macrocephalopod

Some of those might be a partial answer? Most of them are either irrelevant, too small to matter, would act in the wrong direction, or flat out contradict each other. No attempt made to explain the mechanism or size of the effect, just screaming stupid buzzwords into the void.

The first question I’d ask is “are we actually seeing a surprising number of intraday reversals?” — it definitely feels like we are but I’d want to see some stats on that to see if there’s actually anything to explain or whether this could just be seeing patterns in noise.

Then I’d throw out the explanations that can’t possibly work eg negative gamma exposure, CTAs, risk parity, target vol funds... these would all act in the wrong direction (they are momentum-reinforcing) so can’t be a useful part of the explanation.

Then throw out the nonsense explanations (front running, “the algos” without any eleboration, “passive flows” without an explanation of why they would be counter-trend) or the irrelevant ones (eg charm flows given we are not near an opex)

The vast majority of passive flow enters markets via auction and basic twap algo (futures executed over the day for exposure & switched to stock in auction) twap ‘leak’ huge amounts of information into the market that is very easily exploited by HFT’s.

Global or multi country ETFs ‘leak’ even more info due to the predictable nature of order flows across mkts and instruments. Make no mistake there are very complex algo/machines crunching this data to work out the probability of another order... usually a buy entering the mkt.

They effectively buy in front of and sell to the real money account for a few points only. If one real money account needs to buy and there are 5x HFTs the impact of one real account can be magnified exponentially.

As more real money and active managed accounts have caught onto this system the less they use normal mkts in favor of dark pools, auctions etc creating less liquidity and even more price distortion.