Oil prices and trading mechanics

One of the New Normal responses to allegations, first started here in 2009 and subsequently everywhere, that all HFT does is to frontrun traditional market players (among many other evils) now that its conventional and flawed defense that it "provides liquidity" lies dead and buried, is that "everyone does it" so you must acquit because how can you possibly prosecute a technology that accounts for over 60% of all market volume and where if you throw one person in jail you would throw everyone in jail.

SINCE the crisis hit in 2008, there has been a sharp divide between those who believe that the monetary authorities have been insufficiently aggressive and those who believe that central banks have done everything possible given that households and businesses have no interest in taking on new debts. For what it’s worth, a poll of more than 300 research associates at America’s National Bureau of Economic Research conducted for an upcoming article in the print edition reveals that the overwhelming majority (76%) believe that monetary policy has not been too tight.

Enron Corp.’s 2001 collapse revealed the extent of its manipulation of spot gas prices. Twelve years later, European Union regulators may discover energy traders never learned the lessons of the scandal. BP Plc, Royal Dutch Shell Plc and Platts were visited by EU inspectors last week over allegations they “colluded in reporting distorted prices” to manipulate the published prices of oil and biofuel products, the European Commission in Brussels said after the raids.

By Ian Fraser, a financial journalist who blogs at his web site and at qfinance. His Twitter is @ian_fraser.

Last week, Pulitzer Prize-winning author Ron Suskind came by the office to give a talk. In one of his remarks, he referenced the idea of a Keynesian beauty contest. It was a reference to a quote from John Maynard Keynes in his book The General Theory of Employment, Interest and Money. Here it is, in most of its glory

Gold fell more than 1.5 percent on Wednesday, its biggest one-day drop in almost four weeks, hit by a heavy bout of stop-loss orders as momentum-driven fund investors liquidated their bullish positions. After trading slightly lower in Asian dealings, bullion prices suddenly dived $25 at the U.S. pit-session open with an equivalent of more than 2 million ounces of COMEX gold futures changing hands in less than five minutes.

There has been a lot of growth over the last decade in funds that take long positions in commodity futures contracts in order to offer investors an asset that follows raw commodity prices. I've been looking into some of the data that have been used to measure the size of those positions.

[5:28pm ET] Despite the hiccup Friday in the US equity market, it was a ‘risk on’ week as the Four Horsemen (XLB-Basic Materials, XLY-Consumer Discretionary Spending, XLI-Industrials, and XLE-Energy) finally grabbed the leadership with gains this week of +3.72%, +3.02%, +2.34%, and +1.86% respectively. The S&P 500 (SPY) and Financials (XLF) lifted +1.82% also, along with all ten sectors rising, making it a clean sweep. Now, if only we could say that traders have finally swept away the Bear!