The hotly-anticipated initial public offering of GoPro GPRO+8.52% this week is one of the largest consumer electronics debuts of the decade.
Shares surged more than 30 percent on Thursday from its IPO opening price of $24 per share, as the company raised $427 million in cash.
The initial success of GoPro may soon pave the way for entry into a number of exchange-traded funds in the near future as well.
The most likely ETF to get the first shot at adding this high definition video maker is the Renaissance IPO ETF IPO+0.09% . This fund allows new publicly-traded companies to be added to its index on the fifth day of trading, and subsequently removes any stocks that have more than two years of history. Continue reading →
Conflict of Interest is Of Interest to Senate Panel Members “just learning about” industry-rampant Payment For Order Flow Schemes . Market Structure To Be Re-Structured?
Excerpts below courtesy of The Wall Street Letter’s on the spot coverage of the U.S. Senate investigation of Wall Street’s affection for high-frequency trading aka HFT, and with specific focus on order routing and execution practices, particularly with regard to kick-back inspired payment for order flow schemes, “maker-taker” rebate schemes and likely conflict-of-interest issues within the context of brokers such as Charles Schwab and TD Ameritrade (among others) failing to ensure so-called “best execution,” a role that necessarily precludes receiving payment for directing customer orders to any counter-party other than the one offering the best available price for that sized order at that point in time.
Here’s the WSL story as of 8 pm EST on the first day of testimony from members of the securities industry; no surprise to note certain executives take the ‘walk backwards’ and no longer defending the practices that have enriched their business models:
Market participants commenting in front of Senate’s Permanent Subcommittee on Investigations hearing into ‘Conflicts of Interest, Investor Loss of Confidence, and High Speed Trading in U.S. Stock Markets’ noted that the SEC needs to re-examine or dismiss the maker taker rule and subsequent rebates as they’ve harmed consumer confidence and efforts to provide best execution.
Tom Farley, president of NYSE, noted to Senators Carl Levin, John McCain, and Ron Johnson that the maker taker model has led to a proliferation of sell-side broker dealers executing orders on exchanges that are offering induced rebates to create liquidity, rather than sending orders that offer the best execution. Continue reading →
MarketsMuse Editor Note: Below excerpt from this a.m.’s edition of macro-strategy newsletter Sight Beyond Sight..
Neil Azous, Rareview Macro LLC
While commentators largely ignored the Financial Times article released yesterday it garnered a fair amount of attention by investors in our circle. The article stated that “Federal Reserve officials have discussed imposing exit fees on bond funds to avert a potential run by investors, underlining regulators’ concern about the vulnerability of the $10tn corporate bond market.”
Here is one interpretation on why this trial balloon was sent out. Please forgive our attempt at satire; we mean to inform, and hopefully amuse, not insult.
Rick at Blackrock: Hi Lloyd. Our “Yellen Index” is flashing imminent Fed tightening. We can’t tell you the inputs but this is our internally used proprietary index and is made up of the economic statistics she most favors and right now it is saying the Fed should already be tightening.” (FT Article)
Lloyd at GS: So what does that mean to me Rick? We are an M&A and asset management shop now.
Rick at Blackrock: Whatever helps you sleep at night, Lloyd. I need a bid on a 16 billion corporate bond portfolio ASAP.
Lloyd at GS: We are not in that business anymore due to new capital requirements, balance sheet constraints and regulation.
Rick at Blackrock: Lloyd, we go back a long-time and we pay your firm nine figures per year. I need a bid now.
Lloyd at GS: What do you think this is Rick? The 2004 interest cycle? Send over a list and we will work it on an agency basis.
Rick at Blackrock: Screw you Lloyd. I am calling my friends at Bank of America.
MarketsMuse Editor Note: Finally, the topic of payment for order flow, the questionable practice in which large brokerage firms literally sell their customers’ orders to “preferenced liquidity providers”, who in turn execute those orders by trading against those customers orders ( using arbitrage strategies that effectively guarantee a trading profit with no risk) will now be scrutinized by the U.S. Senate Permanent Subcommittee on Investigations in hearings scheduled for this morning.
The first paragraph of this morning’s NY Times story by William Alden regarding today’s Senate hearings frames the issue nicely: “..To the average investor with a brokerage account, the process of buying and selling shares of stock seems straightforward. But the back end of these systems, governing how billions of shares are traded, remains opaque to many customers…Behind the sleek trading interfaces of brokerage firms like TD Ameritrade, Charles Schwab and Merrill Lynch lie a web of business relationships with relatively obscure firms that make trades happen..”
MarketsMuse has spotlighted this issue repeatedly over the past several years, including citing long-time trading industry veterans who have lamented (albeit anonymously) that the notion of selling customer orders is a practice that not only reeks of conflict of interest, it is an anathema to those who embrace the concept of best execution. Their request for anonymity has been driven less by “not authorized to speak on behalf of the firm” and more by a common fear of “being put in the penalty box” by large retail brokerage firms who embrace the practice of double-dipping (charging a commission to a customer while also receiving a kickback from designated liquidity providers) simply because these firm deliver the bulk of orders to Wall Street trading desks for execution.
Throughout the same period that this publication has profiled the topic, we have repeatedly encouraged leading business news journalists from major outlets to bring this story to the forefront. In every instance other than one, journalists and editors have suggested the topic is “too complex for our readers” and many have indicated that its a story that their “major advertisers (the industry’s largest retail brokerage firms and ‘custodians’) would be offended by.”
NY Times reporter William Alden described the issue in a manner that is perfectly clear and simple to comprehend; whether the issue of “conflict of interest” is clear enough or simple enough for U.S. Senators to grasp is a completely different story.
The following extracts from Alden’s reporting summarize the issue brilliantly; link to the full article is below: Continue reading →
Extract courtesy of Spencer Jakab, Wall St. Journal. Full article available via clicking on WSJ logo on left side..
“..Now that volatility has emerged not only as a concept but an investment in its own right, there probably is no putting the genie back in the bottle. And while portfolio managers largely welcome the products, the droves of speculators drawn to VIX notes may be in for a wilder ride than they realize…”
The latest big worry to hit markets is an unusual one: calm. With stock prices high and various gauges of risk low, investors appear to have thrown caution to the wind.
That isn’t entirely true, though. Exchange-traded notes that profit handsomely from market-shaking events have boomed since the financial crisis. But they have two big shortcomings: They may not work as designed in another financial crisis since their value depends on the bank backing them. And due to the way the products work, anyone holding these for the long term will inevitably see their value erode. Continue reading →
Below extract courtesy of Neil Azous, founder of Rareview Macro LLC and publisher of Sight Beyond Sight, the macro-strategy newsletter.
Neil Azous, Rareview Macro LLC
Professionals Actually Sensitive to Weaker Risk Assets Over The Next Few Days
• Model Portfolio Trade: Short NASDAQ
• Partial Switch ofFunding Leg of Carry Trade Impacting Risk Assets
• China MSCI A-share inclusion update, CNY Observation, & Data Surprise
• Our Core Position – Short EUR/NOK – Gets Added Boost from Paid Forecaster
• Gold & Real Rates
• Eric Cantor
Model Portfolio
The model portfolio sold short 132 (~10mm) NASDAQ futures (symbol: NQM4) at 3788.25. This is the first time in a long while that we have added directional downside exposure. We are open to adding to this position but would also not hesitate to remove it quickly if it turns out to be wrong. Continue reading →
Below extract from this a.m. edition of Rareview Macro’s Sight Beyond Sight…
“….The key objective we laid out at the end of April has, we are pleased to say, now materialized – don’t sell in May and go away, as the S&P 500 will trade higher to a range of 1920-1950. What is needed now for our forecasts to be fulfilled completely is a trend change in the US Dollar and greater evidence that the CAPEX profile will accelerate.
On the margin this morning’s US employment data did two things:
Neil Azous, Rareview Macro LLC
1. It mitigated some degree of the concern at the Federal Reserve about the slack in the labor market.
2. It strengthened the intermediate-term argument that a trend change in the Euro-Dollar (EUR/USD) is underway following the actions announced by Mario Draghi at the European Central Bank (ECB) yesterday.
Many with a short-term mindset are focused on price levels or technicals that force people to adjust risk. The Euro exchange rate above 1.37 or Gold above 1258, are two obvious examples.
What we would highlight is that neither today’s data nor yesterday’s actions by the ECB portend to a correction in risk assets. This is primarily because both events do not strengthen the bear argument that the weak data in the first quarter has bled hard into the second quarter growth profile.
Below extract courtesy of this a.m.’s edition of Rareview Macro’s Sight Beyond Sight..(Re-published with permission from Neil Azous)
Neil Azous, Rareview Macro LLC
Here is an aggregation of the various statistics either sent to us from subscribers or we came across during our readings this weekend.
1. Japan Government Pension Fund (GPIG): Apple (AAPL), Exxon and Microsoft have the heaviest weighting in the MSCI Kokusai Index; ~87% of GPIF’s foreign stock holdings follow this benchmark. (Source: Eurofaultlines)
2. As far as we can tell the degree of these inflows have not yet been widely observed by other paid forecasters on the Street. EM Portfolio Inflows Reach New High In May: Our EM portfolio flows tracker indicates that portfolio inflows to emerging economies continued their upward trend of the last several months, reaching the highest level since September 2012, when the Fed launched QE3 (Chart 1). In May, EMs are estimated to have received $45 billion in portfolio inflows from global investors, up from $28 billion in April and $27 billion in March. The May figure reflects $28 billion going into EM bond markets (portfolio debt flows,Chart 2) and $17 billion into EM stock markets (portfolio equity flows, Chart 3). (Source: Institute of International Finance) Report
3. This week the S&P 500 will surpass the 1995-96 record for number of consecutive days in which the index has traded above its 200-day moving average.
4. SPY closed above its upper Bollinger 5 days in a row through Friday. SPY has only closed above its upper Bollinger 4 days in a row 4 times since 2009. (Source: Fat Pitch)
5. Relative Strength Indicators (RSI)
a. The S&P 500 (SPY) 9-day RSI is over 70 = Overbought
b. The NASDAQ (NDX) 9-day RSI is 74 and AAPL’s is 80 = Overbought
c. The Transports (IYT) 9-day RSI is over 77 = Overbought
d. The Semiconductors SOX) 9-day RSI is over 70 = Overbought
6. Since 1950, the DJIA has lost -1.9% and SPX -2.1% in June. The last 20 years have been even weaker. Moreover, the SPX has been down in 11 of the last 16 mid-term elections Junes (Source: Stock Traders Almanac).
7. The VIX has closed below 12 for five straight days, the longest streak at that level since 2007 (Source: Volatility Trader) Continue reading →
Courtesy of Benzinga via MarketWatch
Extract courtesy of Spencer Jakab, Wall St. Journal. Full article available via clicking on WSJ logo on left side..