We have been following this “flash” trading story closely and need to remain vigilant. The fallout from a clampdown on High Frequency Trade (HFT) could be far reaching and is difficult to predict. However, I’ll take a stab at a couple of results that seem like obvious issues:
1) If HFTs are banned we should witness a disturbing collapse in trading volume. Over 70% of the NYSE volume today is program generated, a significant portion of which are HFTs. This may be good for the markets longer term as true levels of volume based on real buyers and sellers will return but disruptive shorter term.
2) Goldman Sachs (GS) earning could be seriously impaired. For years GS employees have been considered the “best” traders on the street. Was the company able to attract the brightest minds? Is GS in bed with Government? Probably yes to both questions but now we are able to see a little further behind the curtain and OZ is clearly aided by a bunch of computers getting fed information ahead of the street and profiting from the illegal early data. This is commonly known as front running and has been illegal for years. If this profit center is closed off GS will need to scramble to make up for the loss and EPS could suffer.
SEC Chairman Schapiro asked staff for method to quickly ban inequity from flash orders; says commission would need to approve proposal banning flashes, according to statement – Reuters
HFT “Flash” Orders: Nasdaq Admission?
…The New York Democrat, who has urged the U.S. Securities and Exchange Commission to clamp down on the practice, said parent company Nasdaq OMX is willing to submit to a potential ban by the agency after it “reluctantly” started offering flashes early last month.
Did I just read that correctly? Did Nasdaq OMX tell Chuck Schumer that it intentionally (even if reluctantly) began offering order types that do not contribute to public price formation and market transparency?
That is, did they (perhaps unwittingly) just admit to the true purpose of these order types and their willing participation in same rather than doing what any good steward of a public trust should have done – that is, standing up immediately as soon as this chicanery began and raising hell…?
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LINC: Lincoln Educational Services beats by $0.08, beats on revs; guides Q3 and FY09 above consensus (21.04 ) : Reports Q2 (Jun) earnings of $0.27 per share, $0.08 better than the First Call consensus of $0.19; revenues rose 50.6% year/year to $128.1 mln vs the $120.9 mln consensus.
On its earnings call, says it hopes its Q3 and FY09 guidance may be a bit conservative… Co says it is increasingly focused on career development given the tough economy. Longer term, the co seeks to expand its degree programs and offer students the ability to go from diploma to degree, all in the LINC education system…. Looking ahead to Q3 and 2009, co says the outlook is very promising… Co says demand is strong across the country, and it saw good improvement in April starts. Co saw growth across all of its verticals. Co is seeing an uptick in its automotive programs. Co is moving ahead with rebranding recent acquisitions. New student starts improved impressively in the qtr… Co is seeing some timeframes lengthen for students to find jobs due to the tough economy… Co is extremely pleased with its execution. In Q2, the co completed the acquisition of Clemens College which, together with Briarwood College, are LINC’s first two regionally accredited colleges. Co says these colleges will serve as the cornerstone of its next growth initiative.
LOPE: Grand Canyon Education beats by $0.03, beats on revs; guides Q3 EPS below consensus, revs above consensus; guides FY09 above consensus : Reports Q2 (Jun) earnings of $0.13 per share, $0.03 better than the First Call consensus of $0.10; revenues rose 71.7% year/year to $59.4 mln vs the $58 mln consensus. Co issues mixed guidance for Q3, sees EPS of $0.13 vs. $0.14 consensus; sees Q3 revs of $63.5 mln vs. $62.21 mln consensus. Co issues upside guidance for FY09, sees EPS of $0.66-0.67 vs. $0.63 consensus; sees FY09 revs of $260.5-262 mln vs. $256.40 mln consensus.
