TRADING THE WEEK: Market Subject to Whim Ahead of Jobs Report

The stock market shifted, gyrated and flexed on whatever news or rumor came its way amid a dearth of hard hitting economic news or position taking.

It all sets the stage for this week’s employment report, which could set the tone of market as it enters the fall, full participation and a Federal Reserve that wants to complete its series of interest rate hikes.

Last week the stock market dipped after President Donald Trump threatened to shut down the government. Fitch Ratings warned that the US' AAA sovereign debt could be downgraded if the government's debt limit is not raised in a timely manner. Lawmakers will have approximately 12 days upon their return Sept. 5 to negotiate an agreement.

Traders said also the chance of a government shutdown in the fall, should Congress fail to reach an agreement around the debt ceiling, may cause a surge in market volatility ahead. But that, they said, is still far enough away not to affect the market or trading.

Traders added the market was also watching how the Securities and Exchange Commission is working to resolve conflict between a ban on free research under Europe's revised Markets in Financial Instruments Directive and US rules on charging clients for analysis, industry representatives say. Industry groups want SEC confirmation that firms can pay for research the same way in the US and Europe.

In other market news, on September 5th, the time it takes to settle equity, corporate and municipal bond, and unit investment trust trades will shorten from three days to two. The transition to a two-day settlement cycle (T+2) is the culmination of a three-year, broad-based industry effort.

"This is a big move to benefit investors. Risk is a function of time -- so shortening the time between trade date and settlement date will reduce the risk of a trade default," said SIFMA's Managing Director Tom Price in a statement. "It will also streamline operations and enhance capital efficiency for firms -- freeing up capital that can be put to better use."

Also, market consultancy Greenwich Associates released a report that noted while the FX markets remain the most electronically traded, there might not be much room for future growth. Despite the FX market’s steady embrace of electronic trading, E-trading levels have remained roughly flat since 2013, signaling the market has hit the upper limits of on-screen trading and the next stage in its evolution.

Non-U.S. exchanges are beginning to examine the practical uses of blockchain and other digital ledger technology (DLT) to boost profitability and increase efficiency.

While blockchain and DLT usage in the U.S. and parts of Europe has been common and in development, usage in other geographies hasn’t been as widespread. According to a recent report in the Nikkei Asian Review, exchanges in the Far East are now getting more comfortable with these new technologies and that the security, lower costs and time savings they afford could boost their competitiveness.

Lastly, electronic-trading firm DRW Holdings agreed to purchase high-frequency trading firm RGM Advisors LLC. Chicago-based DRW said Wednesday it is acquiring Austin, Texas-based RGM, though it declined to disclose the purchase price. DRW, whose roots are in futures trading, is buying a firm with an expertise in stock trading. The deal is expected to close in September, DRW said.

The purchase of the HFT firm is further evidence of how firms, not just the broker-dealers, are having trouble making ends meet in this low commission and low volatility environment. The low volatility has been especially rough on firms – as low volatility takes away trading opportunities that many firms rely on to make money. This holds particularly true for HFT firms, whose small, hyper-fast trading strategies are designed to work when volatility is high or active.