Listen on Apple Podcasts | Listen on Google Play Music
In the sense that high-speed transmission lines connecting computerized boxes are the stock market, it’s boxes and lines.
Also, stock exchange IEX, the investors exchange, hosts a podcast called Boxes and Lines that’s moderated by co-founder Ronan Ryan and John “JR” Ramsay, IEX’s chief market policy officer. I joined them for the most recent edition (about 30 mins of jocularity and market structure).
Realize, the stock market is not in New York City. It’s in New Jersey housed in state-of-the-art colocation facilities at Mahwah, Carteret and Secaucus. It’s bits and bytes, boxes and lines.
What’s not is the disclosure standard for institutional investors. We wrote about the SEC’s sudden, bizarre move to exclude about 90% of them from disclosing holdings.
The current standard, which legitimizes the saying “good enough for government work,” is 45 days after the end of the quarter for everybody managing $100 million or more.
We filed our comment letter Monday. It’ll post here at some point, where you can see all comments. You can read it here now.
The government’s job is to provide a transparent and fair playing field. Yet the same SEC regulates the stock market located in New Jersey. Boxes and lines.
FB, AAPL, AMZN, NFLX, GOOG, GOOGL, MSFT, AMD, TSLA and SHOP alone trade over 2.5 MILLION times, over $80 billion worth of stock. Every day.
And the standard for measuring who owns the stock is 45 days past the end of each quarter. A quarter has about 67 trading days, give or take. Add another 30 trading days. Do the math. That’s 250 million trades, about $7.9 trillion of dollar-flow. In 10 stocks.
Why should the market function at the speed of light while investors report shareholdings at the speed of smell? Slower, really.
Do we really need to know who owns stocks? The constituency deserving transparency most is the only other one in the market with large regulatory disclosure requirements: Public companies.
They have a fiduciary responsibility to their owners. The laws require billions of dollars of collective spending by public companies on financial performance and governance.
How incoherent would it be if regulations demand companies disgorge expensive data to unknown holders?
As to retail money, the Securities Act of 1933, the legislative basis for now decades of amendments and regulation, had its genesis in protecting Main Street from fraud and risk. The principal weapon in that effort has long been transparency.
Now, the good news is we don’t depend on owners to understand prices. It’s not the right way to see the market now.
Take TSLA, now the world’s most actively traded – we believe – individual stock. SPY trades more but it’s an ETF. Active money has been selling it. But shorting is down, Passive Investment is down 21% the past week. TSLA won’t fall far if Passives stay put.
That’s market structure. It’s the most relevant measurement technique for modern markets. It turns boxes and lines into predictive behavioral signals.
Investors, that’s what Market Structure EDGE offers, to help you make better decisions.
Predictive analytics are superior to peering into the long past to see what people were doing eons ago in market-structure years. Still, that doesn’t mean the SEC should throw out ownership transparency, leaving issuers with empty boxes and wandering lines.
PS – Speaking of market structure, if you read last week’s blog, we said Industrials would likely be down. They are. And Patterns say there’s more to come. In fact, the market signals coming modest weakness. The Big One is lurking again but it’s not at hand yet.