality to the public markets so that the massed middle classes are able to add such data to their software and charts.

In a Depression, the temporal edge is the most important.
Markets are volatile in Depressions.
Trading the volatility is easy money.
Gaining solid price enhances these profits.
But the main advantage bestowed by the temporal edge is when significant breakpoint news is known to the elite. In the most serious state - market paralysis, think Iceland - this temporal edge allows massive market advantage.
You should think through the other potential trading templates that offer structural advantage to these market architects - there are many of them.

As we have said once before, the Dark Pools offer temporal advantage in the current Depression in a parallel manner to which the Ticker-Tape did in the Great Depression.

The only question remaining is surely this.
Will this Depression be the Even Greater Depression or the Permanent Depression?

Still we should be grateful for one thing, at least the financial elite look like they will come through with their assets suitably bolstered when judged comparatively.
This is very pleasing...

Speculators are always blamed for the crises of capitalism.
But this is too simple a view.
Insider traders and primary level clone traders are the Dark Pool and their leeches, and the catastrophes that define this system are generated by the market activities of these participants.
But your average speculator is not in these elevated circles.
Your average speculator is riding the surf rather than generating the wave in the first place.

So blame NYFix and Turquoise and, soon, Baikal.
And blame the state-based economic systems that allow this chicanery to take place while the world goes to pot, rack and ruin.

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