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GdayFx said:
A lot of fundamentals could be pointing to a higher Pound including the possible slow increase of interest rates, we could see pound start to price it all in... any thoughts

Functionally, where I'd expect to see this show up first is within the EUR/GBP pair. The USD is being driven higher, across the board, mostly because the Fiber is in the process of laying a wide dirt road everywhere it goes. The response in the Cable directly might take more time. We could be within the Sell Program through the end of the year, with only some bumps along the way.

As long as Fiber is still trending, Cable is going to keep getting pulled that way, me thinks.
Something like this forecast maybe, who knows! i get what you mean though

that divergence we have just seen in the 5 year yield has to mean something to, along with other signals, if we did see a bounce it could be in the tune of around 280 pips


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Anyone make a play off this? I heard of a guy in Reddit who cleared 1$00k on the breakdown. Nuts.
I look towards protecting myself from such events rather than profiting from them. eg buy way out of the money options, partial solution.

Wonder whether or not this event will be a catalyst for a few more Broker failures.
Avoid 'Cunts' such as IG Markets

October 07, 2016
Now...I have as I said been in this market 34 years...and I NEVER come on and say things like this after having my Twitter a/c for more than 9 years....But since I have become involved to an extent with the retail market....ONE platform has been bought to my attention OVER AND OVER AGAIN...IG....IG AND IG...So I starting to trial it...and was totally amazed at 1 the difference of filling of stops.....and 2 the aftercare and the answer from the so called " HELP DESK ".....This s not just in happens in OPTIONS as well.....Option that a taken over a 2 week period that the Oil market will go from 38$ to a 45$ strike price call option...The market rallied 800 points IG options lost money...All within this 2 week period....Now we have kept a record of IG vs other platforms...and I am quite prepared to publish it on here....As I say ..I am not affiliated with any SB there is nothing to gain personally by saying this....What I will say is this...The retail trader has a hard enough job trading these markets....They need a platform they can trust...and platform that looks after client money....a platform that will not rape you on prices....On every level this is NOT IG.....If someone has a different story...please share....I will say to you wary if using this platform...Get another platform and transfer funds into it so that YOU CAN see what we have seen over this past year.....and if you really honestly want to make trading your primary focus....get another platform altogether...close yur a/c with them and at least give yourself a fighting chance...Now over the past 6 months after trailing platforms CMC by far came out the best.....Ring them...they will confirm I do not have an a/c with them...they do not pay me ANY REFERRALS or % of what you trade....I HAVE NOT and WILL NOT use this practice...I am neutral....but I cannot be neutral with a platform that so does not have the client interest at heart.....rant over !!
Carol Harmer/ Comment 1 Like
October 07, 2016 do they explain this dire turn of events....The phone call went like this....IG actually aggregated the accounts and filled at a price WHICH WAS NOT TRADING....and told my colleague who is sitting next to me with the phone on loud speaker...that he should be GRATEFUL that he did not get filled at a higher price....Now this is totally best it is unbelievably bad worst they should be closed down...Now the word slander may well be used against me...It is ONLY slander if it is LIES...This is NOT lies....This is the conversation we had with the CUSTOMER HELP does that happen....why should you be grateful being stopped out EIGHT times the loss of CMC.....Now the clients I feel sorry for are the ones who have NO OTHER system other than IG....they cannot check....they have no option but to believe the unbelievable...I did tell the man on the desk that I was going to publish this....He was under no illusion how disgusted I was with this turn of events....
Carol Harmer/ Comment 1 Like
IG As a BAD Platform
October 07, 2016
I do not use a Spread betting let us get this out of the way to start with...So I have NO affiliation with with these platforms at all...So I speak from the heart and what 34 years trading has taught me....On NUMEROUS occasions it has been bought to my attention just how bad IG is....So I decided to trial this platform, along with others, so I could compare...This was after the SNB ( Swiss National Bank ) debacle of 2015.....Traders I knew were wiped out by IG...and pursued for outstanding amounts running into 100's of 1000's individually....One very close friend of mine was Short USD/CHF...Long EURO/CHF....and told when he was wiped out that the USD/CHF was voided after extreme market conditions....Well...why wasnt the EUR/CHF voided as well...That if anything was under " extreme " market conditions....They had no answer...and have persued him for over a year to the point he has given up trading....So lets take last night when "GBP/USD " was in freefall....So you have 2 platforms....I will name them....CMC and IG.....both had EXACTLY the same order and EXACTLY the same stop.....CMC filled the stop on the Euro/Stg AT THE STOP PRICE.thus limiting the exposure...IG however filled the stop 20 MINS LATER at a loss of EIGHT times the difference....Now how on earth can that be.....The market was up at stupid levels less than 5 MINUTES...So how does a platform ACTUALLY fill an stop order 20 MINS later at a price which was not even trading !!!!!!!!!!!!...So to give IG the benefit of the doubt we rang them.....NOw bear in mind...the order was run on CMC and IG......
rod178 said:
I look towards protecting myself from such events rather than profiting from them. eg buy way out of the money options, partial solution.

Wonder whether or not this event will be a catalyst for a few more Broker failures.

Yeah, and unlike the SNB event before, brokers might have had a harder time seeing this coming.

With the SNB event, you had obvious policy risk and like 95% of retails positioned one way on EUR/CHF to know you need a hedge or protection from a drastic move... with this, sure a lot of retailers were net long GBP, but there was no news or policy catalyst.

No, I don’t know, some fucking country in Europe took a shit. Let them do what they want to fucking do.
Jack said:
Anyone make a play off this? I heard of a guy in Reddit who cleared 1$00k on the breakdown. Nuts.

A little bit like Rod, only on the other side - while Gbp falls I need to buy (not fx trading per se, more to do with commerce on the only Eur/Gbp land border that exists - it's an easy one).

So a few buys, no actually only one, since June 23, then it's a waiting game - guys were pushing for an exchange rate of 85.00, guys that exchange the currency said that 85.00 (around 86.00 interbank) was the line in the sand, they were screaming buy when it hit that, but I held fire.

Man I was lucky, I figured the Conservative Party conference was coming up, the gamble was that these new politicians haven't a clue.

Icing on the cake was two days ago when a TV journalist asked the PM whether she had any concerns over the pound hitting a 31 year low against the USD, she replied, when pushed she

I could hear the buy algos getting pulled.

I mentioned it over on BP more because my jaw was still sore from having hit the floor - I'm still wondering is there an ulterior motive, does this new Government want a lower pound, I can see the short term gain but history tells us that when a government messes with the market it can become very messy :)
The big problem that GBP buyers have is that the govt seems on a collision course with business, the UK trade minister said that business leaders in the UK are too fat and spend their Fridays on the golf course.

But they got their revenge, they waited until Friday, exactly 4 weeks after that slur - and guess what got the blame - yep a fat finger :)

Edit: should have added, that fat finger was raised early, before the golf, might be lazy but always early risers.

"...On Friday, in the aftermath of the historic pound sterling flash crash, we presented Citi's forensic take of how in just 30 seconds, bid/ask spreads in cable exploded as wide 600 pips.

Today, we provide another take, that of JPM's Nikolaos Panigirtzoglou, who looks at the "gapping market" that emerged on Friday morning Asia time, and shares some color on the role of high frequency traders behind the sudden, dramatic plung in sterling.

Below is his full note:

Friday’s flash crash in sterling reinvigorates the debate about market liquidity and the role of High Frequency Traders (HFTs) as providers of liquidity. Similar to previous flash crashes such as the August 24th 2015 flash crash in US equities or the October 15th 2014 flash crash in USTs, market gapping, a step change in prices from one level to another without much trading in-between, raises questions about market structure and liquidity in FX markets. This is also because FX markets are perceived to be a lot more liquid than equity or bond markets, so the conventional view is that FX markets are unlikely to experience flash crashes or market gapping in the absence of high impact news.

The flash crash in a major currency like sterling questions the above perception and perhaps shows there are liquidity vulnerabilities in FX markets that are more similar to those seen in equity or bond markets. A step change following a significant event such the Brexit referendum or the SNB’s abandonment of its peg is not problematic as it represents a natural market resetting. But a step change triggered by an order flow is more problematic and in our opinion reflective of how vulnerable market liquidity is in FX markets also.

Liquidity vulnerabilities in equity or fixed income markets as a result of changing market structures are well documented. In equity markets the shift away from principal trading towards agency trading, where markets makers simply match buyers with sellers without holding inventory beyond a short period of time, took place well before the Lehman crisis. But the Lehman crisis caused a similar shift within fixed income markets. Regulatory and other forces have made it a lot more costly for traditional dealers to act as principal traders in fixed income markets, inducing them to change towards a more order-driven trading model of matching buyers and sellers with minimal inventory risk, or to retrench and be replaced by agent traders.

At the same time electronic trading and advances in technology has encouraged the emergence of HFTs as liquidity providers in the most liquid segments of equity, FX and to some extent income markets. These HFTs use sophisticated quantitative models coupled with speed and high trading frequency, to exploit small price moves. They do so by arbitraging price differences across venues or by detecting and taking advantage of order shifts or imbalances or by simply exploiting very short term momentum or mean reversion signals.

However, different to traditional market makers, HFTs tend to operate with a much shorter inventory cycle, meaning that they conduct offsetting trades within seconds or even shorter, in order to neutralize their original position. As a result they tend to quote for smaller sizes and for a very short period of time. This in turn reduces market depth, i.e. the ability to trade in size in markets, especially in those markets where HFTs are important liquidity providers like equity markets. So we note that while the emergence of HFTs has been beneficial for bid ask spreads and small investors, it has likely had a negative impact on the ability of big institutional investors to trade in size. This is one of the reasons big institutional investors have resorted to dark pools for implementing large equity trades.

More importantly, because HFTs’ models are typically adapted to exploit small price moves, HFTs have a higher incentive to withdraw from their market making role in periods when volatility rises abruptly as they are reluctant to subject themselves to the risk of large price moves. In addition, there is a similar incentive to withdraw from market making when they detect a big order imbalance, i.e. when they detect markets becoming one-sided, as they are reluctant to subject themselves to the risk of not being able to close their position in a very short period of time.

In addition, given HFTs employ similar models, this creates the risk of a simultaneous withdrawal by HFTs in periods of high volatility or stress or in periods when market become more one-sided. A simultaneous withdrawal by HFTs not only amplifies the initial market move, but also creates step changes or gapping markets as liquidity provision gets impaired and quotes are withdrawn.

How big is the role of HFT in FX markets relative to other markets? A previous report by the BIS “Highfrequency trading in the foreign exchange market”, September 2011 concluded that around a quarter to one third of spot FX trading volumes are due to HFTs. But given that this study was conducted five years ago, we suspect that this share has risen since then.

Indeed, the latest 2016 Euromoney FX rankings survey is consistent with a rising share by HFTs as liquidity providers. The biggest change in this year’s rankings has been the advent of non-bank liquidity providers led by XTX Markets who was ranked third for electronic spot FX trading with a market share of more than 10% and third for FX trading platforms. In contrast, the combined market share of the top five global banks dropped to just 44.7% for overall FX trading in this year’s survey. This market share had peaked in 2009 at 61.5% and was above 60% as recently as 2014.

Moreover, many of the banks ranked outside the top 10 for overall FX trading are understood to be sourcing liquidity from non-bank liquidity providers. According to Euromoney, these non-bank liquidity providers or HFTs are set to gain more market share in the future, helped by advances in technology, more defined business models and a lower-cost infrastructure base than traditional FX banks. HFTs are already very important in FX spot markets as mentioned above, but they look to build capability in forwards and other products in the near future.

In all, the FX market appears to be going through structural changes similar to those experienced by equity markets in the past. The advent of non-bank liquidity providers such as HFTs has reduced bid ask spread and increased market efficiency in FX markets, but at the cost of lower market depth and withdrawal of liquidity provision in periods of stress...."

Soft Brexit. It's not that hard.

I spent a lovely evening in the company of those who participate in financial twitter. Lovely bunch, A smattering of buy and sell side and a cadre of journalists. But they nearly all had something in common. Mention that you thought Brexit would turn out Ok and you were mostly greeted by stunned gasps. Laying out a route where it could be OK which involved a soft Brexit along the lines of an adaptive EEA was seen as heresy.

Yet this shock was coming from folk who were 'Remainers'. Surely if they were so in favour of remaining they would support the idea of a soft EEA style exit as preferable to the diamond-hard Brexit that the market is expecting (or rather was, I'll come to that later) rather than arguing vehemently that it wasn't going to happen and instead, all their greatest fears were going to become reality. This was a behavioural clue. These Remainers wanted to remain so badly that getting most of what they wanted through an EEA was just too terrible to think about and they'd rather see Armageddon than see things turn out OK against their protestations otherwise.

So, the basic notion that was being proposed to them went something like this -

May and Rudd completely messed up the presentation of Brexit plans last week, to the shock and horror of all those in Washington on the IMF circuit, but what they said did not mean that heading down an EEA route was out of the question. Whilst the media got excited about the statement about immigrants only being allowed in if they had a job to come to, this is in effect exactly what Norway has in place at the moment. There is a difference between limiting the flow of needed workers and limiting the flow of all people. In fact, if we look at the Lichtenstein model, which the EU agreed to, Lichtenstein can take up to 90 immigrants a year. Now if you pro rata that up to the UK levels it's about 150k. This is over May's target but eminently fudgeable. Heading down an EEA route removes the UK from under the jurisdiction of the European Court of Justice and instead parks it under EFTA, which interprets European Law for the non-EU members. So that's the open borders and ECJ issues handled.

More importantly, it is pretty obvious, as the Remain argument has pointed out, that the process of leaving the EU is gong to be long and tortuous and needs a transitional agreement whilst everything gets sorted out. The soft option could easily be accepted by all parties under a transitionary agreement. Why would a soft EEA style, or 'EEA lite', route be accepted by the EU? Supply chains.

Supply chains are so intertwined these days that disruption causes 'butterfly' effects around the world. The 2011 Japanese Earthquake was a case in point. The microchip maker Renesas was knocked out and suddenly the main ingredient to automobile engine management systems was unavailable. Car manufacturing around the globe staggered. Even when you did get a car they were only available in certain dull colours as the paint factories were also out of commission. A hard Brexit will not take out physical supply and the effects of price, with respect to tariffs, can also be adjusted for, but the legal complications are going to take much longer to adjust for. Even if top level Euro politicians may be sounding flat-out against any compromise, those around them know that upsetting the global supply chain is worth avoiding if at all possible.

A handy EEA style package sold as a 'transition' would be sellable within Europe as the UK are seen to be under some EU directive but without the benefits, in other words worse off in EU eyes, whilst it would be sellable within the UK as the immigration issues will have been addressed (remember we would move to freedom of labour within quotas rather than unlimited freedom of movement of 'people' ) and the UK would be out from under the ECJ.

Now the cunning part would be if someone forgot to add a sunset clause, or expiry date, on the transitional agreement. If the transitionary period went well and everything stabilised it could easily be seen as the new norm and any thoughts towards changing it quietly dropped.

So that was the basis of this evening's debate.

As mentioned in yesterday's post the world is currently discounting diamond hard Brexit, with the US doing what they do best and missing the nuance. The noise from the States has so many similarities to those expressed during the Eurocrisis. It was black and white, though mostly black. We can also note how the US time zone has seen the biggest legs down in GBP over the last couple of days. So any hint that the ideas discused this evening may be a possibility should see the pound rise fast. If May's speech caused a 4% drop in pound then that could easily be reversed on glimmers of hope for a soft exit, even if it was wrapped in barbed wire at the Tory Party conference. May and Rudd may have thought that they were just rallying the troops at a non-election year conference but they seemed to forget that the whole world was watching. Yet listen to what they said and none of it is inconsistent with current Swiss of Norwegian conditions.

So, having had this debate in the pub, I get on the train home and see this.

#Newsnight has learned UK govt may be prepared to continue paying billions to Europe to retain access to markets and other rights

Boom. What fantastic timing considering what we had been suggesting in the pub and up goes GBP/USD by 150 points. But considering where we have come from this really isn't much (so far). For me, this is a game changer. Yet the newsfeeds and Twittersphere haven't gone wild over it (yet). Probably because, as I found out at the beginning of my evening, the narrative is for Brexit disaster and the idea of a soft exit doesn't fit with that narrative. Well, guess what? The narrative just changed.
Yeah, the idea has already been floated, BBC story here:

GBP longs were smiling when Bloomberg reported that May had done a U turn.

The thing for the longs though is that it is only a half turn, not even that, just a slight bend.

She has only agreed to a debate, no vote, merely a 'shift in tone' according to BBC:

That Polemic guy is short Eur/Gbp and long cable..... I see the crowd are with him and have been for a while.
Well, after intense 'chart analysis' :p I detemined some time ago that the Cable is in a downtrend and volatility has increased. Any counter trend trade on the Cable is, imho, a wealth Hazard, eventually possibly even a health hazard. Suspect we will hit 120 and 118 is an even chance imho.

I would only reconsider my analysis on a sustained move back to 128.
How to get the best deal when negotiating - you go to their HQ, you tell them that you are leaving their club but in the meantime you want to be at the heart of all decision making on the future of their club.


Because they call you GREAT.

I kid you not:

Hmmm... when I take my car to la Belle France, their law says I must put a sticker on the back which says "GB".

Do I break their law?
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