Slashdot Mirror
Mysterious Algorithm Was 4% of Trading Activity Last Week
concealment sends this excerpt from CNBC:
"A single mysterious computer program that placed orders — and then subsequently canceled them — made up 4 percent of all quote traffic in the U.S. stock market last week, according to the top tracker of high-frequency trading activity. The motive of the algorithm is still unclear. The program placed orders in 25-millisecond bursts involving about 500 stocks, according to Nanex, a market data firm. The algorithm never executed a single trade, and it abruptly ended at about 10:30 a.m. ET Friday."
I hear the production IT department of a big trader had been drinking (something about the bonuses, don't know if they were celebrating or trying to forget) and started to play truth or dare.
The game was interrupted when the boss arrived (what he called "first thing in the morning").
Perhaps somebody was running some unit test on production here?
Privacy is terrorism.
forgot to exit my Do While loop :) had to ctrl+al+del
A single mysterious computer program that placed orders — and then subsequently canceled them
The algorithm never executed a single trade
No regulator should accept this.
I think we are taking significant risks with the stock market and automated trading. It is now a complex system of interracting algorithms that nobody understands or can understand. I have heard it said that the fluctuation patterns we are similar to fluctuations in chaotic systems before a state change. It is entirely possible that the markets could lose most of their value in a matter of minutes, before anyone knows what's happening - and the unforeseen interaction of algorithms could put a whole generation into poverty
to exploit the next major act of terrorism in the US?
I am pretty sure that these things are not happening by accident - because they do involve real people and money and force share prices to change artificially.
If you are a major bank, you are susceptible to hacks as much as the next person. You just think you aren't because you pay someone $900 a day to tell you that you are not.
I am sure someone is getting rich here.
How does "4% of Trading Activity Last Week" sync with "the algorithm never executed a single trade"?
The real problem is that there is too much fake money that people do not personally feel attached to, because it's created by the main counterfeiters of the world - the central banks, and because starting a competing exchange is nearly impossible.
How about this for a story:
In April, motivated by what I consider pure maliciousness, the SEC initiated a âoecease and desistâ administrative proceeding it deemed âoenecessary for the protection of investors and in the public interestâ against Egan-Jones Ratings Co., a privately owned, 20-person firm based in Haverford, Pennsylvania, and against its principal owner, Sean Egan.
Do you know what the alleged crimes are?
Here:
Now, incredibly, Egan-Jones is the sole rater that the SEC has decided to attack. The trouble for the firm started on July 16, 2011, when Egan-Jones downgraded the U.S.â(TM)s sovereign debt by one notch, to AA+ from AAA. Egan-Jones cited âoethe relatively high level of debt and the difficulty in significantly cutting spending.â Two days later, the SECâ(TM)s Office of Compliance Inspections and Examinations contacted the firm seeking information about its rating decision. (The next month, S&P also downgraded the U.S.â(TM)s sovereign debt, but neither Moodyâ(TM)s nor Fitch did.)
Then, on Oct. 12, Egan-Jones received a call from the SEC notifying the firm of a Wells Notice, an indication that it was being investigated. On April 5 of this year, Egan-Jones again downgraded the U.S. sovereign debt, to AA from AA+. On April 19, leaks started emanating from the SEC that it had voted to start an âoeadministrative law proceedingâ against the firm. And on April 24, the SEC filed its complaint.
The crime is that this one agency is not paid by the sellers of the bonds but instead it's paid by the buyers of the bonds, and the buyers have an incentive to have debt rated properly, so that they know their risk.
Of-course AFAIC US bonds are junk.
So you think SEC is interested in really dealing with HFT and whatever you think is market manipulation?
Think again, the only thing it is interested in is protecting the fake rating of the sovereign debt, so that the US gov't can keep piling it on.
MY OTHER COMMENTS
"The motive of the algorithm is still unclear."
Oh what a load of bullshit.
It's obviously an experiment in painting the tape. Make bids, cancel them. Walk stocks up and down with the bid price. Head-fake other HFT corps that track bid prices in their algorithms.
It went badly because it was detected. It needs tweaking to be not so obvious next time. And yes, there will be a next time.
It's a casino now. It's been a casino for a while, and if you're not part of the house, you're the mark.
--
BMO
Whose pip size is bigger than whose.
My ism, it's full of beliefs.
The data on open orders is available to some. Of those who get it, some are 'more equal' and get the first look at the data.
A group who is 'less equal' and feels a competitor may be using their advanced look at the open orders to gain a competitive advantage could be placing these orders to neutralize that advantage.
Guys, think of it. Our stock exchange, i.e. your pension or if you are unlucky also your mortgage is depending on this kind of software these days... And this is not the first time this year that stock trading software is in the news. This has nothing to do anymore with owning a share of an organization in the hope the organization will make a profit and pay you dividend. This is total craziness.
If it had a motive, it would be sentient. I think the terminator movies were fictional
I was amused. TYVM.
--
BMO
I've found the pattern in pi that can predict the stock market. It is only good until my coffee wears off though. // Yeah but seriously who sees this as being beneficial to the system?
Hahahahahaha......
Thank you I needed that
1) If I were to do something like this with amazon.com (add things in my shopping cart and then remove them rapidly) wouldn't the headline be "hacker attempts to take down amazon site" with jail time? Why does this receive such a neutral headline like "mysterious algorithm?"
2) I pay $25 to execute a trade. How much money does it cost these people to put a bid or ask up and pull it? Shouldn't there be some sort of punitive cost for doing this?
I find it a bit strange that these trading systems don't seem to use some kind of identification (like signed certificates). How is it possible that some system did these things and the stock exchange doesn't immediately know whose system this was? This sounds like a disaster waiting to happen.
Would it be weird to ask what kind of achievements you can get with this trading game?
Any hats for teamfortress 2?
Felix Salmon on high-frequency trading and its part in the current financial crisis.
Listen to this 13 min BBC programme/essay at: http://www.bbc.co.uk/programmes/b01n1thw available for the next 12 months
Artificial intelligence is the study of how to make real computers act like the ones in the movies.
Alright, stop this scaremongering right now. Some under-informed people may actually believe you.
Let's make few thinks clear:
- Condensation trials left by airliners are not chemicals spread by the government,
- Elvis is dead,
- High Frequency Trading does not influence long term security values.
Of course the exchange knows who they are - you can't just stuff orders into the market anonymously from your PC at home. I'm mean the exchange needs to know who you are so they know who to charge for the trades. The exchanges aren't happy about people placing and cancelling tonnes of orders - after all they only make money when something trades. You can guarantee that they got on the phone to whom ever was doing this and asked them to stop.
Sig (appended to the end of comments you post, 120 chars)
The Singularity is near!
Let's make one thing clear. Of course it does.
Two things. One, it has always been like this. The stock market has never been predictable to the extend the players would have liked. Luck is and remains a major factor.
The second thing is - it was never a good idea to run pension funds by investing in the stock market. That "ponzi scheme" whereby the pensions of today are paid by those paying into the pension plan is the only good, cheap, and stable way such a thing can be run. Especially if there is only one plan and it is run by a decent governement. The current system leaves to luck stuff that nobody wants to gamble with (retirement). Banks and fund managers love the current scheme, but not normal people.
Indeed this is an important information...
Herve S.
And now for the truth:
- HFT is essentially a tax that is extracted from users of the stock market, by private companies.
It may not bring about the downfall of civilization, but that does not mean it is a good thing or should be left alone.
NO MORE AUTOMATED TRADES. All trades must be executed by a human to another human. This will eliminate all of the massive fluctuations. Time to reign in the rampant greed.
Do not look at laser with remaining good eye.
This. The motive was completely clear for anyone who even has a slight bit of knowledge in how trading works.
The very fact you can CANCEL it before it went through is hilariously bad.
I wouldn't be surprised if it already happens now and just hasn't been detected, and this one was just someone else who was a little too greedy or sloppy.
It is like saying you bought a car to everyone by putting your name on it with a marker, then washing it off at the end of the day.
Someone COULD wipe it off. But that would require effort and expense.
I bookmarked this under Gaming, on a personal note.
It was going to be Coding, but Gaming seems more favorable for this.
I've always heard that investing in the stock market is the same as gambling in Las Vegas. And that you shouldn't entrust any more than 15% of your available investment money in stocks. Tha way, in case of a major crash, you'll only lose a small 'slice of your pie'.
The US Savings bonds remain the safest bonds in the world. They're also the only bonds worth buying. * * * There's still plenty of funds available to service the debt.
First, while there are too few of them, there are a number of countries in the world without debt problems. The US is one of the countries that is worst off, especially if you add in all of the unfunded pension liabilities (which the government generally avoids). Any country colored green, yellow or even orange in that map has its debt under control. Cross-reference for a trustworthy government, and you still have quite a selection of countries whose bonds are a much better choice than US Savings Bonds.
The only source of "funds" to pay off this massive debt are called "printing presses". While printing more money is, in fact, probably what will eventually happen, this will destroy private saving, cause massive inflation, and completely undermine the position of the dollar in the international markets.
tldr; The US is not the whole world. Have a look around, much of the rest of the world is doing a lot better than the US nowadays...
Enjoy life! This is not a dress rehearsal.
Much as I dislike adding fees to inhibit the free market, the whole HFT world desperately needs them. Placing any bid or making any transaction should cost some small-but-tangible amount of money.
Even better, if more complex: add a fee based on how long a particular security is held. Less than a second, the fee is 1000% of the transaction value, more than a year, no fee at all, and scale for all values in the middle. HFT is legalized theft, and needs to be penalized out of existence.
Enjoy life! This is not a dress rehearsal.
Let's get one thing clear:
Transparency, or lack thereof, will determine if people in the market stay in the market or desert the market. It's called confidence in the market. And if confidence disappears, you have no market, because everyone leaves.
People eventually get tired of being fucked in the ass with no lube or reach-around and look for nicer places to be fucked in the ass or find ways to stop being fucked in the ass.
"I've been kicked out of classier joints than this."
--
BMO
[citation needed]
...just unexpected
'First Pen Test successful. All is going according to plan.'
Where's the news? This is called quote stuffing and has been going on for ages. The reason is simply to mislead or overwhelm the HFT algos of competitors.
How much is the price of milk?
Whoops. Sorry for asking; it looks like the price of milk collapsed.
[pro-hft trolling]
Those of us who "buy and hold" using a properly diversified strategy are unaffected by these shananigans. Yawn...
We've not addresses this issue and I think the use of something like this was a dry run...
That's the fabled HeisenMilk. One second it's on the shelf costing a few dollars, and the next it's on the floor costing nothing, all at the same time.
You're the only slashtard who gets it. This is what has let normal people, instead of just the 1%, into the stock market.
"Marker research" company says public market is a dangerous place. Who would have known?
What is next, Symantec claims that internet is dangerous place?
Ok, it's been a few years since I worked at the stock exchange, so someone please update me:
What is this bullshit with cancelling orders, in bulk? What is the reasoning, how could anyone ever think that would be a good idea to allow?
Assorted stuff I do sometimes: Lemuria.org
As programmers, we have the power to end this fiasco without anyone else's help.
Its simple. OPEN SOURCE HFT software. It doesnt have to be the best HFT software out there, it only needs to work. Make it freely downloadable for everyone, just like a bitcoin mining program. If enough people start using it, then the volume of competition will erode big investing companies edge OR make HFT so expensive that it will no longer be worthwhile for anyone to do
EGAD! The algorithm had a motive?! It must be an AI feeler for the coming machine take-over. I for one would like to welcome our coming machine overlord/s and to offer them this fine basket assortment of premium oils and batteries...
Seriously though, can you denial of service the Stock Exchange if you flooded it with these or something similar?
The rule of law is dead in the USA. Bankers and financiers have a free pass from Washington DC to break the law with impunity.
It is a crime to undertake any action (other than buying and selling of course) to profit from deliberately attempting to manipulate prices. Placing orders with no intent to have them executed is no different than a pump and dump scheme, or leaking a fake press release to affect a company's share price.
There's an easy solution (actually two) to stop this BS. Make a rule requiring that all orders need to be open for at least, say 15 seconds. Long enough for a small day trader to act on them. Alternatively, they could assess a small fee for every canceled order above some threshold in a trading day. Call it 5000. i.e. You get to submit and cancel 5000 orders for free, but every additional canceled order costs you a penny.
If I could figure out a good way to cash out my 401K without getting ass-raped by the government (Ask Slashdot?) I'd cease participating in this gambling casino where the house always wins.
If it's advantageous to sell, you sell and make money, there's your liquidity
That is most definitely not liquidity. Just because you want to sell something doesn't mean there is a buyer. Or it might mean there is a buyer but they want a big premium to do the deal. Liquidity is a measure of the ease with which buyers and sellers can find each other and agree to a price. Our recent financial crisis was in large part a crisis of liquidity. Big banks needed to be able to borrow money and everyone was afraid of lending to someone who might be insolvent so there was literally nowhere to borrow from. It's not just an all or nothing proposition either. If a stock is thinly traded, the spreads are going to be huge and it will be really expensive to buy that stock. If it is difficult to find sellers it likely will be difficult to find future buyers as well. The more trading that occurs in a stock, the narrower the bid/ask spreads because it is easier (and less expensive) for buyers and sellers to find each other. More trading = more liquitity = lower transaction costs.
Now there are algorithms to deal with the algorithms. Someone wrote a program to spook someone else's program into making trades it wouldn't have normally made. I don't think it's illegal at all. Yes it's a war out there. Of course the exchange isn't going to like it when large volumes of traffic don't result in an actual paying trade, because exchanges make money on a transaction not a bid/offer. I expect some sort of "cap" or "fee" soon.
Seven puppies were harmed during the making of this post.
4% of quote traffic is not the same as "4% of trading activity"
The big players are simply the best on the market at the moment. That's why there's few competition or small companies entering the market.
The big entrenched companies simply have the economies of scale so little guys can't enter the market... at the moment
Then again, Egan-Jones is still around, so you're wrong that little guys can't enter the market. They can.
In fact, since Egan-Jones is still around despite the SEC getting on their case, it shows that the free market is working: Egan-Jones is obviously providing something the market wants, so the market lets them stay in business, no matter what tricks the SEC pulls on them.
If Egan-Jones end up going out of business, however, well that simply means what they produce really weren't that valuable, and they should be allowed to fail.
At Reuters.
Best Slashdot Co
- Elvis is dead
Certainly is. Died last year at the ripe old age of 76 after falling down a cliff in New Zealand while filming his latest movie. Sad story.
Except that taxes are generally spent on the well-being of society (and yes, this is easily contested, but it is the idea), whereas income extracted by private companies is definitely not.
No US Bonds pay out in US dollars, they're absolutely guaranteed to lose money over time. They're bought not for investment, but because you have to buy them to hold US$ foreign reserves for trading.
But its risky. There's no willingness to fix the debt problem, the GOP thinks it can simply print all the money it wants, Obama can't slash spending without killing growth. What if you're holding bonds and the dollar collapses? They'll pay you back in worthless currency.
You might think it won't happen, but it has lost half its value against the Euro in the last 12 years, if you held long term bonds over that time you've lost half your money.
There's no easy fix, but as long as the GOP are so out of touch with the real world, he was right to downgrade them.
That "ponzi scheme" whereby the pensions of today are paid by those paying into the pension plan is the only good, cheap, and stable way such a thing can be run.
Please explain how you manage to maintain adequate levels of pension when the ratio of workers (ie those paying) to pensioners (those receiving) has shifted from around 10:1 in the 1960s to around 4:1 now and heading towards 2:1? Pay-as-you-go pensions work when your population pyramid is a pyramid, just like a ponzi scheme apparently works when it is growing -- it's when the growth stops and more and more people want their money that the shit hits the fan.
From TFA:
"Translation: The ultimate goal of many of these programs is to gum up the system so it slows down the quote feed to others and allows the computer traders (with their co-located servers at the exchanges) to gain a money-making arbitrage opportunity."
"What they are doing is consuming the service to the detriment of other users, and extracting a tax with their unfair advantage over other users, while contributing exactly nothing back."
Reply: In addition to competing to a fixed volume of trade time, it still seems possible that these bot traders may accidentally "collide" at some point producing a massive change in prices and cause huge artificial alteration of the market that has NOTHING to do with rational investing.
We usually call this gambling. Normal stock buyers at that point can be considered the sheep to be fleeced.
Wall street hates Obama.
Not a partisan jab, just an observation. (I am actually one of the 'undecideds' they keep talking about)
Remember what happened to the stock market 2 weeks before the last election (October 24th, 2008) The election was Nov. 4th.
this year it is Nov 6th. You'll see.
-badford
There is a very easy solution to this sort of BS. The US stock exchange desperately needs to institute a per transaction fee just like every other stock exchange in the world. Unfortunately the US system is much too corrupt to ever allow this to happen.
...this was Anonymous trying to decide if they want to crash the stock market by doing HFT on every single trade that happen on a very busy day?
1: They get to skim off the differences. Making up for thin profit margins by huge unit time trade volumes.
2: The speed of light insists that you have a limited space to get the same latency as another HFT. Since this limited space has demand, that demand raises prices. And therefore unless you have a huge amount of money AND connections, you won't be able to bid, let alone win, a lease that close to the exchange.
3: study wrong. Fast trades make the stock market INHERENTLY unstable.
And what bad effect does it have? It makes markets crash. Since there isn't any INFORMATION passing that fast, all you work on are the motions of the trade. Since you're looking at small changes, you will not be able to tell the difference between an insider dumping shares before a bad report or an executive cashing out to put their child through Harvard. And so you will sell before it drops any more. Other machines see the bigger drop and will call an out on the product and dump even more rather than be left with the options at a low (hoping to buy when the other suckers who held on find they have to sell at low prices).
but don't let facts get in the way of your rant.
It IS a zero sum game (or far far closer than the share prices say) because you can't sell your shares at the price unless you have so few shares you don't make any ripples.
Look at how the dot com crash happened. Only because companies were trading based on number of stocks x price of stock, but when the UNDERLYING weath dropped too far below this (remember, all you're really going to get is inflationary rises in a sustained system), they lost all this wealth.
Like having homes as an investment.
If the price of housing multiplied 100 fold, nobody could afford it, and all your houses would be unsellable, despite a "book price" making you a trillionaire. AT BEST you can get rent off them, but people's salaries aren't going up at the same rate, so at some point, your rent can't go up any higher than the rise in wage earners for your houses. And that, if invested in a bank, would NOT be what you'd get for the "book price" of your houses.
It is FAKE wealth.
I read the other day that the EU Parliament is considering adding a 0.5 second minimum order duration limit to the relevant directive (MiFID) to ensure that other parties can actually close the orders and prevent this kind of thing from happening.
You do what the SS Administration did. You account for demographics when setting the tax rates. It's why we have this nifty tool called mathematics.
Back in the 1980's there was a big hike in Social Security taxes plus an increase in retirement age. This was intended to give a surplus in SS payments that would accumulate for the baby boomer retirement. People of that age have been paying these higher taxes for their entire working lives.
From planning perspective this approach worked. The SS Trust Fund holds trillions in assets in the form of a specialized government bond. These assets are pretty close to being enough to pay for the boomer generation retirement.
The problem with our system is that the bonds are worthless because the US government is bankrupt - they don't have the funds to pay off these bonds. If it hadn't been spending the revenues from these tax revenues ignoring the long term obligations this wouldn't be a problem.
Where did this money go? Well I like to look at it this way. When the SS tax increase passed Reagan and Congress passed a income tax cut that benefited mostly rich people.
This is a problem with Congress and budgeting, not a problem with demographics which is eminently solvable.
That "ponzi scheme" whereby the pensions of today are paid by those paying into the pension plan is the only good, cheap, and stable way such a thing can be run.
no it is not. Ponzi works and everything is peachy until it doesn't. Shitty economy will take its toll either way in any scenario, but the 'ponzi scheme' is a sure way to enslave the young and the productive once the demographics goes south - many old people vs not so many young... ah the joys of democracy.
Half of fucking Europe sits at the fertility rate of 1.4, next to Japan that is supposedly a country of old people.
https://en.wikipedia.org/wiki/List_of_countries_and_territories_by_fertility_rate
Polish retirement system has a hole equal to 1/3 of total inflows, today. In 30 years it will be a disaster of epic proportions. Half of the earnings will go to retirees right off the bat, before any general purpose taxes kick in. If you believe the US will always have positive population growth, think again.
You pay less pension and increase the rates.
What your rates buy you in a good scheme of this type is the promise that you will be looked after. Note, not a fixed ammount of money, but a guarantee that what comes in will be split proportionally and you will get your share, unless it is too little to live, in which case you get more. Unlike a ponzi scheme, this kind of thing is sound and can go on for ever.
I have no idea why a system with a nonzero probability of leaving people homeless and poor when they get old is considered to be better.
"- High Frequency Trading does not influence long term security values."
That argument provides ZERO justification for skimming a few dollars here and there from millions of small investors. Can I take 10 cents per day of everyone's 401K because it won't have a material effect on their standard of living during retirement? Can I engage in a pump and dump scheme because it won't affect "long term security values"? What if I issue a fake press release and profit from people trading off the false information? Based on your absurd argument, that would be OK because the long term price of the stock is not affected.
You must work for a bank if you're trying to suggest that the blatant and obvious criminality of HFT is just some fringe "conspiracy theory".
No it's front running by any other name, giving a mark/investor a delayed feed is just the same as a broker doing front running. FR was made illegal, so should this.
It's not Wallstreet firms that are the marks to be scammed here, they have their servers sitting on the exchange, its the ordinary investors getting the slow feeds.
It's also not pennies, it's a significant sum, and all of that profit comes from parasitic trading. Every investor needs to cover that extra cost, and in turn every US company needs to grow faster to make up the difference.
Of course the real joke here is the tiered delayed feeds. For free you get 15 minute delayed feeds, pay and you'll get one with a 100ms lag, pay more and you can plug your server direct in the exchange. The exchange is selling 100ms of front running time, or 15 minutes of front running time to whoever will pay. Again it's the sucker investors who are being packaged and sold there.
Thank you for checking on that.
The person is obviously a shill for the scumbags engaged in this practice. Nobody could be so stupid as to think this is "harmless".
By the way, that was a great post, choprboy.
Another way that HFTs justify "liquidity" is that they are generating a lot of transaction fees by doing HFT and this brings down the cost of transaction fess to Joe Schmuck, common man. So basically Joe Schmuck can make his one trade a month or one a year at a lower cost in exchange for allowing HFTs to potentially destroy the market with unchecked activity. Sounds like a fair deal to me - not.
I recently read a book William Poundstone wrote called "Fortune's Formula" that is a history of how extremely smart people like Claude Shannon used their genius to exploit minor advantages in the stock market for profit after first figuring out how to make small profits by gambling (ie. they found that a commonly used roulette wheel wasn't perfectly balanced and tended to slightly favor one color, another guy counted cards at blackjack, and so on). One of the things that fascinated me is how it talks about people trying to exploit very minor discrepancies in the market for a long time now. These techniques are now well known and nobody can really use them any more, but decades ago it was unheard of to use computers to try to find stocks that might be mispriced and use that to make money and the first people to do that became very wealthy. It talks about gaming the system like with junk bonds and how some huge players in the market were wiped out almost overnight by the Russian economic collapse of the late 90s when they had too many investments tied up in that one market. The book is fascinating, but it's very depressing because it made me conclude that the stock market is beyond the control of average guys like me and we'll always be the ones getting the shaft while the rich exploit the system.
There's always a lot of plain assertion in these /. HFT discussions, so let me provide a citation: http://www.futuresindustry.org/ptg/downloads/HFT_Trading.pdf
"By constructing a hypothetical alternative price path that removes HFTs from the market, I show that the volatility of stocks is roughly unchanged when HFT initiated trades are eliminated and significantly higher when all types of HFT trades are removed."
This posting is provided 'AS IS' without warranty of any kind, implied or otherwise.
Meh. If HFT awry can help a 22% market crash along (ref: http://www.reuters.com/article/2011/05/06/businesspro-us-flashcrash-disclosure-idUSTRE7455AS20110506), it's not rocket science to figure that there's some long-term valuation repercussions.
Obvious result is obvious.
I have no idea why a system with a nonzero probability of leaving people homeless and poor when they get old is considered to be better.
Because it stands to make a small number of people an absolutely astounding amount of money, and they're therefore prepared to spend a lot to persuade Congress and the regulators that the system we've actually got is a great idea against all fair evidence.
"Little does he know, but there is no 'I' in 'Idiot'!"
Make it a random 1-10 second delay just to really screw up the bots.
I found this article an interesting read on high frequency trading.
- First they ignore you, then they laugh at you, then ???, then profit.
I cannot remember the book. I thought it was Tom Clancy's Debt Of Honor. A trader manipulated the markets to cause crashes which in turn cascased into political and national turmoil. In the end, the reversed all of the electronic transactions prior to the crash and everyone lived happily ever after (until the next Clancy book).
I've always said English was my second language. Had Romeo and Juliet been written in C, I might have understood it.
My guess: a Huawei switch..
Security price is affected by people buying or selling stuff. It goes up if people are willing to cross the spread to buy, and goes down when they are willing to do the same to sell.
In other words: stock (or any other security) price will go up if people are buying to hold (expecting dividend or buying control over the company); and it will go down if people who held it sell out.
HFT traders by definition don't hold the position for longer than a day. It means that whatever they buy, they will sell it back on the same day, and whatever they sell, they will buy back on the same day. They may affect short term (intra-day) prices by few cents, but they have no effect on long-term price trends. And pensions and similar instruments are long-term investments, when position are held for years. Years [milli]seconds.
One need to remember that *investment* is when your are holding your position for long (some say 3+, some say 5+ years), and everything shorter is *speculation*. From speculator point of view, the exchange is a zero-sum game.
You are mentioning trading off false information and "pump-and-dump" schemes. These illegal activities were invented by speculators long before HFT came to the game, and actually both devices you've mentioned would not work on HFT scale (is hard to issue 1000 fake press releases a second, right?). Granted - HFT has it's own arsenal of dirty tricks, but it doesn't automatically mean that all HFT is wrong.
And finally, the "blatant and obvious criminality of HFT" is a conspiracy theory. It's invented by the same guys who invented "pump-and-dump", "false press releases" and "insider trading", and who have now have they profits slashed by whizz kids with fast computers.
Many people wont go near the market because of this "fix" among many others. Less people in the market means overall weak and volatile economy. Which is bad for the long term value of everything.
Stop cheating and the people will come back to the market and we can use it for what was originally intended: Getting investment capital to companies that want to build something better but cannot afford to do it on their own.
Yeah, stealing money from people is a victim-less crime... Except of course for the people whose money you stole.
So fuck of troll, of course it influences long term values, the profit they make does not pop out of thin air.
If you **ONCE** put-down by firing_squad only a dozen randomly chosen abusers-of-trade ... many abuse-free years of market activity would follow.
That's what they say about murderers and rapists, what makes these people any different?
Bruce Wayne Enterprises must be disguising another order for bat capes by buying 10 million units.
I swear to God...I swear to God! That is NOT how you treat your human!
China is in a cold war with the west. They prefer to win this via economic means. So far, with the global economy dropping, they had high hopes that most would use the Yuan as the core money. However, most have moved back to the dollar (personally, I wonder if the loonie is the way to go). As such, China needs to further collapse the American economy. Best and easiest way is at the stockmarket.
The other real possibility would be setting up for an october surprise. Collapse the American economy and nuke O. It would not be the first time that the corrupt republicans have done such a thing.
I prefer the "u" in honour as it seems to be missing these days.
.... - High Frequency Trading does not influence long term security values.
Citation needed.
I prefer the "u" in honour as it seems to be missing these days.
Get-Money
Doesn't the Securities Act of 1933 make it illegal to place an order on the stock market when there is no intention of that order being fulfilled?
Quoting the act:
"(2) To effect, alone or with 1 or more other persons, a series of transactions in any security registered on a national securities exchange, any security not so registered, or in connection with any security-based swap or security-based swap agreement with respect to such security creating actual or apparent active trading in such security, or raising or depressing the price of such security, for the purpose of inducing the purchase or sale of such security by others."
Why don't we just start prosecuting these jokers with already existing laws?
-- Give me ambiguity or give me something else!
Clearly, SKYNET has some commitment issues when it comes to day trading.
Security price is affected by people buying or selling stuff. [blah blah]
Reply FAIL. Here is GP's point again (since you obviously missed it):
That argument provides ZERO justification for skimming a few dollars here and there from millions of small investors.
Care to try again?
I agree that's a big problem. But one way to solve it is with robots. Actual physical robots, like Bender, doing all the everyday work that needs to be done. Growing food, mining coal, building houses, making large screen TVs, the robots will do all of that. And the robots are built in factories by other robots.
All of the humans can just relax and enjoy life. Well, at least until the robots revolt and KILL ALL HUMANS.
Charge a fee for every placed order. Don't refund the fee if the order is cancelled.
[citation needed]
Why on gods earth would you take another from them.
The population pyramid is now a snake with a big fat area we like to call the "boomer", and that snake has swallowed all of the next few generations hope.
"His name was James Damore."
It's mostly like poker. If you play stupid it's gambling. If you play smart you can eliminate the luck factor and reliably win.
It's mostly like poker. If you play stupid it's gambling. If you play smart you can eliminate the luck factor and reliably win.
Someone should tell that to Phil Ivey.... http://www.latimes.com/sports/sportsnow/la-sp-sn-phil-ivey-london-casino-refuses-to-pay-20121010,0,6445151.story
a test of the new system has been started, and initally ffinished. To see if anyone would step in. No one did, next is a live test of the market kill switch, or the backlog review system. Can the backlog be hacked to eliminate all records from their end. They have a pipe, their program works in milliseconds, they check the backlog, to see if their trades were tracked, and how, now lets pop the system,
Describes all of it. Wall Street doesn't refer to individual private investors as "the dumb money" for no reason.
I could start with all the stuff you got wrong at the beginning of your message, but I'll give you a free pass since you are not a US citizen but rather just a ron paul cultist living in Canada.
However, you really got it epically wrong here:
USSR fell apart not because of USA but because its economy was completely unsustainable, as all centrally planned economies are unsustainable and eventually fall apart or change to a more market based economy.
You should be smart enough to realize that the Russian economy, by the time the USSR fell apart, was no longer "centrally planned' by any meaningful degree. Hell, it wasn't a communist or even socialist economy by any degree for decades prior to that. Stalin himself pretty well began the dismantling of the Marxist ideals as he pursued power. Not long after that, the USSR started plowing headlong into the cold war with no goals or plan. Ultimately they failed because they couldn't keep up with their own spending, but centralization had nothing to do with it. The USSR at some point was fooled into believing that what Ronald Reagan - who was president but as knowledgeable as Mayor McCheese - was saying about the US military was in some way connected to reality. This sent them on an impossible spending spree to protect themselves from a threat that did not exist.
However, that was only one part of it. The other part was that the power brokers in the USSR made the system top-heavy like an American corporation. The concept of distribution of wealth and resources had gone out the window long before as the party brass sought out new exciting ways to make themselves rich, ignoring the fact that it was the opposite of the ideals that they were supposed to represent as leaders of their party.
There is no reason - none at all - why a centrally planned economy has to fail. The failure comes not from the plan, but from the people tasked with its execution.
I checked on Bloomberg today.
7 year US treasury bond is yielding 1%.
7 year Australia goverment bond is yielding 5.25%
7 year German government bond is yielding 3.5%
Why do the world investors accept a lower yield for US government bond that German government bond?
Because they trust the US government MORE than German government to pay back their money.
Don't live in a 'Gold Bug' world view seeing inflation around every corner. You must look at the entire economy of each country one by one and learn the facts, not blindly follow theoretical fantasies.
Maybe my tin foil hat is wearing thin but it would seem to me that a seemingly harmless prank just might be a test of elements of an economic attack program which could demolish the markets. Whatever went on it need to be deeply checked out as it may be the only hint of things to come. There seems to be a line of thought such as attacking the WTC was a way to take down America. Smashing the stock market would fit that attacks pattern and intentions. Although it was obviously foolish to believe that knocking down a couple of buildings would set America back much at all.
I am always amazed at the ability of some people to say absolutely breathtakingly ridiculously stupid things like this. The hope a few generations? WTF?
(for those joining late, "udachny" is a sock puppet of "roman_mir")
I am a Canadian citizen (and of a couple of other countries as well)
If that is supposed to impress, it fails.
but don't live there, not a resident.
Your online resume states otherwise. Are you lying on your resume, or lying here on slashdot?
The Communist Party was falling apart by the end of the regime
The Communist Party in Russia effectively started falling apart as soon as Stalin rose to power. If you were not a total failure in history you would know that Lenin himself warned the party that Stalin would destroy their cause if he rose to power. Unsurprisingly, Lenin was 100% right on that matter.
So in other words, much like I said the Party was falling apart for decades before the 90s. It is amazing that someone who claims to have lived there could be so utterly factually lacking in understanding of what happened there.
USSR wasn't a 'socialist' country for DECADES before 1991
Correct. Stalin started the dismantling of socialist ideals and it just continued from there.
People got there "free" education, "free" healthcare even in 1991
First of all, it appears you are so angry that you are losing your grasp on the English language. Your lie is grammatically incorrect, you need "their" not "there".
More importantly, when you pay the government for something like health care and education it is not free. In the same vein, that is not socialism and most definitely is not communism. There are many free market countries that provide health care and education to its citizens but would not be accurately described as socialists in any way.
all while Keynesians saw the Soviet Union as paragon of progressive ideas
That statement is so far removed from reality it is hilarious. The conservatives in the US - Reagan and Nixon included - were tripping over each other to see who could condemn the USSR first on everything they could possibly imagine. There was virtually no admiration for the USSR coming from any active US politicians.
the only moral and effective way to distribute wealth is through free market capitalism, there are no other ways that are fair, moral and efficient, because free market capitalism is a system of voluntarism
That is not factually accurate, as a free market does not even approach anything that could vaguely be described as approaching something that almost smells like an idea that doesn't really reflect something showing equity in opportunity.
It's the True Scotsman fallacy, there is no True Scotsman that would satisfy the demand.
No, it is not the "No True Scotsman" (learn your fallacies before you try to recite them) fallacy at all. When someone wants to represent Marxist ideals they need only heed the Communist Manifesto. The USSR rapidly deviated from it - arguably one could say they never really followed it - and disqualified themselves from being true Communists. There are very straightforward principles laid out for Communism in the Manifesto, the goal posts are not being moved.
USSR - failed.
And not Communist.
Communist China - failed. (I am using the term 'Communist', but it doesn't mean anything, it only means I am talking about central planning and collectivism).
Wow, you disqualified your own statement, so I don't have to point out you are incorrect in calling them Communist. What then was your point?
Communist Cub
This kind of bullshit is why exchanges shouldn't be run by traders. They should be run by a publicly funded non-profit entity with paid staff members who aren't permitted to trade or gain financially from public trading or be employed by publicly traded companies. All their personal finances and taxes should be a matter of public record. In turn they should be paid an insanely high salary to compensate for the fact that they can't invest in retirement accounts and to keep them contented and less inclined to bribery. Those individuals should also be policed by the SEC.
I'd say make the exchanges government run but that would result in the same backslapping that goes on now with the rich paying congress critters to lock in laws and statutes that benefit them. Usually if congress did a non-profit they'd fill its board with industry leaders (the same arses who run it now) we need independent people with no financial interest that would be considered bias.
Bravo! Well done!
Nanex
40 cents a minute cost would stop this kind of crap and not even be noticable to human traders.
She was like chocolate when she drank... semi-sweet at first and then increasingly bitter.
The problem isn't government borrowing today, it's government borrowing yesterday. Today, the government should be borrowing on a massive scale to stimulate growth.
Indeed. In depression, the most actors are bound to procyclal behaviors: businesses and workers make less money, they spend less money. The only actor that can have a countercyclal action is the state: despite that depression is cutting its revenues, it can still borrow to spend more and restart the economy.
US situation may be bad, but it is nothing like the madness that is occurring in UE. Here most member states (all except UK and Czech Republic) are signing a treaty that is forbidding states from borrowing money (deficit shall be less that 0.5% of GDP). UE member states are about to carve recession in the stone.
You again? If I was looking for a clown to provide bit of deliberate sillyness I would have written something different above. Please stop pretending to be someone far too stupid to have survived to your age.
Suggesting that 70% of all trades have no impact on a market takes a very special kind of person.
I really cannot understand why you are taking such a stand against the obvious.
Those not living under rocks are likely aware of the rash of cyberattacks from China, Iran, & possibly other countries over the last two weeks, made on financial institutions, and supposedly in response to the Flame, et al, attacks on Iran's nuclear facilities. Sure, there are other possilities, but a proof-of-technology test by an entity planning an attack on the Western equities-trading system is one of the more plausible explanations this strange, and apparently sophisticated, attack.
Sounds like groundwork for a large cyber attack on the financial system. An easy way to throw chaos into our economy
This is good stuff, I didn't know Bill Gross was 'an extremist'
Gross runs the largest bond fund called 'Pimco', he manages 1.8Trillion dollars.
Here is his latest investment letter, I just found out:
To keep our debt/GDP ratio below the metaphorical combustion point of 212 degrees Fahrenheit, these studies (when averaged) suggest that we need to cut spending or raise taxes by 11% of GDP and rather quickly over the next five to 10 years. An 11% "fiscal gap" in terms of today's economy speaks to a combination of spending cuts and taxes of $1.6 trillion per year! To put that into perspective, CBO has calculated that the expiration of the Bush tax cuts and other provisions would only reduce the deficit by a little more than $200 billion. As well, the failed attempt at a budget compromise by Congress and the President - the so-called Super Committee "Grand Bargain"- was a $4 trillion battle plan over 10 years worth $400 billion a year. These studies, and the updated chart "Ring of Fire - Part 2!" suggests close to four times that amount in order to douse the inferno.
Investment Conclusion
So I posed the question earlier: How can the U.S. not be considered the first destination of global capital in search of safe (although historically low) returns? Easy answer: It will not be if we continue down the current road and don't address our "fiscal gap." IF we continue to close our eyes to existing 8% of GDP deficits, which when including Social Security, Medicaid and Medicare liabilities compose an average estimated 11% annual "fiscal gap," then we will begin to resemble Greece before the turn of the next decade. Unless we begin to close this gap, then the inevitable result will be that our debt/GDP ratio will continue to rise, the Fed would print money to pay for the deficiency, inflation would follow and the dollar would inevitably decline. Bonds would be burned to a crisp and stocks would certainly be singed; only gold and real assets would thrive within the "Ring of Fire."
To hedge against the inflation risk, Mr. Gross has cut down holdings of Treasury debt to 21% at the end of August compared to 33% in July.
MY OTHER COMMENTS
Alice with the assets wants to sell. Bob the broker wants to buy. Eve wishes to profit by inserting herself into the communication channel and buying at the lowest price Alice will sell at then sell at the highest price Bob will buy at. This works if Eve can communicate to them much faster than they can communicate with each other - hence HFT.
It's a classic man in the middle attack.
Your attempts to pretend it is not by focusing too closely on details of specific man in the middle attacks, and saying that just because Eve is not wearing a black hat and smoking a cigar (or other less silly things that really amount to the same thing), are an obvious attempt at distraction - such as your bullshit that it has to be "covert". Acting rapidly enough accomplishes the same aim since Alice and Bob may never be aware of each other. They can only really hear Eve saying what they want to hear and the other party is lost in the noise.
No.
The attack is only possible due to being able to communicate much faster than a human could. A human can put in a lot of failed bids to find out Alice's lowest price, but in the mean time Bob could have put in a successful bid. A high frequency trader can do that long before Bob can put in a bid.
Thus Eve does have special knowledge of Alice or Bob's price thresholds at which they're willing to trade.
I think your "covert" limit is a completely irrelevant figleaf you are trying to hide behind for purposes of your own terminology - personally I think it defines a type of man in the middle attack instead of being a feature of all of them. Besides, if Alice is never aware of Bob due to the speed of the trade doesn't that even fit your artificially narrow definition? You are pinning everything on a completely irrelevant distraction to get away from your ridiculous assertion that 70% of all trade has little impact on the market.
The attack is only possible due to being able to communicate much faster than a human could. A human can put in a lot of failed bids to find out Alice's lowest price, but in the mean time Bob could have put in a successful bid. A high frequency trader can do that long before Bob can put in a bid.
Well, you just said above that it works better when it's faster, not that it becomes impossible at human speeds. In addition we need to consider the nuts and bolts of what's going on. Basically, in the above scenario. Alice is running a computer program not a limit order and selling to what appears on the market. So no matter how fast the HFT is, it can only respond to Alice's activities as her program makes them.
Now she might have a stop order which is a trade that operates at HFT speeds. Then it becomes to some degree worth poking around to see what triggers when one creates a small "flash crash".
Or she might do a bunch of market orders which are also operating at HFT speeds and very gameable once you know the timing of her activities (say she sees your book order and then 200 ms later sells 500 shares to market). An HFT trader can drop their buy order (in practice they'd be putting up a buy order for short periods of time, long enough for it to register to program traders and short enough that it doesn't have much chance of getting triggered) in that short period of time and pick up those shares for even less than what Alice thought she was selling them for.
But these sort of things are simply bad trading tactics for Alice in a market where HFT traders are known to lurk. That's why it's not a traditional man in the middle attack.
Thus Eve does have special knowledge of Alice or Bob's price thresholds at which they're willing to trade.
This is a typical market maker advantage.
I think your "covert" limit is a completely irrelevant figleaf
The covertness is a standard part of the definition of man in the middle attack. If you know Eve is there, you'll behave differently than if you don't know she's there.
Besides, if Alice is never aware of Bob due to the speed of the trade doesn't that even fit your artificially narrow definition?
Technically, none of the three know of each other aside from the very limited actions they have via the market. But they know there's other people on the market including HFT players doing their thing.
to get away from your ridiculous assertion that 70% of all trade has little impact on the market.
As I stated earlier, it could be 99.9% of the volume on the market and still be as irrelevant as it is now. Market makers have always had a high part of the volume of the stock market. And they don't accumulate stock. So in the long term it's only the people who want to buy and sell long term the stock who actually have the stock. In terms of a communication channel, HFT is noise (and even at high volumes, just not that much noise) and long time scale trade is the signal.
Obviously the vast advantage of speed is where the HFT algorithms can act while a human cannot, so it DOES become impossible at human speeds. Alice and Bob cannot act while Eve is busy working out the profit margin - and they don't even know Eve is doing it. There's that "covert" fig leaf blown right off so stop pretending it's no man in the middle attack.
Not a chance, since it all depends on communicating with Alice and Bob before they can get in touch with each other. If a third party is not quick enough the attack fails and Alice sells directly to Bob without the man in the middle getting their cut.
Why would Alice sell directly to Bob? A feature of this "communication" is that Alice and Bob aren't advertising their actual prices. That is, they're waiting for someone to place limit orders that they'll trade with. Instead I don't believe the trade would occur, at least not on short time scales (until Alice or Bob try a different approach or some other party puts up an order). This "attack" allows a trade to happen that wouldn't otherwise happen.
This makes your term for this activity even more questionable. Now, we see that not only does the activity not satisfy covertness, but the "attack" is beneficial to the supposedly attacked parties in that it creates an opportunity for trade where one hadn't existed before!
You are not being very clear - understandable because you really have nothing.
Even your argument that it cannot be covert because everyone knows there are many HFT out there is worthless, becuase if applied by the same measure to any other form of electronic communication you could say that everybody knows there is some risk of interception by carriers, law enforcement, covert agencies or anyone that owns a router or bridge between the two points.
I'm truly amazed by you claiming that a middleman driving up the difference to the maximum is more beneficial to the two parites than Alice and Bob eventually getting in touch with each other and getting the price without Eve's cut. Have you no shame? With that outlook that maximum exploitation at the expense of others is beneficial, have you ever been sent down for jail time by people that "just don't understand how the world works"? All that's coming out of this discussion is a relevation of an aspect of your personality that you are most likely not proud of.
Now featuring a new concept: Unidentified Financial Object
from what i have read here, its all legal and fine. its a license to print money, basically. so....where the hell do i get a program like this? i want to run 25 instances and see if i can do ALL the trading. then i can steer the market and have the corporations do what i want, or i will turn it off :)
like a completely legal digital hostage game!
Sorry dbill, I just don't get your argument.