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发帖数: 575 | 1 【 以下文字转载自 Chinook 俱乐部 】
发信人: chinook (Base Loaded), 信区: Chinook
标 题: Traders Warn of Market Cracks
发信站: BBS 未名空间站 (Wed Oct 19 00:02:22 2011, 美东)
谁睡不着觉，读者玩。WSJ上的。
Traders Warn of Market Cracks .
By TOM LAURICELLA And GREGORY ZUCKERMAN
Amid the wild swings of the past few weeks, traders are finding difficulty
executing trades without causing a big swing in prices, Gregory Zuckerman
reports on Markets Hub. Photo: AP.
.
Amid the wild swings of the past few weeks, cracks are appearing deep in the
workings of the stock market that some professional investors say are
making the market treacherous to trade.
Hedge-fund traders and mutual-fund managers say it has become increasingly
tough to trade an individual stock without causing a big swing in its price.
That's led many large investors to step back from the market instead of
risking being stung by the trading difficulties.
Mind the Gap
The spread, or percentage difference between the price investors are willing
to buy and sell a stock, grows as markets become more volatile.
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The big moves in stock indexes have caught attention. Just on Monday, the
Dow Jones Industrial Average dropped 247.49 points, or 2.13%, to 11397.00.
But market participants say trading conditions are much worse when they
drill down to individual stocks, highlighting skittishness of investors of
all stripes.
Even among some of Wall Street's most actively traded stocks, such as Apple
Inc. or Netflix Inc., traders say it has been more challenging than usual to
buy or sell.
The problem is a lack of liquidity—a term that refers to the ease of
getting a trade done at an acceptable price.
Markets depend on there being many offers to buy and sell a particular stock
, across a range of prices. But as investors have gotten nervous, many of
those offers have dried up. That is causing wider-than-normal gaps between
prices showing where stocks can be bought and where they can be sold—the
difference between the "bid" price and the "ask" price.
Many big investors, such as hedge funds and mutual funds, which at times can
act as shock absorbers for trading because they tend to trade large chunks
of stocks, have been on the sidelines. Some hedge funds, for example, say
they're not trading as much until they know how much money their clients
will withdraw at the end of October, a deadline some clients have to inform
funds of intentions to redeem money at year-end.
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Bloomberg News
Traders at the New York Stock Exchange.
.
Wall Street firms and banks, meanwhile, have significantly less appetite for
taking on the risk of holding whatever it is that clients are buying or
selling.
Some analysts and investors say poor liquidity and market turbulence, which
has seen the Dow rise or fall by 1% or more in 14 of the past 19 trading
days, will continue as long as government officials squabble on both sides
of the pond, banks and others look to reduce trading risk and the global
economy stays on a shaky footing.
In some ways, investors would be expected to leave the market in uncertain
times, but traders say the exodus of late is striking and underscores the
nervousness of market participants, and the lack of willingness of many to
step in to trade.
"Liquidity will continue to be a big problem," says Patrick McMahon, co-
founder of hedge fund MKP Capital. Mr. McMahon says he has noted the sharp
decline in liquidity, or market depth, in recent months. And, with global
banks reducing their risk exposure, they are less likely to step in and take
either side of trades, Mr. McMahon says.
He says fewer investors are willing to buy or sell stocks, creating an
effective vacuum.
"That's why you get 5% moves in a matter of minutes," he says. "When there
are sellers, there are few buyers, creating an air pocket down."
And it's not just stock markets. Liquidity has also been sucked out of
credit markets, too, traders say, from corporate bonds to mortgage-backed
securities. Global banks have been reducing their exposure to riskier bonds
and are less likely to step in and take either side of bond trades, Mr.
McMahon says. In some cases this is spilling into the stock market, as debt
investors scramble to trade there.
"Any reasonable sized selling is driving individual bond prices down quite a
bit," says Jeffrey Kronthal, co-founder of hedge fund KLS Diversified in
New York, who says bid-offer spreads in areas such as some residential and
commercial mortgage-backed securities have more than doubled in the past
month or so. "Really, no dealers are putting up capital. A lot of stuff just
doesn't trade."
In the stock market, one well-known manager of a large hedge fund said he
recently tried to buy $250 million of shares of Tempur-Pedic International
Inc., a mattress maker with a nearly $4 billion market value. The manager,
who declined to speak on the record, says he gave up after his initial order
of $20 million of shares pushed prices of the stock up too far.
"You try to get something done at one level, and if you take your eye off
the screen, it can move to the next level," says David Schiff, deputy head
of equity trading at JPMorgan Asset Management. "There's not a lot of depth
at any price point."'
To some degree there's a chicken and egg phenomenon at work. As poor
liquidity begets more volatility, big investors and brokerage firms become
even more wary of being active in the market. And individual investors, many
of whom are out of market already, are less likely to return. Volumes,
while erratic, have largely been lower in recent weeks. Some 3.7 billion
shares changed hands in New York Stock Exchange composite trading on Monday,
compared with this year's average of 4.4 billion.
Some traders say this kind of dynamic is what should be expected for such
highly uncertain times.
"Yeah, of course it's harder to trade," the head of one mutual fund trading
desk says. "You can't do things you used to be able to do four months ago,
but it's a different market."
The best way to judge liquidity, some traders say, is by looking at the bid-
ask spreads.
For the stocks in the Standard & Poor's 500 stock-index, spreads have been
at their widest since late 2009, when markets were finally calming down from
the worst of the financial crisis. The median spread on S&P 500 stocks on
some days topped 0.05% of their share price on multiple days, up from an
average of just over 0.03% for the first seven months of 2011, according to
Credit Suisse's AES electronic trading group.
The lack of liquidity can also be seen in the spreads among actively traded
stocks. On Apple, for example, the average spread has on many days been
double what it was back in June, according to data compiled by T3 Trading
Group. On shares of Amazon, the spread has gone from 0.03% of the share
price to a spread of over 0.05% in recent weeks. The spread on Netflix
shares widened to over 0.07% in September and early October from 0.05% in
late June and July.
One surprising element of the fall-off in liquidity is that one key set of
players actually appears to be more active in recent months: so-called high-
frequency traders. These hedge funds use computer models to trade at a rapid
pace. In recent years they have replaced brokerage firms as the go-betweens
when investors trade stocks.
But with so many other players stepping back from the market, the liquidity
that high frequency traders are providing isn't creating much of a cushion,
traders say. In fact, some say they may be making matters worse.
Conditions have improved a bit over the past two weeks, says Scott Redler,
chief strategic officer at T3 Trading, but overall, trading in stock such as
these have "felt thinner and it's hard to get good executions. As soon as
you get filled, it feels like the prices are against you." |
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