The clearing
firms have cut the effective rates
to market makers (Pros) by nearly
220 basis points. That means that those that were short stock will get
significantly less interest on those positions than they were getting four hours
ago. Conversely, those that are long stock are paying much less to carry
(finance) those long positions.

In a nutshell, the program trader that
had on several billion dollars in short stocks vs. the S&P 500 is getting
one heck of a lot less interest, making such a position very undesirable. The
unwinding of those positions could create a vacuum to the upside, which must be
partially responsible for the huge rally this afternoon.

The biggest program traders (also know
as basket traders) would normally try to lock in their short stock rates by
hedging in other interest rate products, such as bonds or bills, but this new
rate, which is tied to the effective Fed Funds rate, is virtually unhedgeable.
In other words, the effect on program traders, which on a daily basis account
for better than 22% of NYSE volume, could be a boost for the battered bulls and
could signal that the bears have overstayed their welcome.