Slashdot Mirror
Computer Trading and Dark Pools
Bob the Super Hamste writes "CNN Money has an article on computerized trading; specifically, the non-public markets that are often used to execute orders. The company that the article discusses executes 1/8 of all stock trades in the U.S., or about 900 million trades a day. For comparison, the NYSE executes about 700 million trades. The article discusses 'dark pools,' or private markets where quotes aren't disclosed to the broader public markets. If the company is unable to fill an order from within its own dark pool, it will submit the order to the broader public market (13 public exchanges), as well as up to 20 other private dark pools. The quotes offered by the private dark pools, by law, have to be the same or a better quote than those offered on public exchanges. There have been recent questions about whether the quotes provided by dark pools have been the best for customers and there is a current investigation by FINRA into the methods used by market makers and dark pool operators to fill orders."
If the question is, "are financial institutions doing the end run around public or private regulation for the purpose of screwing people, engaging in fraud, and dodging (necessary) liability?" the answer is always yes.
This isn't really any voodoo here, and it is something stock brokerage companies have been doing for decades or even from the very beginning. If you have two customers where one customer is trying to unload some stock and another is trying to buy the same issue of stock.... why not simply exchange the stock certificates between the two customers without having to go through the big stock exchange?
The point is that these trading companies sometimes have thousands of trades going on all of the time, sometimes with customers having "put" or "stop" orders in place to buy or sell at certain prices. On the whole it really does make the markets much more efficient because the only time you go to the "big boards" is when you have a large number of your customers either all trying to sell or buy a particular stock issue.
This is certainly not something that will "destroy the economy", but rather that it will even help make the "economy" run even better by making sure that those who are either buying or selling shares can get the best possible price among the most number of people who may be interested in either buying or selling that stock. It also keeps stock brokerage costs down, thus lowering your fees for making an individual transaction. In other words, this makes it much easier for "ordinary people" to get involved with the stock market if you really care to do something like that. The New York Stock Exchange was explicitly set up with this kind of arrangement in mind, where people "with a seat" would carry on major transactions on behalf of trading companies, and ordinary people would contract out with those trading companies if you wanted to make occasional trades or buy in low volumes.
That there are problems with brokers and reasons to be concerned about how they are handling your money is something to be concerned about, the mere fact that "dark pools" exist isn't one of those things to panic over. If they didn't exist, all trades would need to happen on the major exchanges and would be a whole lot more expensive with much higher fees. The end result is that it would cause the world economy to collapse if they were outlawed or something else equally stupid. That brokerage houses should be expected to be honest to their customers is what this whole story is about, not the existence of these trading environments.
This is why you're supposed to keep your pension funds, endowments, real property and other critical assets out of liquid markets. It is disappointing that doing this means they're not going to grow 8% a year, but juicy returns require big risks.
When the pension funds, endowments, etc were buying up various mortgage-backed securities, they were buying what they were told was AAA-grade investments. That's the same grade the rating agencies give US Treasury bonds (actually, for a little while it was a better grade than US Treasury bonds), and even now US Treasuries are pretty universally perceived as the safest investment on the planet. Another way of saying this: The big banks took turds, worked with the rating agencies to polish them up really nice, sold them as gold, and then successfully ducked responsibility when it turned out that they were still turds.
And yes, there were US federal regulatory agencies that at one time would have stopped this. They didn't, and it's a disgrace that they didn't, but that doesn't mean that we shouldn't have the agencies, it means that the people who didn't do their jobs at the agencies should be fired and replaced by people who will do their jobs, and the bankers who committed these kinds of fraud should be spending a while in PMITA prison so that they will be less tempted to do it again.
I am officially gone from
So, in effect you're saying "since government can be inefficient, we should scrap all rules which keep corporations from committing outright theft"? Yeah, that'll fix the problems.
You're an idiot.
Says the USELESS fool who apparently has faith in the same governement that sics the IRS on political opponents, the same government that ignores the law to delay implementation of health care reform, the same government has the NSA reading everyone's every email, the same out-of-control government that spends hundreds of millions of dollars a MONTH more than it takes in, the same government that conducts "extrajudicial killings" of US citizens?
And that's all in the past handful of months.
Yet you call ME an idiot?
Coming from you, that's a compliment.
Let's see, it's been what? 6 years since Booooosh!!!! was President. It's been 8 years since Democrats took over both the House and Senate.
So tell me, you brain-dead dumbfuck self-appointed delusional wanna-be, why does workforce particpation rate in the US continue the rapid decline that started about the same time DEMOCRATS took power in Washington? BOOOOOSH's fault? Yeah, right. Can't be Obumbles, Pelosi, Reid, et al. Oh noes! Not THEM, even after they've being in power for YEARS. It's gotta be teh Eeev-il Rethuglicans!!!!
You are one delusional fool.
Because unregulated markets always work the best. Disregard the panics of 1819, 1825, 1837, 1847, 1857, 1866, 1873, 1874, 1884, 1890, 1893, 1907, and the Great Depression. Those were just anaomolies, as were the crashes which occurred as the market regulations were dismantled starting in the 1980s. The unregulated market is always the best.
putting the 'B' in LGBTQ+