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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."
When telegraph was first used to pass data (both trading orders and share price-affecting information) around, I'm sure, it was also seen by some as "dishonest", "unscrupulous", and "disadvantaging small players"...
In Soviet Washington the swamp drains you.
The government isn't just regulating stock markets because they want a cut.
They regulate them because there is a widespread opportunity for fraud and the bullshit from the Asset Backet Paper Commodities which were worthless but some how were getting passed off as AAA debt. It was a shell game of moving around the money until it was someone else's problem.
This isn't trying to "satisfy a market demand", this is trying to sidestep the entire market and play under a different set of rules than everybody else.
Banks and their high-frequency trading is just trying to take a cut out of the market before anyone else gets a chance. Why should trading institutions have privileged access to the market to pad out their own bottom line and skim the money off before everyone else can?
But, based on your posting history, you probably think it should be perfectly OK to manipulate the markets for their own ends.
Lost at C:>. Found at C.
Junk bonds, liar loans, "derivatives", "subprime", EFTs, dark pools, etc. Yes, it's a new bubble. Yes, the regulators are 45 steps behind.
You can't make liquid financial markets safe. You can only outlaw them after they emerge, and unless you're willing to employ gulags and torturers you can't prevent them from emerging.
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.
We use to understand this but hey, working for a living sucks so abso-fucking-lutely everything has to be hung out on the precipice to return enough dosh. So we employ righteous hyper-statists to punish anyone that might jiggle system a bit and upset all that tasty income. Every few years a new regulatory regime blossoms on top of all of the existing ones to make sure nobody tampers with the magic money faucet.
Keep printing Ben. There aren't enough lawyers on the planet to keep that bubble under control.
Maw! Fire up the karma burner!
I heard a funny story about the 1929 stock market crash, where in the middle of all of the sell orders somebody on the exchange decided to write up an "ask 1" order for 1000 shares of a major company that had been trading at about 50 dollars previously.... sort of as a joke just to see if anybody was that desperate. The shock was when the bid was accepted as there were order in to sell at any price.
Your general explanation here is spot on though. It is one of the ways that traders can make money for themselves if they spot a large gap and can identify a potential trend in the near future. This is also a good thing so far as it does make the markets much more efficient, noting that traders don't hang onto shares of companies like this.... their only motive is just to buy the shares and unload them a short time later. It helps the markets because it can help smooth out the ups and downs of the market and make it possible for trades to actually go through when people want to buy or sell their shares instead of needing to wait.
So to make sure I understand you correctly. What you are saying is Obama and his management of financial regulations is so pathetic, and shamefully corrupt; your only option is to compare his actions to other hypothetical time lines to make him look better. Got it.
Repeal the 17th Amendment TODAY! Also Please Read http://www.gnu.org/philosophy/right-to-read.html
Automated trading systems are far different than whats intended for a working stock market...one could make a compelling argument to suggest automated trading was by its design made to quickly and quietly abdicate the big players from any sense of liability or responsibility for a crash. If for example automated trades dont go the way wall-street firms like, they can have them rolled back. its not selling a share, its not cancelling a buy, its literally going into the system and undoing the trade. HFT is based on algorythms that themselves are as unfounded and hypothetical as the very modern theory of economics. Market Making, or as we know it to be pump and dump, is a real algorythm employed daily by firms.
dark liquidity markets take this a step further, but HFT has cataclysmic potential here. the buyer and seller are generally not known, quantities can be limited for sale or purchase, the markets themselves are not available to the general public, and there is very minimal oversight. The dark market was invented for the financial sector. its purpose is to silently enjoy the benefits of things like credit-default swaps and predatory lending, but without having to atone for their sins on the open market once they start printing the eviction notices.
Good people go to bed earlier.
My problem with this is, you can't say what the "market" price is when so much of the bidding is in dark pools. You can't look at a 1/8 or smaller sliver and say "that's the market price" - your participation in that market would have changed the price.