Market Manipulation 101

Check out this post on Yelnick, which summarized, says that all of the gains in the stock market in this rally have been made on just 30 Mondays. No kidding.

http://yelnick.typepad.com/yelnick/2010/01/vampire-market-all-the-action-is-at-night.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+PlanetYelnick+%28Planet+Yelnick%29

And then I (along with a lot of other people) get this email today from a professional pit trader (Larry Levine), who has a free newsletter he produces, in which he talks about an event yesterday that raised eyebrows in the trading pits. Some of his comments:

What happened at 12:03pm Eastern Time? There were no reports out, the 10-YR Note auction wasn't until 12pm, and the S&P500 was a bit stonewalled just under 1137.00 after a rally from the day's low. As the market advanced slowly through the congestion it hit: a MASSIVE order, or series of orders, lifted the offer in the e-minis. But it wasn't your garden variety large order of 2,000 mini's - I'm talking about 114 times that size.

At 11:03am today at the Chicago Board of Trade (12:03pm EST) over a quarter of a million mini-S&P500 orders traded north of 1137.00! (228,000 last count)

Could this be real I wondered? Was it some sort of computer malfunction that added too many zeros to the reported, yet smaller, trades?

No, that's not what happened. In fact, a bit of a hullabaloo occurred around my trading booth on the floor of the CBOT as many locals, brokers, and compliance members stared at the aforementioned volume chart in disbelief. As it turns out, all of the trades were indeed valid. None were busted. Moreover, as one of the compliance members told me, he saw the trades listed sequentially (1,000 or 2,000 lot orders) and they all occurred with milliseconds of one another until the massive order was completed.

This order size takes a SERIOUS bankroll to get done. If you are wrong by one-point on a 228,000 lot ES order, you can say goodbye to $11,400,000.00. If you contemplate this size your margin requirement is $1,282,500,000.00, while the notional value is $12,961,800,000.00.

Has a new "playha" hit the scene? Is his nickname "Helicopter?" Has high frequency trading (HFT) taken root in the mini-S&P in a huge way?

Of course by 'Helicopter' he means Ben Bernanke and the Govt. Talk about rigged markets, it sure looks that way...