Traders Warn of Market Cracks

The WSJ is finally noticing that markets have become, you know, weird:

Amid the wild swings of the past few weeks, cracks are appearing deep in the workings of the stock market that some professional investors say are making the market treacherous to trade.

Hedge-fund traders and mutual-fund managers say it has become increasingly tough to trade an individual stock without causing a big swing in its price. Thats led many large investors to step back from the market instead of risking being stung by the trading difficulties.

The big moves in stock indexes have caught attention. Just on Monday, the Dow Jones Industrial Average dropped 247.49 points, or 2.13%, to 11397.00. But market participants say trading conditions are much worse when they drill down to individual stocks, highlighting skittishness of investors of all stripes.

Even among some of Wall Streets most actively traded stocks, such as Apple Inc. or Netflix Inc., traders say it has been more challenging than usual to buy or sell.

The problem is a lack of liquidity—a term that refers to the ease of getting a trade done at an acceptable price.

via Traders Warn of Stock-Market Cracks –


  1. Makes perfect sense given around 40% of total volume on US exchanges is with ETFs. Less volume in individual stocks would mean a) more volatility and b) more slippage. We've created a vacuum environment for the underlying.

  2. Wow. Liquidity is why the stock markets keep merging. This is a very bad trend.

  3. ITS A scam wall streets latest, ,ramp the market up and down to their benefit. scarry man they have let market be destroyed by ETF and high frequency traders.. sad man very sad

  4. shouldn't the hedgies, who are ostensibly driving the SEC to look at HFTs and whatnot now that THEY feel disadvantaged, be raking it in (in theory) from options instead?

    ETFs are a replication of equity (albeit baskets of eq.) like CDS are in a sense a replication of debt. suck liquidity away. new exchanges suck liquidity away. HFTs suck liquidity away. it eventually adds up eh?


  1. […] Paul Kedrosky: Traders Warn of Market Cracks […]