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The machines have to find another plaything.
Citigroup (NYSE:C) completed a10-for-1 reverse stock split yesterday.
Today, the shares “magically” trade above $44 a share, instead of $4.40,
where they closed on Friday.
Now, if you follow the markets closely, you know
that Citi has been a favorite of the high velocity trading firms, who
using computer algorithms to scalp pennies from stock price movement.
Being a low priced stock that did huge daily volume, Citi was perfect for
the machines. And you could see it in the volume. There were days when
Citi accounted for as much as half the shares traded on the NYSE.
But now, at $44, the machines will need to move
on. That’s going to mean less volume on the NYSE.
*****As for Citi, the reverse split doesn’t do
anything for the company’s valuation. The split is just an easy way for
the company to put its failure behind it. It was once a +$40 stock based
on its earnings and balance sheet.
I’d rather the company keep the scars from the
financial crisis as a reminder…
*****Oil prices are back on the downside today.
We’ve seen some downward revisions for U.S. economic growth. Oil
inventories have been rising. And some would say the death of bin Laden
removes some of the fear premium in oil prices.
But don’t miss the fact that the
CME is raising the
margin requirement for oil futures contracts by 25%.
Margin requirement hikes by the
CME helped spark a
vicious sell-off in silver last week. Oil’s a bigger market, and probably
has more institutional support than silver, and so will be less
volatile.
Still, higher margin does have an effect. It’s a
little bit like the Fed raising interest rates to mop up liquidity. We
might expect oil to continue to trade somewhat lower. But let