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Hackers Find New Way To Cheat On Wall Street
GMGruman writes "The high-speed trading exchanges that conduct the business of buying and selling stocks and mutual funds are so fast that hackers can introduce delays of a few microseconds completely unnoticed by today's network monitoring technology — and manipulate prices in the process to reap millions of dollars to the detriment of everyone else, InfoWorld's Bill Snyder reports. This kind of activity creates new reason to distrust Wall Street and shows how the computer networks we all rely on for conducting business and moving information are ripe for undetectable hacking."
Trades only take effect every 5 seconds. Wouldn't that stop this sort of abuse?
The reality of Wall Street ripping off the consumer is not far from reality. I work "in the industry" as well (and have, for 10 years), and I've seen and been witness to all kinds of shams and problems that Wall Street is culpable for.
Let's just leave it simply, the average investor doesn't know *anything* about investing. They don't know stocks, bonds, they don't know diversification, they don't know how to change allocations before retirement age for 401ks, etc. But the sad thing is, Wall Street doesn't either. They may know the P/E ratios of firms, the current stock price, and lots of fancy math, but the reality is that a lot of money made on Wall Street isn't in active trading, it's in knowing their customers and playing on that information, and topping it all off with fees. For example, Goldman advises its customers, and the clients lose out, and Goldman wins -- See here. This isn't uncommon.
The simplest secret about Wall Street is that the average investor can forgo using a trading firm, and just invest in an index fund instead (like the S&P). Those funds have very low fees, and require zero understanding about Wall Street. They go up as the economy gets better, they go down as it doesn't. And less than 20% of firms out there can *BEAT* the S&P, meaning that 80% actually do worse. In addition, they charge higher fees. So if you throw your money into the index fund, you don't have to know anything, and you do just as well as 80%+ of the firms out there, and keep the fees they'd charge you to just meet the same ROR in your pocket.
Sadly, you'll never hear about this on the Street, because it would ruin their whole scam. The only thing you need to know is that 5-10 years before retirement age, pull out of indexes and put into guaranteed products so you don't get thrashed on your retirement day, and you'll be a happy camper.
With the amount of influence Wall Street has in our government, in our economy, it's about due time we start getting them the hell out of the way so that we can do better as a country. I know it sounds cheesy, but it's true.
The price is always right if someone else is paying.
Liquidity IS good, and in the end, I don't see how this is doing anything but provide more of it.
If the hackers are netting themselves a bunch of money by out-trading the other high-frequency-traders... good for them. It's not my money they're taking, because I've got better places to put my money than trying to out-arbitrage the arbitrageurs. But both of them, the Evil Hackers and the White Hat Ginormous Wall Street Bank, are both making sure that when I do sell my stocks, I've always got somebody to sell it to.
The arbitrage means that maybe I'm losing .01% off the transaction. If that's Big Money in aggregate, it's still only a tiny fraction of the mount of money on the line. It's money I couldn't ever get my hands on.
So I don't really much care who wins here. Let 'em fight it out.
Setting a fixed time moves the goal to whomever can shave their systems closest to that fixed time.
Set a fixed time ... plus a random fragment of a second. That way no one knows exactly WHEN the trade will go through. But it's still close enough for humans choosing to trade.
The key here is to reduce the ability of software to "cheat" but still allow humans to trade.