Today’s guest post is by Tom Morton. Tom started his career at the Chicago Mercantile Exchange in 1996, working in the Eurodollar futures pit, then moving to the Nasdaq 100 pit in 1998. In 1999, Tom left the floor and began building a successful career trading individual equities. He is the co-founder of The Equities Room.
Dear market news services….
Before I start, I’d like to say that generally, I find your products to be useful. Getting corporate news and earnings and economic data in a timely fashion helps me navigate the stock universe for trading opportunities, and I have come to rely on it.
I used to actually be able to trade-off some of this news, digesting the information quickly, and occasionally be “first” into a move. That has proven to be difficult lately, so I’ve left that for the news reading algorithms (more on them later). Still, just being aware of real news in a stock and the market in general helps me make sound trading decisions.
This brings me to the point of this letter. I’m begging you to stick to real news. Lately, the “chatter” and “rumor” stuff has gotten out of control. It happens so often now…everyday, every hour ”XYZ takeover chatter” pops up constantly, causing XYZ shares to flip around wildly (thanks to the news reading algorithms mentioned earlier) and disrupting trading flow.
I know, you probably will say something like “we are just reporting what we hear” and “we’re trying to explain why stocks are moving”, but I’m here to tell you that nobody is buying that anymore. Instead, we’re pretty sure you’re getting played… that someone at some hedge fund or HFT firm is looking to spark a move in a stock by reporting these “rumors”.
Am I being too cynical? Possibly, but why does it always seem to be the same type of underperforming stocks that get attached to these rumors? Why is it, that once you have reported this “chatter” those market making algo’s continually seem to aggressively take the other side of the trade, backing it away from its psuedo-elevated prices, grinding the stock back down to where it was before you reported this “rumor”? And, why is it that more often than not, there is never any color as to who is behind the “rumor”?
Here is the thing. If you want to report takeover chatter and rumors, that is fine with me…there are occasionally some legit ones I’m sure, and we don’t want to ignore those. But, if you’re going to report them, let’s make sure that either it’s based on an actual article or research report that can linked to.
Not only will this allow traders and investors a chance to get a sense of background on the “rumor”, but it will allow us to know for sure that the chatter is based on an actual thought from a firm or individual, and not being used as a vehicle to stir up volatility. See, our market structure has already eroded enough with HFT and quote stuffing algos that were built to confuse human traders…we don’t need you making it worse.
(Note: If you are new to my blog, I post about all sorts of things. Sometimes it involves something extremely personal, like creating a 30K baby or my Monster Trades. Other times it deals with hot ex-porn stars who trade stocks. And sometimes it’s about how to avoid “suicide”. But a good place to start is The Best of bclund. If you like what you read, please tell a friend. If you don’t, please tell two friends.)