Had dinner last night with partners of a 30+yr old securities firm that specializes in trading equities and derivatives for top quant funds and other HF’s.

I asked them if they had the expertise to explain how market makers effect prices and this is what I learned. 🧵
2/ For starters, and as we all know there are really only 3 or 4 MM’s that control most of the flow.

This CEO had dinner just 2 weeks ago with the CEO of one of the top mkt making firms, won’t say who.

In the words of that market maker, being one “is like living in the matrix”.
3/ Bullets are flying at you non stop from all venues. Some you catch, some you let go by to the next shop. Basically the top MM’s are choosing what bullets they want to catch and what they want to let go by.
4/ So let’s think about this like a trader. If top MM 1 and 2 decide they both want to let the bullet fly by vol expands and price moves rapidly. If they decide to catch the bullets price gets pinned and stuck in the mud.

What determines catch or pass?

Their discretion.
5/ This is what I had feared all along, and that is, if MM’s have the discretion to choose what they want to catch/let fly by, albeit they have to catch bullets x% of the day, the entire trading game is not random and they can control outcomes most of the time.
6/ I was also told that if these top 3 firms simultaneously decided they wanted to let bullets fly by, the entire market would turn upside down and everyone would be like wtf just happened? Does this sound like a random fair market based on supply & demand? Doesn’t to me.
7/ So this was my confirmation that markets are not random & these firms truly do have a monopoly on trading due to the size of the order flow they cover. They have the balance sheet to decide when to catch bullets or let them fly.
8/ That is totally unacceptable if we want a fair and random market which should be based on supply and demand, and not a market makers algorithm or discretion.
9/ Also, think about how volatility effects so many strategies tied to it Eg low vol dividend ETF’s, implicit short volatility strats(vol targeting, yield harvesting etc). These MM’s can change the profile of an asset they cover whenever they choose? Doesn’t sound honest to me.
10/ I can probably go on about this and tie in effects to other asset classes, and what to trade/not trade over another 10-20 tweets, but I will stop here and let you all start extrapolating the rest. /End

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More from @endless_frank

Apr 3
The effects of de-globalizing due to a great reset will have inflationary repercussions that linger for quarters and very possibly years. 🧵
It is clear that Russia and China are attempting to drive a global reset which doesn’t include the dollar as the world’s reserve currency.

The system that exists today was built on the U.S exporting dollars and importing goods.
For the U.S to continue to make the $’s reserve case, it must continue to export dollars and thus is reliant on foreign imports.

The monetary system built around this gives the Fed it’s power.
Read 7 tweets
May 18, 2021
So let me get this straight. The fraud mother fuckers buying 10, 20,30 contracts of ES right now trying to hold futures up when all major markets in the world are closed are sure that the last 20 minutes today was all the selling we’ll see for now.

Futures should be abolished.
This industry is a cesspool of frauds. They rigged LIBOR, a market tied to 300 TRILLION in derivatives. If they can rig LIBOR the whole thing is a complete fraud if and when they want it to be.
Is it Ken Griffin(Citadel) and Doug Cifu(Virtu) trading back and forth with each other?

Who really is it that buys every fucking 20 handle dip intraday within an hour?

Derivatives dealers shouldn’t be allowed to trade underlying equity if you want a free market.
Read 4 tweets
Apr 7, 2021
1/ Regarding my tweet about a potential 1987 tech led crash, here is a thread.

For disclosure, I do not manage money other than my own, nor do I have any insights/advantage over anyone else.

I head a secondary private mkts team for an IB in NYC & this is my opinion.
2/ Again, I do not work in any regard with public mkt securities.

Ok, now that that’s out of the way, here we go. This is solely my opinion and may not at all play out...I’m open to all outcomes and will change my opinion/not marry it for very long should this not develop.
3/ There are a number of reasons why I believe a 20-30% rapid decline may occur and it’s related to how we got here, what it looks like today and what the preset conditions were in 1987 which led to that crash.
Read 14 tweets
Sep 17, 2020
I think the entire market is a Ponzi scheme. Hear me out...


Es breaks todays low tonight and just gets slowly bid back up. This happens over and over again when key lows get broken and volume fades.

Who can possibly have the confidence to buy every single broken low?
Intellectually it doesn’t make any sense, technically it does.

Technically meaning dealers trade to increase order flow and often trade with each other.

If somebody sells stock X down from 105 to 100 & a couple dealers take the inventory they have a blended cost basis above 100
Then when volume fades the fuckery starts, you sell to me for 100 I sell you to for 101 you sell to me for 102 I sell to you for 103.

Neither of us lose money trading, but if we take in the supply from someone that sold from 105 down to 100 we win by driving the price back up.
Read 6 tweets
Apr 17, 2020

From an anesthesiologist friend that works in a top hospital.

Columbia Med school grad....Chimed in about the Gilead study:
I saw that. Hopefully it works. On the other hand, no control group, their exclusion criteria were basically people you know would do worse, and the data/talk from China and Italy wasn't great.
Plus, it's still an IV drug given for 5 days and you'd still overwhelm healthcare systems if people kept getting infected.

Doesn't change the trajectory of the disease other than perhaps decreasing mortality for ICU patients.

Which is still VERY QUESTIONABLE....
Read 6 tweets
Feb 14, 2020
I'm changing my profile name to Endless Capital LLC temporarily. I'm doing it because I want to make a prediction that Fed policies have led to unforeseen risks in the marketplace.

Risks we cannot quantify because liquidity has masked them. Those who trade the market know...
...exactly what i'm talking about. There is an endless capital buffer underneath the market that wakes up on every downward volume spike, whether it be 1 day, 1 hour or 1 minute. It's always there and seems completely mechanical. And its driven asset values for the majority...
....of this bull market, fundamentals have not. My prediction is somewhat of an LTCM ending to this, but worse. A number of HFT/algo based shops providing liquidity to the marketplace will begin to feel the stress of lower asset prices and the domino will begin. This will....
Read 6 tweets

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