S&P Snaps Win Streak; Fed on Tap

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Unlike my days on the trading floor in bonds, the S&P always provided a lot of big trades and volatility. I knew when I was called over to the CME that I was stepping into a different animal — and that animal has only grown bigger and bigger over the years. 

While most of what we did involved taking orders and providing flow, not everyone receiving it was trading with the desk. What they wanted were the instant messages sent out when the markets were moving. Having that type of order flow was key to the desk and its customers. 

We did enough business with banks and hedge funds that it was hard not to notice. The flow to us was just everyday buying and selling, but it wasn’t to the CME. A lot of it was extremely market-moving, so when the CME told us we had to shut down the Pivot instant message on the desk — which had 400-500 trading firms, prop desks, banks, and hedge funds — the people on the other end were not happy. 

Why? Because they traded equity options and glommed onto the flow. One of those glommers was Pete Najarian. He wanted to stay on the desk blast, but he didn’t trade with the desk; all Pete wanted to know was the flow. Today it's different. We all know there are buy and sell programs running simultaneously — and not just when they align with fair value. 

There is a constant rattling of programs that, if you end up on the wrong side of, is like jumping in front of a steamroller. I guess what I’m trying to say is that the pit may be gone, but creating flow isn’t.