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Stock Market Manipulation By Millisecond Trading
cfa22 writes "Nice piece in the NY Times today on ultra-fast trading on the NYSE and other markets. The 'algos' that make autonomous trading decisions have to be fast, but I wonder: Is network speed ever a bottleneck? Can anyone with inside experience with millisecond trading provide some details for the curious among us regarding hardware architectures and networking used for such trading systems?" According to the article, high-frequency traders generated about $21 billion in profits last year.
Traders make a profit on each trade. But the profit is always to the broker.
Ultra fast trading is an interesting idea and done right it can lead to successful short term returns, but if you take a Ferrari around a hairpin at 120mph, you're still going to hit the wall and die.
Are using special trader's routers from D-Link. Helps you get those NYSE unlocks so much faster. Worth every debased dollar.
Fiber Channel: It's gigabit speed, and very reliable once installed. The only thing to worry about is to make sure you're not bending the cables too far when you're installing the rack mounted gear - if you do - SNAP! - and you've destroyed the cable.
Sock Puppets: damn_registrars=pudge_confirmer=jimmy_slimmy=raiigunner=cml4524=a_klavan=red4men=ronpaulisanidiot
Latency issues have been an important factor for a long time. Here's an example article about some of the details:
In one or two decades we might be able to let all the stock trading to be done by the machines while we focus on doing the non-specialized work ourselfs! Ow wait... wasn't it supposed to go the other way around?
...for a while. A post from several days ago - The Day That Was - HFT's Superdominance. Extra points to them for the Fight Club motif!
The Army reading list
Stock Trader Just got a Headshot - $3000
SEC Official: I see you over there...
Stock Trader: I'm not hacking, I'm just lagging!
SEC Official: Turn them off, or I'm banning!
It seems to me like any potential for exploiting millisecond delays in transaction transmission will be consumed and defeated by the time it takes a human operator to interpret the information and hit the "confirm purchase/sale" button.
I believe that precision millisecond stock trading globally is the real reason behind the IEEE 1588v2 precision time protocol. The cisco 9000 enterprise switch supports it. Support has been lacking in smaller switches. The only other group using PTPv2 is the cell phone industry.
The interesting part of PTPv2 for me is that it is used in the 802.1AS protocol ( http://www.ieee802.org/1/pages/802.1as.html ) which is one of the foundations of Audio Video Bridging (AVB) http://www.ieee802.org/1/pages/avbridges.html - Which allows for real time low latency low jitter media streams transported via ethernet with guaranteed bandwidth.
Just yesterday I was joking with friends: Forget about stealing the rounded pennies from bank accounts, criminals could re-program the PTPv2 implementation in switches to steal milliseconds of time during trading!
Anyways, back on the original question, no, network speed is not so crucial once all of your packets are properly timestamped.
--jeffk++
ipv6 is my vpn
These computers are only as good as the "algos" (God, what a lame term) that are programmed in them. Screw up, and billions potentially are lost.
They're doing the same as anyone else can, just faster and more reliant on technology to do it. They're gonna screw up before long...
Sent from your iPad.
I interviewed at a millisecond (market-making) trading firm in Chicago. They claimed that when a hedge fund, etc. would buy or sell a stock, that one large purchase or sale would typically signal another. Whichever firm could get their quote up the fastest would make the buy or sale, and it's a winner-take-all system. The first market-maker to adjust their price would benefit. Thus, server speed is THE essential bottleneck. Needless to say, they keep the location of their server a secret.
My reading of the article brought out the point that, for a few extra bucks, you can actually go to the head of the line - giving the window of opportunity to perform the other actions described. Interesting definition of "free market" ...
A firm I worked with recently tore down an arbitrage network (they were getting out of the business as it was not core) which comprised of a great deal of Layer 2 dark fiber between sites in NYC and an external data center in NJ, Force 10 fabric switches with multiple paths to server clusters, and a great many Sun X-series servers running Linux. This arbitrage network bypassed the standard corporate (i.e. Cisco-based) network as they wanted exclusivity, higher bandwidth and as much speed as possible. Still, there were issues and the whole environment was scrapped since the actual returns did not match the expectations or cover the costs.
When I looked over the shoulders of the designers (they didn't want too much support from the regular network engineering team) they were concerned with raw performance and not as much with security or other daily operational issues. I would characterize it as the difference between, say, a NASCAR Sprint Cup car and your regular transportation. The former is purpose-built solely for performance while the other has to contend with safety requirements, daily functionality, and a lower common denominator for use.
I think, therefore I am - Rene Descartes; I yam what I yam, an' that's what I yam - Popeye
Allston Trading occasionally speaks at my university, and they've said that network bandwidth can be a big bottleneck. They needed to install servers across the street from the NYSE to attain the edge they needed.
As far as who the profits go to, ALlston (and I suspect many similar organizations) keeps most of their profits internal, and exercise big profit-sharing programs for their employees. It's actually quite an interesting idea, as this group of almost entirely Computer Scientists are using their expertise to make some good money as a cell in an atmosphere dominated mostly by business-types.
I'm looking at an HP Rack with Fiber channel networking and a hardware balancer right now.
As someone who works with people who do this, I can tell you they spend a lot of money on very powerful machines, and then try to place said machines within walking distance of the exchange's computers. I have been told that running a server at the office is too slow, even if its in the same city. Also, millisecond is the wrong word. Their trading is measured more closely in microseconds.
"Going to war without the French is like going deer hunting without your accordion." ~General Norman Schwarzkopf
I'm involved in the industry, and can say that anyone who gave up pretty much anything regarding those types of systems would find themselves no longer employed by any financial services firms. Ever again. As the article indicates, it is an arms race, which is why the potential code leak was such a big deal. The kind of advantage gained by knowing the algorithm of a competing firm is potentially massive, even if it came down to something as simple as fixing a single loop for a smaller set of average recursions. In short, these are black box technologies. Anybody who really talked about them should get used to removing their current position from their resume, if not sued to oblivion over violating terms of an NDA.
This has been a common topic on the stocks news groups about FAZ and FAS using different methods because of inefficiency between the two funds.
They are support to inverses of each other (short and long) of the finacial markets with leverage, but a few people have noticed that during the first minute of trading they aren't exactly the same.
The basis of the what people are doing is complicated and usually involves buying both shares and dumping one in the first minute and then selling the other shortly thereafter.
But there are other methods people have talked about but I can't seem to find the newsgroups since they were buried in spam a month or so ago.
"I am the king of the Romans, and am superior to rules of grammar!"
-Sigismund, Holy Roman Emperor (1368-1437)
The problem is the start-up cost. Buying the necessary hardware, obtaining the required data sources, developing the necessary analytical formulas and coding them efficiently costs a *lot* of money. So it's the free market of people who already have a lot of money and time, or simply an enormous amount of money.
I'm not entirely against it in some cases; well implemented it can smooth out market fluctuations and value securities more accurately. But it still makes me squeamish: It's yet another mechanism by which the rich get richer, and the poor get left behind. Every trade a "normal" person makes will end up costing a small amount more, and the difference goes into the pocket of the HF funds. It feels very much like the "shave the fractional cents off interest calculations" scam: No one suffers individually suffer, but it still feels wrong.
$_ = "wftedskaebjgdpjgidbsmnjgcdwatb"; tr/a-z/oh, turtleneck Phrase Jar!/; print
You're free to purchase that service. no?
No kidding, just look at all those stock exchanges popping up everywhere and competing, unregulated by the government. The NYSE and NASDAQ are so awesome that no one would ever want to compete.
I suppose that's the same guys that are always getting the "first post" on /.
I work in the finance industry, and know a few things about this business. It can be very profitable indeed. Since the HF trades are typically finished at the end of each day (or even minute), they are not required to hold much cash (capital) to support their positions. Thus the business is unusual in the finance world for making a profit on, essentially, zero capital. Of course, it costs a lot of money to stay in the arms race.
The article hints at two kinds of HF strategies, and they really are distinct. First, there are the "rebate" strategies that collect those credits for providing markets. Then, there are the "predatory" strategies that try to find the price points of buyers and sellers as described. Other HF strategies include pairs trades (Exxon goes up so RIG will soon), inter-exchange arbitrage where a stock is traded on multiple exchanges, and index arbitrage such as trading the elements of the S&P 500 against the index futures (which has been around almost forever).
Other algorithmic trading includes strategies meant to take on positions slowly (or quickly) and efficiently. A famous old category are the Volume Weighted Average Price (VWAP) strategies that try to trade a little bit at a time throughout the day, so that the average trade price is close to the day's average. Other algos try to take advantage of mean reversion or trends during the day.
There is huge demand for technical people in this industry (I probably get one headhunter call every two weeks), almost all of it in NYC or Chicago. There's demand for network engineers, statisticians, programmers, and traders, and high pay for quality. Surprisingly few programmers these days are really acceptable to the business, because the code has to be so fast and efficient, and almost no one studies that any more.
Most exchanges aim for that kind of speed now, but fail to make it. Some of them, like the London Stock Exchange, http://blogs.computerworld.com/london_stock_exchange_to_abandon_failed_windows_platform, which made the idiotic mistake of relying on Windows Server and SQL Server, don't even come close to delivering that kind of performance.
For those that come closest, the servers tend to be transaction-optimized RHEL (Red Hat Enterprise Linux) and Solaris. The networks are fiber optic-based. While they may connect to the Internet, the core systems, like those provided by AboveNet, are usually private 10GBe networks. In short, to really take advantage of this kind of high-speed trading you're not going to be doing this from your basement. You need to have a trading station either co-located at the market, or just down the street on a high-speed network no more than a link or two from the exchange's servers.
And, yes, network speed does matter here. So does server, storage and DBMS access speed.
Needless to say, none of the exchanges are exactly forthcoming about what their particular magic technology formula is since being able to deliver high-speed trading consistently has become an important sales point. I know many traders on Wall St. and the City in London who will move from one Exchange to another based purely on their ability to deliver faster trades. For this group, what's being traded is besides the point. It's all about keeping an edge in trading speed over their competitors.
Steven
To a previous commenter. The companies doing high frequency trading "are" the brokers. They aren't paying any brokerage fees because they have direct access to the market. Additionally speed is important enough that your computers need to be at least in the same physical vicinity as the trading computers. Literally every millisecond makes a difference. One of the things explained in the article is because the computers are so fast they can issue and cancel an order before it gets fulfilled. So with the Intel example: Notice there is a large buying trend in Broadcom Issue at x and see if there is a match. When a match is found immediately cancel. Issue at x+1 and see if there is a match. When a match is found immediately cancel. Repeat until a match isn't found. Place a huge sell order at the final number a match was found. PROFIT Basically the company made a .4% profit in a few seconds on 1.8 million by doing nothing but taking advantage of proximity to the market. This runs against several of the ideas around how an exchange is supposed to work. By the way... if I remember the match correctly that small .4% profit? It becomes huge when you consider this is done every second of every day. All that money those big firms are sucking up are coming from the small investor. The question is what is there to do about it? It will kill any small time daytrader. Someone like me who buys and holds will be alright but man forget trying to trade minute by minute based on technicals.
This kind of activity is an abuse of the free stock market system.
This activity does not generate wealth. It doesn't create something from nothing. And it doesn't add value to society. If they generated 21 billion, then 21 billion was necessarily lost by others.
People should look down on this kind of business and method of trading.
High frequency trading, millisecond holding period mean that traders are able to bring more liquidity to the market. A floor on holding periods will increase bid ask spreads as limit orders will become riskier and increase volatility. In this story, Broadcom shareholders were able to sell their stocks for a higher price
\u262D = \u5350
The really unfair bits are:
* Access to market data is prohibitively expensive
* The fees retail investors are hit with which effectively hinders those from stepping in to and out of positions frequently (to take home small profits or keep losses small)
Front Running is when the broker or market maker (eg, Nasdaq) does such behavior.
Although the high frequency trading is slightly different, it is almost electronic front-running, especially with the ability to PULL the orders unfufiled after a few milliseconds.
Test your net with Netalyzr
Ever played a first person shooter with someone who was running on the server? Even if you lag was short they had a distinct advantage. Seems like these traders are doing the same thing.
This is an outstandingly bogus article, what happens when arts graduates attempt to understand anything except celebrity gossip.
>It is the hot new thing on Wall Street,
The first algotrading I encountered was in the early 1990s at Deutsche, and they senior guys there told me of some of the mid80s stuff they'd done.
Not new.
>a way for a handful of traders to master the stock market,
Although algotrading is not exactly mass market, it is about as exclusive an activity as getting drunk.
>peek at investorsâ(TM) orders
That's not algotrading.
>and, critics say, even subtly manipulate share prices.
A major topic in algotrading is actually market impact modelling, ie working out how to make prices move less when they trade.
>Nearly everyone on Wall Street is wondering how hedge funds and large banks like Goldman Sachs are making so much money so soon after the financial system nearly collapsed. High-frequency >trading is one answer.
Actually they're working out how to employ these guys since they've often been shafted by the GS bonus scheme.
>software that a federal prosecutor said could âoemanipulate markets in unfair waysâ â" it only added to the mystery.
He was fed this line by GS as part of a dispute over an algotrader's pay. There is no suggestion that GS was being "unfair", just addressing the issues caused by GS having an inferior tech infrastructure for AT than may competitors.
>"This is where all the money is getting made,â said William H. Donaldson".
I'd love to see the original quote before editing. Bet it was a lot less sexy.
>For most of Wall Streetâ(TM)s history, stock trading was fairly straightforward:
For an arts graduate the writer is terribly ignorant of history, as well as trading.
For instance is he not aware of how the Kennedy family got rich as part of causing the crash of 1929 ?
>Joseph M. Mecane of NYSE Euronext, which operates the New York Stock Exchange. âoeMarkets need liquidity, and high-frequency traders provide opportunities for other investors to buy and sell.â
It's more complex than that. Some ATs are consumers of liquidity, others provide it, and there exist models that imply that heavy AT activity drives liquidity away.
>Average daily volume has soared by 164 percent since 2005, according to data from NYSE. Although precise figures are elusive,
164% is a surprisingly "precise" figure, which PR bunny fed that to him ? Wonder why the PR wouldn't give more ?
>"The result is that the slower-moving investors paid $1.4 million for about 56,000 shares, or $7,800 more than if they had been able to move as quickly as the high-frequency traders."
That's really quite amazingly precise. So precise that I believe not a word of it.
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Dominic Connor,Quant Headhunter
The problem is the start-up cost. Buying the necessary hardware, obtaining the required data sources, developing the necessary analytical formulas and coding them efficiently costs a *lot* of money. So it's the free market of people who already have a lot of money and time, or simply an enormous amount of money.
Because the people currently providing these services didn't have to pay all the infrastructure and coding costs when they joined? Since when did "free market" mean you didn't have to spend money to join in?
Why does it seem like the economy encourages this gaming of the system? There's millisecond and insider trading, IP lawsuits, lobbying, corporations shielding the boardroom, etc... Even as an employee, to get a promotion, you're better off bullshitting your way up the ladder than working hard.
It matters so much that companies that do a lot of trading set up their algorithmic trading facilities as close as is possible to their respective market/trading centers. EBS has heavy-hitters collocated with them, and it can be a selling point, like this.
Think of it this way:
In rough numbers, round-tripping 5000 miles, in light-speed-based latency alone, adds just under 55 milliseconds. That is *huge* in terms of algorithmic trading. These guys talk about the speed of light all the time.
If holding something for a minute is that risky, you shouldn't be buying it in the first place.
Knowledge is how to play a game, intelligence is how to win, wisdom is knowing what game to play.
That fast trading going on now is just them sucking out more stimulus cash from other places that got stimulus cash. Gaming the system, legal and obscured front running. Leeches.
Canceling an order should be discouraged, in the form of a fee small enough to be merely annoying to someone who occasionally cancels an order, but costly enough to discourage routine cancellations.
Knowledge is how to play a game, intelligence is how to win, wisdom is knowing what game to play.
Market is not zero sum game.
Winners outnumber losers in long run.
This is basically arbitrage.
Whiners call it "speculation" but the signals they create correct the market in a healthy way.
GS sees both the buy order and the sell order.
They can sell before large sell orders. Then buy again after to avoid a loss.
They can buy before large buy orders. Then sell right after to take a gain.
It's called front running and it's illegal.
But the government is not enforcing the law.
My theory is they are letting illegal activity go on to hold up the market prices.
I could be paranoid. But I've been in this thing for 28 years now and I've never seen such goofy market behavior and repeated evidence of price manipulation at market close on thin volume-- and yet there are no investigations.
She was like chocolate when she drank... semi-sweet at first and then increasingly bitter.
Personally I think that ultra fast trading is bad for the economy. It causes artificial imbalences in how supply and demand, business values should work. It then gives way for people to abuse the system given enough money and speed. There should be limits on how much can be traded in any given time. If there were limits it would allow who ever it is that should be regulating the markets to put some breaks on things when they see a problem, at least until things stabilize without closing down the entire exchange or destroying peoples retirement funds in the blink of an eye.
If holding something for a minute is that risky, you shouldn't be buying it in the first place.
Holding something for several years or decades is also risky. Ask any Fannie Mae or Freddy Mac or GM or Citibank shareholder who bought 20 years ago.
Perhaps holding STOCK is generally risky. If you don't like it, don't trade.
Me, I'd rather hold stock for 5 or 10 minutes and make $20 (20 times a day) than try to fool myself into thinking I can predict the future. I can tell you the price of a stock right now - and usually I can tell you roughly where the price should be in a few minutes, over half the time. That's all I need to make money.
Seven puppies were harmed during the making of this post.
I develop for the back-end system of a major online brokerage. Milliseconds do matter when routing orders to Market Makers (third parties responsible for filling orders). Legally (the SEC vaguely requires brokers to fulfill best execution speed and for customer services reasons efficiency is key. Some Market Makers can fill orders in under 20ms.
However, trading stocks listed on the traditionally manual NYSE is generally much slower then buying/selling a stock that is listed on the all electronic NASDAQ.
This is essentially a two-tiered system. The idea that people can pay to get an advance look at order flow is astoundingly stupid - I can't believe the SEC allows this. Knight Trading was busted years ago for front-running their customer orders. Why is this any different?
I was a Sys Admin for a day trading company in Chicago.
We had a 100mb serial line direct to all of the major markets that we traded in. We also traded the European markets. Trades were taking upwards of 300ms to complete. So, we spent $25mil USD to build a data center in Germany. We could then use Citrix to remote into this data center and trade, We still had traders that would scream for us when a trade took >100ms on the local markets. And we came running and scoured network logs trying to find the bottleneck.
We replicated all traffic to certain ports on the Cisco and had Wireshark running constantly, even after hours. Every millisecond counted. And seeing that the owner of the company personally made $3mil profit every quarter, it seemed to be working.
Short answer: Transmission speed impacts latency when you consider how long it takes to drop all the bits (one at a time) onto the wire. This has not typically been a concern with LANs, but as latency gets measure in 10's of microseconds, it is a very real concern.
Long answer:
Network speed is a bottleneck in that it impacts latency through serialization delay (the time it takes to drop the bits onto the wire). This sounds trivial when were talking about Gigabit, 10 Gigabit and 100 Gigabit speeds, but the Exchanges are striving to meet network and trading latencies measured in microseconds. You can do the math yourself to see how long it takes to drop 512 bytes (1 bit after another) onto a wire. If you're anal you can add the appropriate overhead for framing, headers, etc.
Switching latencies also vary significantly and have a tremendous impact on vendor/product selection. This also drives network architecture as eliminating as many switching hops as possible is key maintaining latency budgets.
Distance from the exchanges is important, but not as important as switching latency and serialization delay. You can do the math to figure out how much time it takes bits traveling at roughly 2/3 the speed of light to reach their destination. Most trading firms pay large premiums to either collocate at the exchanges or very, very close to them. So-called program trading is performed by autonomous server farms operating in these spaces.
I can go on, but refer back to the short answer. Network speed is important.
Of course latency is a problem. It screws the algorithms when they miss their trade opportunities and millions are spent to solve the problem.
Latency occurs in many places but boil down to network, processing, software and storage. You can solve the processing by more or parallel CPU, solve storage by using Infiniband, software by using good coders but lets ignore those.
Networking latency is solved by reducing distance, removing firewall and unnecessary devices, increasing speed (but not bandwidth), and implementing QoS for exceptional event. Obviously any potential bottlenecks are identified and designed out in the network hardware. Redundancy is key and failover needs to occur in milliseconds, and this is the single largest challenge in designing these systems.
is that a free market requires regulators. which seems like a contradiction, but only if your ideology is shallow
its a classic failure of libertarian and other anti-government ideologies to posit that things get more fair when you get rid of governmental intrusion. you need government in this world to keep things fair. of course bureaucracy and official corruption ruin plenty of things. its just that, without the government, things are far worse
certain large players abuse the system to their benefit. this ALWAYS happens. the whole notion of a free exchange of equals is pure fantasy. without an intrusive governmental system in place to actually keep things equal, things get very unequal very quick
the one good thing about the financial meltdown of 2008-9 is it puts a stake in the heart of the reagan era idea that the smaller the government the better. not that plenty of things about big government doesn't also suck. the truth of course is the government must maintain a certain presence and size, not to small or too large. but the idea that smaller is always better has been proven to be a failed ideology
intellectual property law is philosophically incoherent. it is your moral duty to ignore it or sabotage it
We had a couple of mini-meltdowns of the market in the early 90s because of programmed trading that went haywire. Ever since, programmed trading and the arbitrage that comes from out-pacing the market by a few seconds (at first, and then a few tens of seconds and now milliseconds), there has been an ebb-and-flow that looks like this:
* Someone starts doing this (they think it's the next big thing)
* They run into problems, and accidentally make the news
* The news media is all shocked that this new thing is happening
* The company (or project) that started it either goes away or settles down and becomes a mature member of the programmed trading community.
The interesting story, and the one never covered is the nature of the mature community. They essentially have a shadow-stock market that hasn't fully been regulated, and which is literally invisible to most humans. Now, these companies are mostly very large and stable organizations that want to stay that way, so for the most part, they implement controls that are sane, but as we've seen over the past few years, systemic mistakes which have no obvious downside until they cause wide-spread failure are not typically regulated well from the inside (alas poor Lehman, I knew you).
However, we should be clear here: this arbitrage is very often not as valuable as you would think. It costs a lot of money to do and has fairly small margins of return. It makes money, but there are easier ways to make money in the market. On the other hand, it has the virtue of very high turn-over, which means you can throw a pretty sizable chunk of money at it. When you're a large investment firm saying "sizable chunk of money," you typically mean, "dang, they won't let me buy more than 10% of IBM in this fund."
where investing in the arms race requires significant cost, and therefore favors large entrenched interests at the expense of smaller traders
in what alien universe is that "leveling the playing field"?
intellectual property law is philosophically incoherent. it is your moral duty to ignore it or sabotage it
There are a lot of things about these high-frequency trading systems that strike me as bad. The market should be a level playing field, and here it clearly is not. If I built a computer that could analyze the data and make the decision at this speed, I still couldn't use it. Who do I have to pay first to get my equipment conneced to the network? Who do I have to pay first for access to the data?
So from that, I'd say regulatory fixes are called for. I don't care about arguments of the good or harm these systems may do, the playing field needs to be level.
But, let's not miss this opportunity to see flaws in the system at a more fundamental level. TFA talks about a loophole in the regulations that should provide transparency, then shows how high-frequency traders defeated strategies used by slower traders who were themselves trying to defeat transparency.
Stock traders are always trying to get or to keep an information edge on the other guy. This is, in a sense, just an extra-dangerous (and apparently extra-effective) way to do it.
It's hard, but not as expensive as you think. I have a acquaintance who developed an algorithm in grad school to trade currencies. His algo wasn't the microsecond type, but he never keeps a position longer than an hour or two. He convinced a few people to invest in him and now he runs a small company controlling about 1B in leveraged currency. Keep in mind that the FX will let you leverage up to 100:1 so the amount of real money his company was given was not that much to start.
It doesn't necessarily have to be free, but it's well accepted that having high barriers to entry reduces competition and trends towards monopoly.
there is a good reason we have stock markets - they bring benefits to the economy. However when the financial industry that runs them starts being as huge as to be believed to become the most important industry there - this is where problems start. But of course them casino boys are system relevant so they should be allowed to do what they please, after all if things go well then they reap the profit, if things go bad it is (mostly) not their money that gets lost and they still reap profit and if things go really bad then there is Joe Taxpayer who signs the bill (together with PRC among others). As far as I see there is no way this is going to change any time soon - after all the casino boys are the only ones that are allowed to regulate their only trade or so it seems - it is naive to expect them to change the way it works now as this means only pain and misery for them.
put a "tick" in the market place
the exchange's computers receives orders on a nice lazy interval, say every ten seconds. it may receive a bunch of orders at various milliseconds, but it simply queues them, then releases them at the ten second mark, all with the same timestamp
this removes the unfair manipulations of large players with lots of server iron at the expense of small traders
because surely this sort of fast trading is unegalitarian and against the notion of a free market
i have to defend the obvious wrongness of these fast trades, since it seems some people in this comment thread actually consider this bullshit fair, probably because they're involved and have sold their conscience
you know, the same sort of assholes who bought us million dollar mortgages for waitresses
who cares if you're damaging the marketplace and the economy, right? as long as you're fucking cashing in, right?
intellectual property law is philosophically incoherent. it is your moral duty to ignore it or sabotage it
Tobin tax
Automated trading has been a growth engine for data center colo providers, who market "proximity hosting" space within their facilities to hedge funds who believe that they can get an edge by being physically closer to the exchange's servers than their trading rivals. In other words, once you max out the wire speed, it's about physical distance. Savvis says its ultra-low latency offerings can reduce connection speed to microseconds, rather than milliseconds. The NYSE's data center expansion purportedly will enable it to offer colo space to low latency trading operations.
RichM
Data Center Knowledge
Sure it can, but there are certain fields that are just going to have high barriers to entry by their very nature.
I call BS! Want to know how you could get rich?
Buy in March of 2009! Yet did you? My mother started buying in January this year and kept on buying as the market feel. (she did it on my advice). Her returns are 90%! No need for high frequency finance there! I invest as well, and want to know something I am up 30% from Jan 2008 (not Jan 2009, Jan 2008) ! Pretty good yes... And I only go long, no shorting.
How did I do this? Stock pick and as the market fell I just kept on buying, buying, buying... Yet the average investor and many hedge funds don't because they have deer in the headlight syndrome. So not you in particular people should stop complaining about market manipulation.
"You can't make a race horse of a pig"
"No," said Samuel, "but you can make very fast pig"
Goes into more detail than the NYT article. Have a look.
Your god may be dead, but mine aren't!
You lack reading ability apparently. He never claimed rich people didn't have to pay all those costs. He pointed out that the non-rich people cannot afford to pay the costs, but rich people can. The cost of development is a barrier to entry. It's the same way that you couldn't start a telecom tomorrow on a Joe's salary and expect to get anywhere. And no matter how savvy you are, a Joe isn't going to get wealthy backers by saying "I've been a computer programmer for 15 years."
Comment removed based on user account deletion
For the shadowrun fans out there:
The Nanosecond Buyout was a legendary computerized exchange of stock in 2033 that propelled Damien Knight to the head of Ares Macrotechnology. In the span of 63 seconds using a set of mainframes in Stockholm, Sweden, Knight executed a series of transactions that caused the dissolution of three corporations, two multi-millionaires to lose their fortunes, three other people to become multi-millionaires, and Knight to gain the ownership of 22 percent of Ares. Since then, computerized controls are in place to prevent such blindingly fast stock transactions, preventing an individual from performing the same trick twice.
Lucien Cross gained much from the Nanosecond Buyout, and probably helped orchestrate it (facilitating the server time from Stockholm). It is rumored that Damien Knight had the aid of Dunkelzahn, due to an unusual bequest in Dunkelzahn's Will:
"To Damien Knight, I leave my antique chess set, except for the black king piece. I hope you find another worthy opponent. It was only 60 seconds, old friend, but what a ride!"
Everybody has a purpose in life, maybe mine is to lurk in slashdot.
Sometimes you have to remind people that *everyone* is touchable.
Deleted
Goldman was the top trader by volume on the exchanges until the code went missing. Then they were notably absent, and overall volume was down (and still is). Massively.
Read into that what you will.
Except that isn't really true. The article did a good job of misrepresenting what flash orders are. There is more to getting a broker/dealer license than paying a few extra bucks. Also, it only gets you to the head of the line when whoever places the order wants to show it to you first. The flash order is controversial and may soon be regulated away, but it isn't what that article made it sound like.
No I don't lack any reading ability at all. He was trying to claim that because there are high costs of entry that somehow it's not a free market which is false. Certain types of activities have more expensive infrastructure costs. That's just the way it is. That doesn't make it any less of a "free market". The notion of a "free market" has to do with being able to freely exchange goods without government intervention not that anyone and everyone can necessarily start a business in any field they want.
OK, fair enough. But I don't think the guy was trying to use "free market" in its technical sense. I think he was saying that, functionally, it is a free market only for the wealthy. I see no problem with using the term in that way, because people should realize what he meant:
There's the relevant quote for reference. Of course he's not literally saying that it's a free market for wealthy. He's pointing out that, while not literally a free market for the wealthy only, it's effectively one. And that's pretty much true because non-wealthy are excluded by barriers to entry and therefore can be treated as nonexistent from a practical POV.
The problem with leveraging is that if things start rolling downhill, it will all crash very quickly.
Nonetheless, since he set up a company, he's absolved of any personal responsibility if things do crater. Of course he will lose his business, though.
Note to self: Form a company, do crazy stuff and get a bunch of people to give me their money, pay self well with that money, don't be stupid and run an outright ponzi scheme at least try to do something vaguely "innovative", and save all of the personal income possible. If things go bad, I still have all my friends money that I paid myself with, and the FDIC may well bail out my friends too, so they will have their cash and I will still have them as friends. Hahaha!
That's how our economy is run today. We go boom to bust every so often because our faked propped-up economy comes to a screeching halt.
Within the last year, we had a new high end FPGA vendor visit us. They mentioned that some of their first customers were people/companies doing these fast trades. They were willing to spend $50k+ per part to increase the algorythm speed by 10 - I think going from 10's of ms to ~1ms, but I'm not sure the exact magnitudes. In some ways, this cost isn't that much, considering that the product development costs are likely $300k+. I do wonder how widely the algorythms vary across the different players. There are definetely some large players in this space, and industrial espionage too.
Consider the case of Bloomberg LP, the financial information company. While the company itself does no trading, one of the products it sells is a (rather vast) live data feed. The main customers for the data feed are algorithmic traders. In order to provide the speed and reliability the customers demand -- and for which they pay handsomely -- the company maintains large worldwide network of private leased lines. The internet is not reliably fast enough for this use. Nor, for that matter, is TCP/IP -- Bloomie uses their own proprietary networking protocol instead.
If it's too risky for you to hold it even 1 minute, you shouldn't be a day trader.
Barring fresh news, intra-hour price swings are usually not related to the underlying stock.
Buy-and-hold investors like Warren Buffet are actually investing in the company itself.
Knowledge is how to play a game, intelligence is how to win, wisdom is knowing what game to play.
And a CEO somewhere is probably wanting someone to develop a way to send messages at faster than the speed of light.
Um, "stealing code" doesn't mean removing it from a computer, stuffing it into a bag, and running away with it. The allegation is that someone stole a copy, not that they left GS without access to it.
http://www.exegy.com/
I would recommend people see a talk by Yaron Minsky at Jane Street Trading Company - http://ocaml.janestreet.com/?q=node/61 . In his talk he explains the fast trading approach that his company is taking (he claims they a part in about 10% of all stock transactions!) and talks about how and why they use the OCaml programming language for developing their trading algorithms.
I've been out of this for a few years now. We did this from 2001-2003 or so, and, unfortunately, my partner was too inflexible to broaden our trading strategy from the simple market-center arbitrage scheme we employed. (Buy on one electronic market at a better price than is currently being offered at another electronic market.) We did quite well during that period, but certainly not the billions being made today. It was a small "boutique" market with only a handfull of players at the time.
I wrote all the software and selected hardware and services, while my partner did the "trading" (which really was watching and then manually trading-out of orders that somehow didn't go as planned).
When we started, my partner did the trading from his home in the midwest. Our typical buy/sell cycle took 1 second, maybe 500 msec per side.
When we wound-up, our ISLD orders were being filled consistently in 100 uSec. (Only after getting approval to send our orders directly to ISLD, bypassing our broker's order system. We sent the order on a dedicated feed to ISLD, and simultaneously send "order advice" to our broker for their back-end system. BTW, nobody else came close to ISLD - fastest ECN outside of ISLD was around 10mSec. Instinet (later bought by NASDAQ) was among the worst. This technology gulf was the main reason why Instinet bought ISLD, and one of the main reasons why NASDAQ then bought Instinet.
We started with a dual Pentium-III Xeon, and upgraded to a dual Pentium-IV Xeon IBM server. We eliminated switches and hops of any kind where ever we could. We leased rack space in the same building where ISLD was located (they did not yet offer co-location space, so we had to house with a third party - which just happened to be their ISP, LOL...), and ultimately managed to wangle a dark fiber up the elevator shaft. We moved into the NJ data center when ISLD moved, and shared a fiber under the river for access to the other exchanges.
Everything was a direct as possible. No "feed consolidator", no BS multi-tier architecture. This wouldn't have worked for a bigger operation. Every feed went from the router (for everything but ISLD, which was a local Ethernet connection) to our Ethernet switch to our one trading box. The switch was, in fact, a controversial compromise. Our broker had some prior experience, and advised us to use a port per feed. I though that was silly, and he just didn't understand how little you are giving up with a good cut-through switch.
This will take the biggest iron you can throw at it, and I'm afraid my partner didn't fully appreciate that. Throw cores at it (one core per data feed is ideal) and run the thing 90% idle if possible. It's hard to get traditional IT types to understand that a low-latency system needs to run a near-idle. (My partner wasn't an IT-type, but I had plenty of arguments with "experts"...)
A few months ago, I ran across some information that suggests that, today, this kind of trading is done with dedicated hardware for managing the data feeds. That is, ASIC-based hardware (NOT a "computer") that takes in a data feed and pours it into an in-memory database, handling all the feed-handling and indexing tasks ahead of the trading computer.
This is taken from http://tententwo.com/
I have talked to people who do this sort of thing. I'm no expert but here is what I think to be the general gist.
These people are known as black box traders or arbitrage traders. They construct computer systems to automatically identify opportunities and execute trades.
There are two parts to the task. Identifying the opportunity and executing the transaction.
Identifying opportunities requires low latency data from the exchanges, which includes not only network latencies but also processing latencies. Opportunities within a single market are essentially non-existent as the various merchant banks and brokerages have been doing automated trading in this space for some time. The more recent black box traders usually focus on arbitrage between exchanges or through synthetic instruments.
Arbitrage between exchanges consists of looking for an instrument that is listed on more than one exchange and identifying when the orders get out of sync, such that you can make money by buying on one exchange and selling on the other. For example, Royal Bank of Canada trades on NYSE and on the Canadian TSX exchange. The stock is traded in US $ on the NYSE and in CA $ on the TSX. Its possible to write software that looks at the orders on these exchanges and at the foreign exchange rate such that opportunities can be identified.
The second group of opportunities is through synthetic instruments. This is much more technical and I don't really understand it. Essentially what is done is that the software identifies inequalities in the market based on a basket of instrument that, when traded together add up to an instrument. These synthetic instruments are made up of various positions on real instrument. For instance the synthetic might consist of an equity and several options to buy or sell that equity.
Once the opportunity is identified then the order must be executed before the market picture changes. For this, low latency order execution is required. I think that traders may use two different boxes, co-located at the data vendor and at the trade execution provider to reduce latency as much as possible.
"I often do wonder how we ended up here."
The short answer is that any system which allows for monopolizing of land and capital (by the state, it's Soviet-style communism, by the corporation, it is our present corporate fascist state system) always has this end result.
For the longer answer you'll want to pay attention to this site and this site.
The first site is phase I while the second site is phase II; both worthwhile reading. I'd recommend examining the original reason for the creation of holding companies, but you've already explained that quite well.
Comment removed based on user account deletion
something is fundamentally broken in a system that instantly rewards corporate announcements of massive layoffs with equally massive stock buys.
How many people have suffered (directly and indirectly), how much damage has been done to communities and countries because of the endless bloodlust to 'make the quarter'?
Profit from lag is quite common ... or at least in what I've seen. Just in case I'm wrong, this is posted anonymously.
Observe a trend in one market and then ride it early on another market. This is only possible due to the lag between the two markets. Perhaps not the exact lag you're talking about, but it's the same concept at least, and it does rely upon millisecond timing with automated systems.
Yes, no questions were answered.
"high-frequency traders generated about $21 billion in profits last year"
Many of those trades took money from the guy who comes home at night and trades for his 401K. With every winner in the stock market, there is a loser, and it is big banks like Goldman Sachs that are usually winners.
I suspect that talking about "market liquidity" is just avoiding the issue: The U.S. financial system is corrupt.
Hi,
I've been writing high-performance financial code in NYC for 4 years and doing algorithmic trading for 2 of them.
Basically, everyone one in the industry is trying to turn information into money. "Information" is the difference between what the price a stock is currently at and the price it should be. There's actually some really good theory, like the Kelly Criterion, behind information -> dollars.
The industry as a whole has different goals - it's to (1) determine the correct price of products (e.g. oil, corn, future dollars) so that people in other industries can make informed decisions and (2) provide a means to "store" dollars in a company or bond so that they can be withdrawn and used later.
Automated and millisecond trading help get accurate information into the market (i.e. move the price towards where it should be) quickly. Those are good things.
The big issue is fairness. Do all traders (Goldman Sachs or Joe Q. Public) have the same access, tools, etc. to compete on an equal footing? Also, does "matching orders" (pairing buyers with sellers) on a microsecond basis provide a useful function to the participants or the economy as a whole? And, yes, a difference of a single millisecond makes a huge difference in profits.
When Goldman or someone else is able to put a computer in the same machine room as the exchange, able to receive "flash orders" that others can't, and able to trade based on infinitesimal speed differences instead of information, you have to worry that this is helping the economy.
As it is, I think the article writer does a bad job, putting in the title "millisecond trading" as if it is the problem. It isn't. If any problem exists, its the rules that put market participants on an unequal footing.
There was a story on /. a while back about Goldman Sachs's "secret sauce" being stolen. Follow the links; you'll find reports of GS claiming this was a serious problem because the software could be used to manipulate the market. The real concern that GS has is that someone might use the "secret sauce" to do to GS what GS was doing to everyone else. To sum up: Tough shit.
Millisecond trading is certainly not illegal. I don't think I could call it unethical or immoral either. But the concept still somehow feels wrong to me. It feels like this activity is for some reason not supposed to exist.
Yes, that's why those in the know get their server place at the central exchange itself.
That 2% that is screwing over the other 98% is known as the Federal Reserve. The Fed is responsible for jacking around with our money supply to create inflation. Apparently it's not enough that they steal our money by inflating it away; they add insult to injury by hitting us with capital gains tax.
End the Fed!
Actually he only takes his salary as a percentage of profits. If no money is made he doesn't get paid. He's made a pretty steady return for years. When things cratered he lost very little for his clients (down ~1%).
The beauty of the algos running the show is that they can trade out instantly when things appear to be going bad. The FX is also a 24/7 market so you can always get out. BTW, anyone who does currency trading is using large amount of leverage because the moves are generally very small (called PIPs).
The moral of the story is: The stock market is a nonlinear system with up to 1 MHz bandwidth in the feedback loop. That's pretty friggin scary.
I know that stock markets that deal virtual goods, are doomed to crash every couple of decades. It's a psychological must. It crashes every time people start to check, what the real actual value of the stock is.
But millisecond trading? I thought the rule was to see who could wait the longest!
Oh well. I never was an expert on imaginary money. (E.g. everything not backed by real physical things like gold.)
Any sufficiently advanced intelligence is indistinguishable from stupidity.
(Posting anonymously because I probably shouldn't be saying this...)
I know at least two NYC hedge funds recently upgraded networks from 1GbE to 10GbE even though they were only using ~10Mbps of bandwidth, simply because the transmission time for a 64 byte UDP packet is half a microsecond less at 10GbE than at 1GbE.
I have this theory that many of the people who hate the stock market have a history of thinking it is a scam, seeing it go high, getting in high, watching it crash, getting out low thinking it is a big scam, watching it go high...
Nerd rage is the funniest rage.
They are necessary to increase market liquidity and if they really manipulate prices, in the end, they are only creating interesting divergences for long-term value investors.
Whenever a stock is in the soft parts of the price elasticity curve, sensitivity to fundamentals is low and the trading can be manipulated by applying the correct trades at the correct technical points. The method involves representing all traders and trading accounts as one aggregate trader with an average propensity to respond to technical signals and then using this theoretical trader as a model to predict which trading contention points will be most influential on the developing technical pattern. If a stock is trading well within its plausible valuation range, this technical response sensitivity is the dominant mechanism driving new trades. You can draw the stock market as a control function and solve for the type of feedback necessary to induce the desired trading pattern. Engineers who do analysis of oscillations of mechanical or electrical systems will understand this readily.
Whenever a stock is deep on either side of the price elasticity curve, the influence of fundamental traders will present too much of a "noise" signal for technical manipulation to be effective. I'm writing up a on this subject here.
"There are some people that if they don't know, you can't tell them." ~ Louis Armstrong
However, you explain it, Goldman Sachs gets the money, and the 401Ks lose.
it didn't take long for the value of the internet to exceed the value of AOL's services.
Doesn't that kind of assume that at one point, the value of AOL's services exceeded the value of the Internet?
http://www.juniper.net/us/en/company/press-center/press-releases/2009/pr_2009_06_24-16_00.html
They are touting 50 microsecond RTT for any two points in the data center. Might be related to what is being discussed here.
I put more money in mutual funds regularly, regardless of market conditions (and conveniently, the way my company matches 401-k contributions meant their entire match was deposited between January and March). Dollar cost averaging is wonderful. I never said this prevents the less wealthy from making money in the market in other ways. I said it is one more way of making money that is inaccessible to the poor.
$_ = "wftedskaebjgdpjgidbsmnjgcdwatb"; tr/a-z/oh, turtleneck Phrase Jar!/; print
I am actually laughing out loud at that one. My girlfriend's father (a repellent, money grubbing man) was operating as a day trader for years. He was operating on margin too, so much of his profits, even in the good years, were eaten up by the interest. Last November he pulled out of the market (having lost the vast majority of his wealth aside from the house) "for good" due to it being a "big scam."
Meanwhile, I've been investing over a thousand a month ever since I got a full time job. I think I'm still down a little bit overall (I graduated in 2006, so my timing was a bit off), but not that much, and watching the returns the past few months has been magical.
$_ = "wftedskaebjgdpjgidbsmnjgcdwatb"; tr/a-z/oh, turtleneck Phrase Jar!/; print
This is efficient markets (and technology) at its best. Slow-moving investors did not pay more than they should have -- they paid exactly what they should have, namely their willingness to pay.
There are three types of players here that need to be called out: Little Bo Peep, the Wolf, and the Sheep. Little Bo Peep is the initial investor who saw the opportunity in Broadcom and bought it at $26.20. That Bo Peep is a slow trader is inconsequential because she makes the first move. The Wolf is the high-frequency trader who picks up on Bo Peep's move and waits for the kill. The Sheep is the dumb and slow trader who mimics Bo Peep and gets eaten by the Wolf.
It's not the holding which is risky, it's the price offering. Any liquidity provided is a sitting duck for people with more information.
\u262D = \u5350
Also something to note, it's only slightly related.
A good majority of trades (especially with large brokers) happen in house. For example lets say I use Broker_A and I'm looking to buy 1,000 shares of xyz, someone else also using Broker_A is looking to sell 1,000+ shares of xyz. Those shares are traded "in house" and the trade is reported after the fact. This happens all day everyday so it probably cuts down slightly on the required resources.
In the US trading done by an automated computer program is illegal
You'd better tell the SEC that and have them arrest all of the day traders who setup computers to automatically trade. Heck, you'd better have them arrest brokers too. It's possible to sign up with an online broker and do this. ETrade allows you to "pre-program your entry and exit strategies". With a number of different brokers it's possible to set limit orders, where stocks at buy or sold when the stock reaches a set price. If as a trader I believe X Inc's stock price will bottom out at one price, Y, I can place a limit order to buy the stock at Y. Then if I believe it will top out at Y+2 I can set another limit, this one to sell, at Y+2.
No, I haven't done it myself but my brother-in-law's a Certified Financial Planner, CFP, who has worked as a daytrader.
Falcon
Should there be a Law?
So true, so sad.
Online trading is quite simply a good way to get eaten for lunch. All it's done is supply more suckers who have NO business in the stock market their opportunity to get bankrupted.
Online trading's a good way for those who shouldn't be trading to get eaten but not those who know how to trade. And part of know how is knowing when to get out or not trade. I have a brother-in-law who day traded but he stepped away when the markets became erratic. As for being in the stockmarkets, everybody belongs in them. There is this thing called personal responsibility and it's each persons' responsibility to save and invest money while working so they can afford to retire.
Falcon
Should there be a Law?
But surely government intervention is simply another barrier of entry? All you have to do to work around it is to hire a mercenary force larger than the army of the nation in question. Sure, it'll cost a lot, but "Certain types of activities have more expensive infrastructure costs."
If barriers of entry to a market are high enough, then that market is not free, for any reasonable definition of free.
Forget magic. Any technology distinguishable from divine power is insufficiently advanced.
Sure you can, you can cheat almost anybody.
If you could make an easy living simply trading stock, everyone would do it.
This is just as probable as if you could make an easy living simply as an engineer, everyone would do it. Or substitute some other action verb and maybe an adverb.
Falcon
Should there be a Law?
I know some of the people doing this work, and they really trade in nanoseconds and clock cycles.
Some of the things relevant:
- level 3 switching, routing is out for these speeds
- performance measuring has a heavy impact on throughput and is thus rarely done
- they use mysql as postgresql appears to able to keep up
- market data processors run Linux
- doing it right means a full factor difference in speed, I believe this means an algo fed by this can acquire data, analyse it and post a trade before others even see the data
It's fascinating stuff.
BTW, I suspect the code that was alleged to be stolen from Goldman Sachs was just that, an algo..
Insert
I caught the Frontline (PBS) about Bernie Madoff recently and the show discussed an early concern the SEC(?) had about the guy. His "public" company, the one he was known to run by the Wall St. types, placed trades. Now IANAFA (...financial analyst) so I'm somewhat talking out my ass, but you can probably fill in the blanks with wikipedia or pbs.org, etc. Because of Madoff's position as a "market maker" (whatever that is), he had access to trade information from many different sources either just before or directly after the trades were placed, before the information was posted to the public, by a few minutes, I believe. Frontline went on to say that somebody somewhereorother did a study about the potential for Madoff to enter in his own trades immediately after another entity makes a big purchase to take advantage of extremely short term bumps in price...their study showed that the idea was a non-starter. Even with Madoff's company accounting for something like nearly 10% of the entire volume of trading in any given day, going after the short term bump just really wasn't a great way to make a whole lot of money very quickly so the idea was dismissed.
I expect that if an advantage of a couple of minutes doesn't really matter, I doubt making trades in fractions of seconds is really going to benefit anyone.
and you drown the 98% with the upper 2%'s greed.
No, those 2% were made bigger. If they couldn't fall them they certainly can't now. Meanwhile others are still losing their homes. If there was to be a bailout, which I don't agree was needed, then there could have been at least two conditions on the money. One was that those going through foreclosure be helped to stay in their homes and two the banks, and AIG, be broken up. Instead the banks used the money to buy each other making them bigger.
With the bailout bad banks were rewarded and good banks punished.
Falcon
Should there be a Law?
Libertarian no-tax, no-fed-money "ideal" is progressive taxation.
And where are these no taxes libertarians? The Libertarian Party only calls for the repeal of the income tax and oppose employers acting like tax collectors.
It's an existing mechanism for inhibiting John Galt from excessive, unwarranted greed, and it can be used to redistribute wealth in a directed fashion.
Yea we need a reverse Midas, everything touched turns to shit. Reward mediocrity and punish merit. Yea wasn't that tried during the 20th century? I think it was called communism. Where are all the communist countries now? They don't exist.
For example, to fund a health care system that provides health care for all
You mean one that rations health care? Fact is is there is no free market in medicine and health care which is what is needed.
Falcon
Should there be a Law?
a great example of a bad company that was poorly run and didn't "deserve" to survive. How many more people in Detroit, for example, would go out of business when all of GM gets laid off? Is it worth punishing all of those other people in an already-bad economy to "set an example" of GM? Is it worth punishing all of those other people in an already-bad economy to "set an example" of GM?
You're assuming all of GM's employees would be laid off. If it had been forced to declare and file for bankruptcy others could have picked up the pieces, reorganized, and gave what buyers were willing to pay for. It has not been shown not bailing out GM would have harmed a lot more people. Nor has it been shown the bailout will help more. All it's done is show that if you screw up the government will bail you out, if you're big enough.
Now where is my bailout? Heck I won't even ask for as much money as the large corporations are, all I'll ask for is $500,000.
Falcon
Should there be a Law?
When betting on an Apache helicopter and your armed uprising, my money is on the Apache.
I disagree with the GP but I also disagree with this. Despite Kent State, Ruby Ridge, and Waco it would be difficult to get most US military personnel to fire on US citizens. I don't know if you have but I served on the US Army and most of those I knew would have refused to fire on Americans. Even China found out it would be difficult to get Chinese to fire on other Chinese. During the Tiananmen Square protests of 1989 the government had to order an army unit from another part of China to Beijing, some local army units refused to fire on protesters and the authorities didn't know who was loyal to whom.
As difficult as it was for the Chinese to get Chinese to fire on other Chinese, it would be considerably harder for American authorities to get Americans to fire on other Americans. I can't see my nephew who's a Marine stationed in Iraq firing on other Americans. Then again if they gave him another $250,000, they gave him that much so he'd reenlist, he might.
Falcon
Should there be a Law?
Apparently it's not enough that they steal our money by inflating it away; they add insult to injury by hitting us with capital gains tax.
Yea, only those who work for a living should pay taxes. Those who are fortunate enough to get capital gains shouldn't pay tax. The same with those who live off of dividends.
Falcon
Should there be a Law?
It was a waste of the larger companies money, destroyed 260 people's lives (some had been there 20 years)
If the clients went to the small company because of the employees those employees could have started their own business and they'd have willing clients thus beating the big business.
Falcon
Should there be a Law?
A $20 dividend check doesn't mean much in the general scheme of things
For the short term you're right. But if you have a lot of tyme left before you'll need or want the money signing up for the corporation's DRIP, Dividend reinvestment plan, it can mean a lot later.
Falcon
Should there be a Law?
That's what they're "for" but is that what people buy stocks for?
Dividends are one purpose of stocks but not the only. The original purpose for granting limited liability to businesses was so they would serve the common or public good. For investors another reason for stocks is growth. But only the young should invest solely for growth, as you get older your investment portfolio should shift to income.
Falcon
Should there be a Law?
No, it's not a moot point. They are artificially raising the price that everyone has to pay for a stock. They literally see what you are going to buy, snatch it up before you can buy it, and then sell it to you at an increased price. How is this even a little fair?
If you're not setting limits then it's your own fault you're paying more. Every, or nearly every, online brokers allows people to set limits, price over which you will not pay or under which you will not sell. Even ETrade users can set limits, which ETrade calls Conditional orders.
Falcon
Should there be a Law?
I know people who play this game, making many trades on tiny margins. Its educated gambling at best. More to the point it takes time and effort to be knowledgeable enough to have a good feel for what a stock is generally doing at any given time. To me this sort of behavior is idiotic. Why not just devote effort to creating something of value to sell to the marketplace, rather than try to leach money out of the system.
Half the people involved in the financial system are just that, leeches trying to get a free lunch without doing anything of real value. What does this sort of activity really do to create wealth in the global sense?
HA! I just wasted some of your bandwidth with a frivolous sig!
And something that statists don't understand, or try to hoodwink people about, is that governments have caused more harm than any individuals or businesses. Hitler killed more than 600,000, Stalin more than 20 million, and Mao some 50 million. The most deadly business accident I know of was Union Carbide's Bhopal disaster which killed an estimated 25,000.
That's ancient history? After General Pinochet's overthrow of the democratically elected government in Chile in 1973 thousands of people disappeared. During his rule in the later 1970s Pol Pot was responsible for "slave labor, malnutrition, poor medical care, and executions resulted in the deaths of an estimated 1.7 to 2.5 million people, approximately 21% of the Cambodian population." After Indonesia's president Suharto ordered the invasion of the independent nation of East Timor in 1975-75 some 200,000 East Timorese, one third of the population, was massacred.
Still too far in the past? How many people did Saddam have tortured and killed? Hundreds of thousands were killed during the Rwandan Genocide in 1994. How many have been killed in Darfur?
Governments have caused far more deaths and human rights violations than any business.
Falcon
Should there be a Law?
the stock market was never intended to be the domain of the average citizen.
The stock market was exactly for that. Average citizens have to have some way to invest their money, and that's where stock markets fit in, they provide liquidity.
Note how the regulations put in place after the Great Depression were lobbied against and removed, thus paving the way for our current mess.
Note how laws and regulations like Smoot-Hawley Tariff Act made the Great Depression greater and last longer than it would have otherwise.
Falcon
Should there be a Law?
Throw in the enormous growth in the economy and stronger antitrust laws (I'm pretty sure that Microsoft faced stronger enforcement than Standard Oil)
If Microsoft had faced as strong an enforcement as Standard Oil it would have been broken up, Standard Oil was. Here's a list of some of the companies that came from the breakup of Standard Oil. A few of those companies are some of the largest businesses in the US.
What may amaze some now is that Republican Teddy Roosevelt was known as the Trust Buster and was who led the effort to break up Standard Oil.
Falcon
Should there be a Law?
uncommon for a person to work 30 years and retire.
I always assumed 45 years. If you start working at age 21 and retire at age 65, that's 44 years.
Start working at 21? I was mowing yards by 15 and was on a payroll at 16. When 18 I went into the US Army. Where I came from if you didn't work you didn't have money.
Falcon
Should there be a Law?
Didn't almost everyone do "boring work"? Many think farming and gathering is boring work. And those along with hunting, which many think is gross, is what many did.
Falcon
Should there be a Law?
However, I think the fair tax is a lot less progressive against poor people. The fair tax taxes expenditures, and as poor people spend more (in proportion) than rich people (rich people invest more), the poor are taxed more than the rich proportionally compared to the current tax structure.
Now that depends. If all purchases were taxed then the poor would be paying more as a percentage of income. However if food, medicine, and shelter were not taxed then the poor would not be paying as much in tax, because most of their income would be going to these whereas those with money would be buying other things.
Falcon
Should there be a Law?
In the real world, starting new businesses is a lot harder than maintaining an existing one.
You know "Brand" recognition, "Good will", and what not.
She was like chocolate when she drank... semi-sweet at first and then increasingly bitter.
In the real world, starting new businesses is a lot harder than maintaining an existing one.
Better not tell that to my sister, oops she already started her own business. And I'm hoping to start my own.
Falcon
Should there be a Law?
they do not generate profit, they just stole money in a legal way
I think we need stock exchanges exclusive for Value Investors
Slashdot = Sarcasm
Free as in freedom, not free as in beer. You pay to get to the head of the line. Anyone is free to do so.
-I like my women like I like my tea: green-
It is a level playing field. The market is free, as in freedom, not free as in beer. Anyone who can pay the fee can link up to the exchange.
-I like my women like I like my tea: green-
Efficient price discovery is the purpose of the market. Liquidity is essential to that end. Traders provide that liquidity and, overall, the market benefits because of it.
Perhaps "the market" benefits; unfortunately, the American economy doesn't.
Wall Street drives corporations to ever higher profits - a good thing, if the playing field is level. But it isn't; some countries have a cost of living that is 1/5th or less of ours; thus, their worker/consumer can survive on correspondingly lower wages than an American worker/consumer can.
So the net effect of Wall Street's "efficiency" in quickly reflecting the success of their demands for ever higher profits from publicly-held corporations is to ever more efficiently drive jobs out of our country, eliminating U.S. workers...who are U.S. consumers.
Wall Street is the albatross around the neck of the American people and their economy. (Banks are the cement shoes on their feet, but that is another story.)
But none of the above matters or is even considered to be relevant to anyone who works on Wall Street; they accept no responsibility for any repercussions from their actions, or for anything at all except "the efficiency of the market".
And that "efficiency", curiously, is measured - in reality - by how much money they themselves are making at whatever form of market-making or -manipulation they themselves are involved in.
Orwell: "In a Time of Universal Deceit, telling the Truth is a Revolutionary Act"
The most deadly business accident I know of was Union Carbide's Bhopal disaster which killed an estimated 25,000.
I'm not talking about accidents, I'm talking about purposeful manipulation. How many people are dying of starvation in the world right now because of the structure of its economy?
Okay name one incident whereby a business purposefully killed as many people. And people are not dying of starvation because of a free market. People are starving because there is no free market. When a large US company like ADM and Cargill receive billions of tax payer dollars and can then export agricultural products to the Third World and sell it there for less than a Third World farmer can grow food for there is no free market. Nor is there a free market when governments take land away from the people who live on it and give it to large mining companies. Or when governments let timber and logging businesses clear cut other people's land.
Each and everyone of these is governmental interference and with this interference there is no free market.
You seem to be saying that you prefer the rule of democratically elected government to whoever can amass enough personal power to overthrow them. So do I.
No, I prefer liberty. Democracy is the worst form of government, but all the others. I don't trust government, and so want it small.
Governments have caused far more deaths and human rights violations than any business.
Actually, all your examples were of individuals who had gotten enough power to compel anyone to do anything. You demonstrated why regulation is necessary (to prevent dictators from rising), not the opposite.
Where do they teach such baloney? All of my previous examples were of governments or groups who seized control of government and not of businesses or free markets. And regulations would not have stopped them. In fact it was the other way around, they made their own laws and regulations. The German government, yes government, passed gun control laws in 1938 denying millions the means to defend themselves from the government. Turkey established laws and regulations controlling guns in 1911, then between 1915 and 1917 1.5 million Armenians were killed in Turkey.
Falcon
Should there be a Law?
it felt like 1/2 the town-folk would have happily marched on the campus and pulled the trigger themselves.
And how many others from different towns would have marched to protect the students? Going back 15 years before the Kent State shootings there were white people supporting the Montgomery Bus Boycott in 1955. Many of those offering rides to Blacks during the boycott were either military personnel or their dependents. Then six years later there was the first Freedom Ride in 1961 with whites riding buses from Washington, DC, to the south.
And like I said not everybody in the military would follow orders to fire on Americans. Some would actually frag, you're old enough to know what that means, officers giving such an order. It was used in Viet Nam, where the term comes from, a number of tymes.
Do not think for a minute that the USA is above detention centers
I don't. I have no illusion the US government would not have them, I've said elsewhere that I believe the government does have them. However there's no way the government could put into detention or reeducate enough people. The military couldn't do it to those in the military. Sure there are some who, like some Germans did, follow orders but not everyone will.
It only takes a bit of irrational violence to get that ball rolling; once in motion the fabric of society, the recognition that opposing sides should talk 1st and shoot later, dissolves as part of the de-humanization of those 'not like you'.
As there are those who ask questions and think for themselves even in the military there would be civil war, in the military itself. It's ludicrous to think that no one in the military now would frag those giving bad orders when it happened before.
Falcon
Should there be a Law?
which is the impact of street protest/riot on the military and specially the grunts.
Ah but you missed where military personnel and dependents supported the Montgomery Bus Boycotts. And as I said before I was in the Army, I was one of those grunts. My MOS was 11B, Small Weapons Specialist, or infantry which is often called grunts. Actually my first unit was one of the oldest army units and had the song "The Battle of New Orleans" written about it, the 7th Infantry Regiment or Cotton Balers that was led by Andrew Jackson during the War of 1812. Stationed at Fort Benning, GA, my unit trained the Officer Cadet School cadets and the Rangers and we also trained with the Special Forces. Please don't think that I'm bragging or anything I just wanted to point out I was one of those grunts and have inside knowledge of how other grunts will act.
Grunts fragged their CO's not because they didnt want to kill the 'little people', but because they didnt want to be killed for a pointless cause.
Some but not all.
don't kid yourself that locking up 20-30K dissidents (the leadership) won't have a chilling effect on the masses.
It will chill some but outrage others. Some will clam up and others go underground. I knew some who would take it as the ride of the Four Horsemen of the Apocalypse as in "Behold a Pale Horse". Others would see it as a sign of the New World Order. Yes, I knew some of each, both civilians and in the military.
Given sufficient stressors people will turn on, even torture and kill, their neighbors.
Oh I agree, I also agree it will be bloody and messy but some will rise up to oppose the government. Look even now there's conspiracy theories floating around 911. Look at all the militia groups in the US. Heck the government can't stop the drug trades.
Falcon
Should there be a Law?