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Alan
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Trading halts, circuit breaker rules in the US

March 9th, 2020, 12:29 am

Unfortunately, already an issue today (Sunday, Mar 8, 2020):
 Deepening Rout in U.S. Stock Futures Triggers Limit Down Rules
 
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bearish
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Re: Trading halts, circuit breaker rules in the US

March 9th, 2020, 1:19 am

Not to mention the oil futures...
 
Austriarian
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Re: Trading halts, circuit breaker rules in the US

March 9th, 2020, 2:26 pm

What do you hardened vets make of this situation? 
 
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Alan
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Re: Trading halts, circuit breaker rules in the US

March 9th, 2020, 6:24 pm

These violent delights have violent ends.  
 
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Paul
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Re: Trading halts, circuit breaker rules in the US

March 9th, 2020, 7:15 pm

I knew things were going to be bad when the Economist said there probably wasn’t going to be a recession.
 
leptoq
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Re: Trading halts, circuit breaker rules in the US

March 17th, 2020, 9:33 pm

I knew things were going to be bad when the Economist said there probably wasn’t going to be a recession.
Nah, Trump said it before Economist, so the credit goes to POTUS
 
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Paul
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Re: Trading halts, circuit breaker rules in the US

March 17th, 2020, 9:36 pm

No, Trump is random. (Plus he has a duty to stabilize things.) No information there. But Economist and FT always wrong!
 
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VolMaster
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Re: Trading halts, circuit breaker rules in the US

March 20th, 2020, 3:11 pm

Has anyone experienced such a violent trading like we are experiencing right now? it feels like nothing i've experienced (say 2008/2011), and it just feels like the market is seriously broken. Liquidity has evaporated across all assets and cross-asset correlations have gone to zero in no time.
 
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Alan
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Re: Trading halts, circuit breaker rules in the US

March 21st, 2020, 8:05 pm

I have only been trading SPY and QQQ in an attempt to get/keep my small retail account "market neutral". To me, those ETF's have been functioning normally, of course with (sometimes record high) background volatility and volume. Putting that aside, notable to me is to see those ETF's "hard to borrow", although at (so-far) modest costs. Not surprising, given the understandable hedging demand. 

I was working at a money manager during the Oct 19, 1987 crash. Although that was only one day, it was, IMO, functionally far worse than current markets. Then, S&P500 futures became grossly disconnected from the index, disseminated quotes were running 15 mins behind actual trade times, and Nasdaq market makers simply stopped answering the phone. (The NYSE at least was OPEN!) 

While the last month has been a terrible melt-down, it seems to me that US equity markets (at least for the retail investor), have been providing a (more-or-less) properly functioning melt-down!  

Can't speak to other assets, markets, etc.      
 
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VolMaster
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Re: Trading halts, circuit breaker rules in the US

March 22nd, 2020, 7:42 am

I believe that the equity slump is the tip of the iceberg when it comes to what's going on right now in financial markets. While retail investors don't see it, there is a true funding stress across the market. Investors are either liquidating or called on margins, and basically hoarding dollars. Even after the Fed cut interest rates to zero, providing infinite liquidity, the implied USD deposit rate went to the roof. No one is lending money...
 
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Alan
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Re: Trading halts, circuit breaker rules in the US

March 22nd, 2020, 2:17 pm

Good points -- this is a very important topic.

I could see a little of that from the retail side in the US mortgage market. I was hoping to do a refinancing as the US 10-year rate fell under 1%. While mortgage rates fell for a while, then they reversed. With the 10yr Tsy at 0.92% and a 15-year mortgage rate at 4.0% (latest quote from my bank), the banks' implied message seems to be: "sorry -- the mortgage lending dept. is currently closed". What do you think it will take to restore "normal spreads" to the mortgage market? (And bank lending in general?) 

Also, I would be helped by a definition of the "implied USD deposit rate". Finally, can you post a chart of that?
 
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VolMaster
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Re: Trading halts, circuit breaker rules in the US

March 24th, 2020, 6:34 am

First, there is a huge disallocation between the Fed's target (or lending) rate at the window (where it lends to swap dealers and major banks) and the terminal rate where regional and mortgage banks lend to the comsumers. Furthermore, the swap dealers, probably due to credit risk and their need for USD on the balance sheets, create a severe USD shortage for international banks (for the likes of Deutsche Bank and other European banks). this USD shortage widens the cross-curreny basis (say DB wants to swap EUR into USD - while the Fed-ECB overnight rate spread is approximately 0.5%, the swap market adds an additional premium of 45bp for 3m period. which makes it additional 1.8% per annum).

This type of stress has spread across all credit markets in recent weeks. Commerial paper (widely used by money-market funds), Municipal bonds, IG corporate bonds, all have been dumped by funds and investors (either due to liquidation of funds or margin calls).

Yesterday the Fed announced open-ended QE, which should support credit market, and put some relief to the tightening of credit.
 
jkiely
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Re: Trading halts, circuit breaker rules in the US

March 28th, 2020, 9:25 am

Hard to know how much stress there is in the funding market as corp bonds have serious liquidity issues right now. 
Bond ETFs trading at record discounts to NAV give a good indication of spread activity and funding issues (although some bond traders insist that the ETFs are totally dislocated from the real market now and don't reflect bond market participant's view of spreads). 
 
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lloydsatchwell
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Re: Trading halts, circuit breaker rules in the US

March 29th, 2020, 6:30 pm

What is their response when you suggest it may be that NAVs are dislocated from the "real value" and the ETF better represents the perceived value of the underlying? The market structure & price discovery process of a number of assets has become a more interesting in these times, to me at least.
Separately, were any of the Wilmott forum vets around for 1929..?
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