Submitted by ***************** on 03/17/2011 14:46 -0400
* Barclays
* Ben Bernanke
* Prop Trading
* Yen
In an eerie recreation of the events that transpired during last year's flash crash, among the reasons for the spectacularly wide spreads during yesterday's dramatic yen surge (which was more than just a selloff of in the USDJPY but virtually all carry pairs as we pointed out previously) is that various brokers pulled away their entire market making in the currency. While the full list is those who turned the machines off is still unknown, one company is........
According to Dow Jones, "Barclays Capital pulled yen prices off its Barx dealing system for a short period Wednesday, as the Japanese currency fizzed to its strongest levels on record, a person familiar with the situation said Thursday." The reason: "to protect themselves during hectic trading conditions" - but why, remember there is no more prop trading on Wall Street (wink wink). And had others followed suit in Barclays footsteps and withdrawn markets due to a stop loss triggered wipe out in the FX market, compounded by fundamental uncertainty, it is easy to see how the yen may well have surged far, far higher. Luckily, it did not happen this time, although the USDJPY is trading at all all time lows today. On the other hand, if the market, despite trillions in capital injected by the central planners is so jittery it can take out all bids in what is supposedly to be the world's most liquid market on literally a moment's notice, we wonder just what will happen if and when Bernanke announces the end of QE3 and we have a repeat crisis...
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