John At The Center

I call bullshit on naive contrarianism. There are too many people looking to take the rhetorical other side of every short-term blip in market sentiment. Every amateur contrarian — many of whom admittedly talk a good game, but never trade that way, of course — prattles endlessly at each supposed sentiment inflection point about “going the other way”. Case in point: I’m hearing lots of such talk today from the chattering class.

The trouble is, empty-headed contrarian calls like these have lost investors money repeatedly over the last twelve months. It is naive and facile illogic. Because while the investing pack is sometimes wrong, and big inflection points are often missed, the market’s investing pack is usually right: Going the other way against the crowd too early or too late is indistinguishable from being dead wrong. So, while contrarianism can work, the art is in knowing when to bother trying, not to shout “buy now” every few points up or down, like you’re at some CNBC-watching drinking game.

Four months ago, judging myself to be the next Warren Buffett, I logged on to my Charles Schwab account and did something that in hindsight was astonishingly stupid, even for my own very long roster of financial screw-ups. I clicked over to the trading page and bought shares of Citigroup.

The company, like most of the big Wall Street banks then staring down the subprime meltdown, was limping along. The headlines were bad. The chatter on CNBC was pessimistic. I saw a bargain. I saw a company whose credit card bills and offers show up in millions of mailboxes every day. Just as soon as the banks got their write-offs out of the way, optimism would return to the sector. There would be more buyers of the stock than sellers. I would profit.

http://www.washingtonpost.com/wp-dyn/content/article/2008/05/24/AR2008052400002.html

Exchanges are under relentless pressure to find the best ways to accommodate new types of traders beyond the simple trading flow from brokers on behalf of large institutional clients.

That explains why some exchanges have started by offering – or planning to offer – their own dark pool-like platforms.

But Larry Leibowitz, chief operating officer at NYSE Euronext, said that the sheer number of dark pools available could lead to confusion among investors and sees a role to consolidate. “We are the natural aggregators of these dark pools,” he said.

Alfred Eskandar is head of corporate strategy group at Liquidnet, one of the largest dark pools containing equities from 29 markets around the world.

He says that the benefit of dark pools – being able to hide your full trading intention – are not being realised because of the way dark pools have been designed. That has limited the ability of dark pools to supply sufficient liquidity for large orders.

He believes that will lead to a consolidation of dark pools – which may drive some into the arms of exchanges as well.

Some analysts suggest the dark pool providers could eventually join together, combining their individual dark pools and apply for exchange status, something exchanges are obviously keen to avoid.

http://www.ft.com/cms/s/0/bab73b9a-4147-11dd-9661-0000779fd2ac.html?nclick_check=1

Our goal is never to make money on retail customers who are actively trading in our internal market — in fact, we are actually going to pay some of them (more on that later).  Instead, think of retail investors with <$100,000 invested as our investment team.  If we can get enough traders and we can remove all transaction costs for investors to convey information about stocks, we can assemble information that no existing fund has at their disposal.  And we are going to use that information to [try to] beat the market.

The New York Stock Exchange (NYSE), a subsidiary of NYSE Euronext (NYX), today will introduce NYSE Realtime Stock Prices, a new data product that enables Internet and media organizations to buy real-time, last-trade market data from the NYSE and provide it broadly and free of charge to the public.  Google and CNBC are the first organizations to make the product available to the public, effective today.

Covestor opened up the doors to everyone. Until yesterday, you had to share your trades with others to be able to follow investors like this. Not any more. Now anyone who wants to get trading ideas, or just follow one or more of these investors, can do it. For free.

“There’s a strong business case for Linux as an alternative to Microsoft or Unix derivatives,” said Roger Levy, senior vice president and general manager of open platform solutions at Novell, which late last year released what it calls SUSE Enterprise Real Time 10 specifically for use in organizations that have millions or billions of dollars at stake based on how quickly they can complete trades.

Red Hat, which last month celebrated news that the New York Stock Exchange (NYSE) and its international subsidiaries were adopting Red Hat Enterprise Linux and dumping Sun’s Solaris, also has a Real-Time Linux version. Its Red Hat Enterprise MRG uses the Advanced Message Queuing Protocol developed by financial institutions JP Morgan Chase Bank and Credit Suisse with contributions from Cisco, Red Hat, Novell and other high-tech firms.

But even as the Wall Street crowd increasingly puts its money on Linux — market watcher Tabb Group estimates that Linux adoption among the 14 biggest investment firms this year will reach more than 72% of the installed operating server base vs. 60% in 2006 — it’s clear concerns linger about the licensing model. That model requires users return changes to the open source community under certain circumstances, a touchy subject for companies that are battling to accelerate their business processes.

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If you can’t beat em, join em: the Nasdaq and the New York Stock Exchange are forging ahead with plans to offer clients access to the “dark pool” networks that compete with them on order execution. The moves come as Wall Street exchanges and brokers race to pull together the popular but disparate “dark pools” in a sort of anonymous electronic-trading waterpark.

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The moves by NYSE and Nasdaq OMX come at a time when the exchanges are seeking to generate as much revenue as possible from market data, which now makes up for a larger share of revenue than equities trading. At Nasdaq, market data generates 20 percent of revenue, while at NYSE, the figure is 14 percent.At Nasdaq, market data generates 20 percent of revenue, while at NYSE, the figure is 14 percent.

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