Slashdot Mirror
SEC Chair On HFT: 'The Markets Are Not Rigged'
Hugh Pickens DOT Com writes "Reuters reports that U.S. Securities and Exchange Commission Chair Mary Jo White told a U.S. House of Representatives panel that she flatly rejected claims that retail investors are being fleeced by high-frequency traders who can use their speed to jump ahead with buy and sell orders that fetch better prices. 'The markets are not rigged,' says White. 'The U.S. markets are the strongest and most reliable in the world.' White's comments to the House Financial Services Committee mark the first time she has directly responded to allegations in Michael Lewis' new book Flash Boys: A Wall Street Revolt. The book alleges that high-speed traders are engaged in a form of front-running, in which the firms are able to quickly identify an investor's desire to buy a stock, rush to buy it first and then sell it back at a higher price. The SEC has been reviewing equity market structure issues, particularly following the May 6, 2010 flash crash incident when the Dow Jones Industrial Average sharply plunged before quickly rebounding. Although staff at SEC are considering whether to launch some pilot studies to test different regulatory proposals, there are no immediate plans to issue rules to crack down on high-speed trading or trading in unlit markets. 'I want to be very clear that the market metrics suggest that the retail investor is very well-served by the current market structure.'"
Looks like she's bought and paid for.
It's insanity, we are watching real life crazy people.
This is my sig. There are many like it, but this one is mine.
Of course the markets are rigged. It has always been that way all the way back to the 1920s. Most often the regulators where former insiders themselves, in which case they were complicit in the buddy-buddy world of Wall Street. This woman, however, just seems to be an imbecile. [I'm a 30 year veteran of Wall St and have worked on the trading floors in most of the major firms.]
I highly recommend reading Flash Boys , mentioned in the Slashdot summary here. While advocates of HFT have always claimed that it provides liquidity, and it did fulfill that role usefully for a long time, we've passed a point where the gains of liquidity are overcome by the overall detriment to the economy: transactions that would have occurred anyway are penalized with what is essentially an extra tax because they came a few seconds later, and people with arcane and specialized equipment jumped the gun.
Yea, somehow banks are using HFT to magically pull money out of thin air, definitely not at the expense of traders, because traders are being so well served.
That definitely makes sense and doesn't sound like complete bullshit at all.
while(1) attack(People.Sandy);
Can the market drop 10% in the matter of half an hour?
Put your money where your mouth is, M.J. White, and tax HFT already! Curb this damn insanity!
for Joe plebb investor. There's just another level nowadays.
She has a point – a weak one but still a point. I have read the book and it seems to me that the system is not gammed for small retail orders – those are harder to front run. And even if the HFT trades scalp a penny or three per share that is still better than the $.125 spread 20 years ago. Not saying that the system can’t be improved – Flash Boys did change my mind on that – but let’s realize the magnitude and who it affects.
Nothing to see here, people. Move along. And could you put that Social Security Trust Fund money here before you go?
Either people are being front run, or they are not being front run. Can't the SEC grow a pair and actually say definitively whether people are being front run or not? I don't think the concept of front running is an obscure concept that is up for debate. Come on SEC, investigate and pass judgement. Don't give us these weasel words.
I'm largely of the opinion that HFT is a chance for the banks and trading houses to skim off the top of the stock market, at the expense of the 'normal' investors, and using information and access we couldn't possibly have.
I don't believe at all that the "retail investor is very well-served by the current market structure". In fact, I believe the retail investor gets fleeced by these trading programs.
And since there are several well known examples, including the one in the summary, in which these trading programs themselves distort the market and significantly changes the valuations of the stocks.
HFT is the large trading houses using the money of investors (their own and everyone else in the market) like a Vegas casino slot machine.
Basically, HFT is vigorish.
Lost at C:>. Found at C.
Simply tax profits on all equities held for less than 5 minutes at 100%. Problem solved.
[Insert pithy quote here]
Officer I was not speeding. Yea, that's what they all say. So, what did you expect the SEC Chairperson to say. Anything but "the markets are not rigged" would gave caused a panic. Congress took away her option to say nothing. Of course the markets are rigged in favor of the HS traders. Why else would you do HS trading but to gain an 'unfair' advantage? Let's have a regulation that requires investors to keep what they buy for 30 days before they can sell. No penalties for early sale. You just can't sell it for 30 days.
HFT is another sound argument for Network Neutrality. Fair open markets can not exist on top of a network where superior bandwidth and latency decide market winners instead of legitimate market forces.
If a nation expects to be ignorant and free, in a state of civilization, it expects what never was and never will be-T J
So, if the market's not rigged and HFT is a feature, what's wrong with introducing random delays of tens of milliseconds into their data streams? Robustness testing, don't ya know. Since there's no way to guarantee flawless links you need to stress the system to locate problems.
The likely outcome would be that the markets would continue to perform as expected while a number of HFT firms would go belly up. Who would miss them?
Front running and adding a spread ?
Ummmm, aside from it sounds like something different, not much.
the book actually talks about large investors getting screwed. Not the casual wanna be day traders, but hedge fund managers who have to take massive losses on those couple of pennies as they are buying many shares at a time.
Even if you check the bid/ask price, without HFT there's a conceivable chance for your buy order to be filled for less than your limit, but with HFT the cheaper stock is exhausted and your order filled at the buy price.
Sounds silly, but pennies matter to these people due to volume and that's what's occurring.
bragged that the ship was unsinkable and look how well that turned out. Of course the CEO is going to say that but that doesn't mean much.
Perhaps you don't understand "front running".
The actual buy/sell price of a transaction isn't the number either part put in, but is a dynamic number based on the market, within the constraints of the buy/sell orders. So if you say "buy at up to 8" for a stock selling at 7, you'll end up paying somewhere below 8 depending on available sell orders.
What is happening is that a company has tapped into the front-line routers to the trading systems with extremely high performance systems that can see and execute and deliver an incoming buy/sell order faster than the real buy/sell orders so they execute first, and injecting their own order AHEAD of your order. This requires their hardware being tapped into the network, and having extremely high performance systems and networking, so it's an option only open to an extremely small number of companies. So if the stock is selling at 7, you say you'll buy at 8, and the third part injects an order to buy at 8 that executes before your buy order, to you end up buying at 8 instead of at 7. The actual differences are smaller, of course, but the volume is infinite, so it generates plenty of cash. Because it requires specialized gear running inside the exchange's network, it's an option only available to a very small number of well-connected companies (one that's been reported), and the collusion of the exchange to arrange for the trader to have better access to the exchange's data feeds than the exchange itself. Other than being highly profitable, I can't see how this can possibly be legal, since it's a clear corruption of the exchange giving one party an unfair advantage.
The is different from high frequency trading, which is programmed trading of rapid transactions, which can be done from anywhere - that doesn't require special network access, etc., just huge piles of cash and an algorithm.
Enable 3D printed prosthetics!
Rigged implies pricing is completely controlled by these HFTs which is not true. It is a skimming
basically these hfts are making pennies per trade but doing so in billions of trades.
In further news, the Nevada Gaming Commission claims that the games at the Vegas Casinos are not rigged in the house's favor.
Film at 11.
As I recall, before computerized trading it was done by human brokers who took a bigger cut than the computerized trades do today. I don't claim to understand either way, but for my occasional trades it doesn't seem any worse, maybe better than the old way.
are trading houses spending hundreds of millions of dollars on high speed, fiber optic, trunk lines, in an effort to cut milliseconds from their transaction times? Give me a break puddin cake!
The USA is only 4X older than me...perspective
When put this way, the only events that qualify are explosions and lightning. Even an earthquake takes seconds to minutes to "change value". Tornadoes take minutes and hurricanes take hours or days.
HFT is totally removed from real world phenomena. It is a completely fictional construct. Is it any surprise that it is used to fleece the suckers? It has no legitimate purpose because it is not a real world measure of anything.
Why is Snark Required?
Casino Owner on Casinos : The games aren't rigged.
You don't understand the issue or you are making money from the technique and have fully disconnected yourself from the ethical implications of HFT scamming.
I'll use plain english terms to describe it since I'm not in that industry and never remember the fancy facade of names used to obfuscate investing practices and technical points from non-industry people.
You can check the bid/ask prices, the type of HFT process that screws you happens entirely AFTER you press the buy button, they see your buy at one data exchange location and literally outrun your network packets to remaining exchange points to buy up what you just clicked 'buy' on. You end up with a portion of what your lowest bid was, but suddenly the other locations that have the product to fill the order are all priced higher from the HFT gamer. This requires special high speed access and high speed API access to the data exchange points.
It's rigging the system. It's a great hack if you are making money for yourself but it's more than just unethical, it utterly destroys any usefulness of financial investment markets, and also leads to caustic disruption of real world economic data.
Cheers.
This is my sig. There are many like it, but this one is mine.
and lobbies are not involved bribery. Nothing to see here. Everyone is playing fair.
U.S. Securities and Exchange Commission Chair Mary Jo White told a U.S. House of Representatives panel that she flatly rejected claims that retail investors are being fleeced by high-frequency traders
I'd make a bet with anyone that someone is going to be "shocked and surprised" one day that there was rigging going on just like Allan Greenspan. And just like Allan Greenspan, a certain SEC Chair is going to be miraculously a very wealthy bitch when she retires from a government oversight job.
Of course, I feel compelled to let you know that the betting process is rigged in my favor.
>>"ad space available -- low rates!!!"
They are guaranteed jobs in HFT firms after they retire from SEC:
"High-frequency trader Getco hires key SEC staffer"
http://www.reuters.com/article...
Someone did a study on this and proved it. I think the study showed that if the bid/ask is $1.00/$1.01 and you offer $1.01, all of a sudden the bid ask goes to $1.01/$1.02.
I've seen this myself. Just watching the stock price go up a penny every time I put an order in. The study showed that HFT can step in before my order is filled and get the transaction that I wanted.
This is what these "smart" people get paid for. It's total BS and not "American"
Exactly this, it's the Richard Pryor / Superman II scenario where he routed all the fractional cents to his paycheck - but in this case, they're sucking out the margin between your limits and the market - that margin used to be significantly in favor of "the trader," especially in higher risk thinly traded stocks and options, and now that margin is going to the HFT people, in exchange for filling your order a little more quickly. Some people argue that the liquidity is more valuable than the margin, I disagree - the margin was real money that I can spend, the liquidity is so small/short that I can't tell the difference.
False. Any competent broker has techniques to avoid the problems described in the book. The major gist of which is, don't dump huge orders across multiple exchanges within a few seconds of each other.
This posting is provided 'AS IS' without warranty of any kind, implied or otherwise.
What is happening is that a company has tapped into the front-line routers to the trading systems with extremely high performance systems that can see and execute and deliver an incoming buy/sell order faster than the real buy/sell orders so they execute first, and injecting their own order AHEAD of your order
Completely false. This does indeed describe front running, which is illegal. There is no mechanism provided by any exchange which would allow any market maker to observe orders entering the exchange and then enter an order ahead of them. When an order enter the exchange, it is matched with offers that already exist in the system and that is the first time any market participant has an opportunity to react directly to it. What the book talks about is order placed across multiple exchanges, where one party would observe heavy activity in one exchange and *guess* that it is likely to be quickly repeated on other exchanges and try to get to the *other* exchange before the original party.
This posting is provided 'AS IS' without warranty of any kind, implied or otherwise.
The whole concept of 'insider trading' is that you're using knowledge that wasn't yet available to others.
If someone told you, 'hey, we're going to sell in 5 minutes at $100/share', and you went and bought it all up so they had to buy it at a slightly higher price ... wouldn't that be trading on information before it became public knowledge?
Now, it might not be 'insider', as you're not within the company whose stock is being sold ... and they're legally allowed to release the information ... but there are so many other laws regarding stock sales (eg, 'tender offers', where a company plans to buy back shares at a higher price, and they have to leave it open for a given amount of time), that I'd be willing to argue that it *should* be illegal, even if only to improve 'investor confidence'.
(ie, why would you trade in the stock market when you're getting scammed every time you do?)
Build it, and they will come^Hplain.
If the SEC simply required all exchanges to have a minimum time slice of 1 second this would not be a problem.
Load up the current bids and asks, and only "solve" the match up once a second. Problem solved. The entire scheme of HFT would dissolve.
The only problem with that argument is it ignores the liquidity and spread reduction produced just by having HFT in the market.
God i am sick of this BS being trotted out every time someone wants to defend HFT. Liquidity as a useful metric is *never* measured in milliseconds. It could be easily argued that measuring less than a minute is simply not understanding what liquidity even is.
If information wants to be free, why does my internet connection cost so much?
tl;dr
This is much simpler. HF traders are making money. That money comes out of the pockets of people who aren't doing HFT, and don't have access to the needed resources even if they wanted to. The simple solution is to put a 1 second delay on all orders.
"National Security is the chief cause of national insecurity." - Celine's First Law
...as evidenced by the retail investors' yachts...
those same people fought the move to decimals tooth and nail. it would destroy liquidity, blah, blah, blah...
I don't buy stocks anymore because I KNOW THEY'RE RIGGED.
A 10% tax on selling stocks held less than a month (or whatever numbers you think appropriate) would quickly put a stop to all sorts of shenanigans, while not harming, and in fact benefiting real investors. After all, the whole point of stocks is to allow investors to invest in a company, not some sort of gambling scheme.
Don't waste your vote! Vote for whoever you want, unless you live in a swing state it won't matter anyways
There is no mechanism provided by any exchange which would allow any market maker to observe orders entering the exchange and then enter an order ahead of them.
You assume that. You have no way of knowing it for sure. There have been explicit allegations about back-channel signaling via agreed-upon patterns of rapidly canceled orders being used to alter the sequence in which orders are processed.
I used to work as a trader for a major wall street firm. Slight correction in the terminology. If you are bidding the stock you are a buyer, If you are offering the stock you are a seller, regardless if the price you want to buy/sell at is on the bid or ask. If the bid/ask is $1.00/$1.01 and you offer $1.01, you are offering to sell at $1.01, and become part of the offered volume at $1.01. I know, I know, I sound like a bit of a prick pointing out the nuances. But you'd be in for a world of trouble in a pit or on a phone order offering a ton of stock if you were a buyer.
No, the OP was right. They see the buy order placed at one data exchange and before it can get to the other exchanges, the HFTers microwave beam the information to servers located next door to the NYSE and outrun your buy, buy over your bid and then sell the shares back to you. It's straight up scalping, and the only difference between this and front running is front running requires the scalper to be your own broker. The HFTers just found another way to see your buy order before it executes.
We don't have a state-run media we have a media-run state.
There is no mechanism provided by any exchange which would allow any market maker to observe orders entering the exchange and then enter an order ahead of them.
Doesn't have to be provided by the exchange. What they do is place small (100 share) on lots of stocks and when someone buys a small amount, the HFT algorithms can interpret intent to buy and buy up that stock ahead of the rest of the order. Some exchanges even pay firms to make markets which is nuts until you realize what they really are doing. Additionally a lot of orders are not filled on open exchanges but in dark pools. Stock exchanges permit HFT firms to co-locate in the exchanges. There is NO plausible reason to do that unless some form of front running is occurring. There is NO reason for HFT firms to lay their own fiber or microwave connections unless it provides them some huge informational advantage.
Seriously, read Flash Boys. It's an interesting read and worth your time. Even if it gets parts of the story wrong, there is enough credible evidence in there which can be backed up to paint a pretty damning picture of how you are getting screwed. Maybe not big time screwed but definitely screwed.
The stock exchange is a zero-sum game, at least in the short term. Contrary to popular views, no profits of the company being sold, nor even dividents granted to shareholders, inject any money into stock exchange -- they change only the perceived valuation of shares, and the only new money comes from the Ponzi effect.
And in a zero-sum game, if someone is skimming, everyone else loses.
The creatures outside looked from Alt-Right to Antifa; but already it was impossible to say which was which.
If companies opt for a low cost solution (non-colo, 100 mb line or lower) then it is truly their choice.
Here's a thought experiment: Everyone except the HFT firms takes their business to another exchange where high frequenct trading is not allowed. This would leave the high frequency traders on their own network to trade among themselves. Would this be a viable situation fo them?
I didn't think so. HFT is only viable if 'slower' traders exist to be exploited.
Have gnu, will travel.
Thinking anyone believes her.... Sure, hun. Santa Clause is coming. The Easter Bunny is real. There's going to be oil *forever, and the markets aren't rigged.
Please do not read this sig. Thank you.
Then again when the regulators have been gutted,bought off, and have former (and soon to be again) Wall Street insiders running them, what do you expect?
The industry is practically self regulated now, an oxymoron of course, which is to say: they aren't regulated.
Free markets will solve all -- except of course when our extreme greed causes the excrement to hit the fan and then it is time for the taxpayer to pony up. Bonuses!
If HFT doesn't yield an advantage
It does. For the HF Traders. At everyone else's expense.
Its the goose principle: The art of HFT consists in so plucking the goose as to obtain the largest amount of feathers with the least possible amount of hissing.
We are the goose.
Have gnu, will travel.
I'm sure she thinks that America has the best health care delivery system in the world, too.
Well, apparently, you only have to fool the majority of people for a little while.
So, the probelm can be avoided with sufficient competence. Now, is there any reason that you would intentionally not avoid the HFTers? And if not, why should they be permitted to continue gaming the system?
--- Most topics have many sides worth arguing, allow me to take one opposite you.
But they're those long term investors everyone wants in the market right? They're expecting to make more than those few pennies on the stocks aren't they?
This fantasy long term investor looks at things they could invest in, determines the potential return and risk of losses and picks stocks to invest in. So when placing the orders to buy these investments they set a price at which they thing it's worth buying - e.g. where their calculated risk/return ratio favours that investment over something else. If someone winds the price up, exceeding the limit, then don't buy it, buy the other thing.
If you're not going to adapt to the market that you're in - e.g. make use of the information provided - like the fact that there are HFT players out there - you're pretty much asking to lose money.
If the investment houses that do HFT didn't get an advantage by doing it then they wouldn't do it.
They clearly do it so they're getting an advantage.
Is this not plainly obvious to even a child?
I've decided to stop wasting my time responding to AC trolls/sockpuppets... so if you want a response from me... login.
The “within a few seconds of each other” shows that you have not really paid attention here. The problem is that if you are trying to place a single composite order on multiple markets. Unless you time your partial orders to arrive at their respective markets within 10 milliseconds or so, you will find that someone has magicallly swooped in to the markets that got your orders 20 miliseconds later than the others and bought what you were trying to buy and is now offering them for marginally more.
The way that they are doing this is by watching for your orders and predicting that you will go to other markets as well, and then having faster network routes than you can have to all of the markets. While this might not be illegal, it is copletely unfair. And more imporantly this means that people are making money from the markets (sucking money out) without providing anything like a benifit to the market as a whole.
I shouldn't touch this. It's off topic flamebait by an Anonymous Coward. I KNOW I shouldn't touch this.
The Benghazi "scandal" is either 1. A fuck up. They didn't do security right, and people died. Then they quibbled about it when asked. This is probably the actual scenario and I'm not too worried about it. The fact of life is that you can't be prepared all the time, everywhere. Terrorism works because you can't see it coming. That's kind of the point. Start TSA'ing all the planes, they'll use busses next time. Start TSA'ing busses and they'll use something else. So, it's an understandable fuck up.
Or 2. It's a secret plot by Hillary Clinton to do.... What? Ruin her own presidential chances?
The TLAs can't keep us safe all the time. Shit is GOING to happen. I could bring this country to it's knees with $500 in cash and a home depot, and they'd never catch me. So shut up already.
The problem is a lack of regulation. That we allow entities that aren't allowed to vote to donate political capital is a crime against representative government. Until we outlaw private campaign contributions nothing will change. Sure, it may be freedom of speech, but so is yelling "fire" in a crowded theater. There are cases where the good of society overrides the individual's freedom.
Yeah, after re-reading it is ambiguous whether the OP meant within an exchange or across different exchanges. Obviously, I read it one way and this may not be what OP meant.
This posting is provided 'AS IS' without warranty of any kind, implied or otherwise.
Can't the SEC grow a pair and actually say definitively whether people are being front run or not?
The SEC isn't as all powerful as they seem. They are pretty limited in budget and resources. That is not an accident. Guess who controls SEC funding? Congress.
It's called front running and it's both unfair and illegal. It's just that in this case, being illegal doesn't mean it will be stopped or those doing it punished.
It doesn't hurt to be nice.
Foxes, and they want a rather large order of Mcnuggets.
Got Geometrodynamics? Awe, too hard to figure out? Too bad.
These people do not obey laws.
They do not care about the constitution because they control and print the money.
We are way way WAAAAAAAAAAAAAAAY beyond the point of fixing this through the ballot box, and if anything thinks so, you, your wife, kids dog cat and canary are going to end up dead.
Got Geometrodynamics? Awe, too hard to figure out? Too bad.
I'm not sure the 100% idea would ever happen, but I know the notion of varying capital gains taxes based on the duration they have been held has been discussed a lot as means to discourage risky, short-term bet-making, market churn and encourage investment.
Several problems with that solution. 1) It is a bookkeeping nightmare. Even if you could keep super accurate records in a useable and transparent form (nobody does) it would be impossible as a practical matter to check them. 2) Taxation is a post-hoc solution and it's not remotely difficult for a large firm to dodge taxes. 3) It does nothing to eliminate or mitigate the information asymmetry problem which is at the core of the issue. 4) It's not remotely clear that it would actually cause the behavior to cease - at best it might shift the problem elsewhere.
How on earth does a *smart* investment rely on microsecond-span fluctuations in stock prices? It can't. Either something is or isn't a good investment. If you need a Mathematics PhD churning out time-sensitive algorithms to make money, by nature that means you're gaming the market.
I swear to God...I swear to God! That is NOT how you treat your human!
No one on Wall St, except for the willingly deluded, believes that the markets are not rigged. Ever strategy takes into the account how the market is rigged and works to deal with it. You're either a whale (those that rigged the market) or remora (those work to siphon some value from the whales).
I'm half way through "Flash Boys" (well written, entertaining). It is interesting the impact that technology has had on the stock market, but this isn't anything new (which is one of the points of "Flash Boys").
one for putting things in perspective: "Where are the Customers’ Yachts?" by Fred Schwed, Jr. (first edition 1940).
and under "they are trying to change the world": IEX Group
It ain't what they call you. It's what you answer to. http://mylyceum.us/
If it's not a problem, then she shouldn't mind the proposed fixes, since they should have no appreciable effect. But the fact she is making a deal of it is a sign there is something going on to be cncerned about.
get themselves a fast enough connection to get between a valid trader and a valid business
That's the part I'm questioning. The HFT program *is* the trader, it takes a commission for arranging the trade between a buyer and a seller. The commissions charged today are far lower than just a few years ago.
Imagine someone putting a toll booth on your residential road. That's what effectively happening.
Where are you anti-tax wing nuts? This is a tax in all but name.
Make sure everyone's vote counts: Verified Voting
You can almost see the dollar signs in her eyes.
Make sure everyone's vote counts: Verified Voting
Better to remain silent and be thought a corrupt fool in dire need of replacement than to speak and remove all doubt.
When people successfully create their your own exchange and sell consulting services to help investors avoid the HFT tax it is no longer in the realm of being a question. You are arguing against objective reality at that point.
Exchanges give special technical access to HFT's to do the deeds---because HFT's kick them back money.
You see, a perfectly "free" lassiez-faire market, where bribing the referees is called business.
As usual, tales of rigged markets and front running are equated with HFT, and modded up +5 by people who need to step back and take a deep breath. Please ponder the following points and think again.
1 Front running is what we call it when a market participant gets a peek at orders before they go to market. You could send your orders in on a post-it note on the back of a snail, and if that participant sees and acts on them before they go to market, that's still front running.
2 Flash trading is what we call it when an order is shown to a market participant for a brief moment of time before they go to market. Sounds like front running, right? Except that (at least for DirectEdge customers) you can flag your order to not be subject to flash trading. Why would anyone voluntarily subject their order to flash trading? Who knows - maybe they get a break in commission - the point is they can turn it off.
3 Rigging the market may also include self trading in an attempt to boost apparent volume at a price, or quoting prices you don't intend to be filled on to goose the market. Both of these practices are already illegal and well policed by the exchanges and the SEC.
4 The "liquidity" that everyone pooh-poohs is part of what makes things cost what they do. Introduce more bid-ask spread in the commodities markets, and the costs will go up for pretty much everything: bread, milk, gasoline, etc. HFT helps liquidity because it reduces the time for cheaper prices to percolate around the market.
5 HFT is there because the markets are largely FIFO, and the markets are FIFO because FIFO is unbiased. Can you think of a more unbiased match algo? Lots of people put forward some sort of time bucketed system, but it doesn't solve the problem of who gets filled when there are more buys than sells in a bucket or vice versa. Nor does it solve the problem of cross exchange trading where time buckets are not likely to be synced, and people deal with it by increasing the bid/ask spread they're willing to quote. (See #4.)
Sometimes, it really is more complex than "She's bought and paid for by HFT". Plus, if you can't bring yourself to take off the tinfoil hat, you might consider that opponents of HFT (like big banks) are precisely the ones who benefit if HFT goes away. Now back to your regularly scheduled screedy goodness.
| You are crazy. Being charged a fraction of a penny more per share is the most you could claim the effect is. The only problem with that argument is it ignores the liquidity and spread reduction produced just by having HFT in the market.
The HFT's job is to avoid providing liquidity and reducing the spread---that's how they make money. Providing liquidity means trading on the opposite direction of a large investor's trade. The firms which mint money from front-running are trading in the same direction as the investor's trade. They sacrifice a tiny amount in the opposite to trigger their trading, and their apologists call this triviality as 'providing liquidity'.
That can't possibly be 'making a market'---and making a market doesn't require super low-latency connections faster than the exchanges own connections, but front-running does.
Look at the evidence of what the HFT's invest their money in---is there any legitimate need for them for market making?
Real market making involves risk by taking on inventory when other people don't want it and then slowly distributing it back out---it is statistical arbitrage of volume vs time.
And your 401k is managed by people so naive as to allow that? They don't themselves adopt similar technologies and strategies to mitigate that?
The people who manage your 401K are not paid for performance. They do not give a shit if you make or lose money. They get paid either way. Furthermore what makes you think they aren't in on the fleecing? It might not be the folks managing the 401K but it may very well be some other arm of the company managing your 401K.
Frankly there is nowhere to run.
HFT's get the heck out of the market in a plunge.
You may have been filled by a statistical arbitrage trading system, which is fine.
While HFT needs to be controlled, or at least watched, I strongly suspect that it does less damange to individual investors' portfolios than a general lack of knowledge about accounting, tax, and business. HFT is an important issue, but if you don't know how to understand a 10-Q, then HFT is probably not your largest problem.
Just sayin'....
... while standing at the door of the hen house.
. . . no human would! No wonder she did such a piss poor job on Enron (she lead the DOJ's legal team), when all those offshore debt vehicles they used to hide the debt (similar to how Fastow did it at Continental of Illinois, which was the largest bank failure prior to Enron) should have been easily and legally damning enough, for chrissakes!
Although HFT is front running, even worse to the retail investor is the business of internalization, whereby the major brokerages sell 100% of their retail stock trades, on an almost daily basis, to the top banks and hedge funds (and the largest hedge funds are normally owned by the largest banks) --- where the banks and hedge fund match up those trades internally on their computer systems (know as dark pools) which gives them almost complete command and control in insider information on a swarm basis, and manipulating things to their own profit by how and when they do those matches (matching buyer stocks to seller stocks, etc.).
Of course, with the existing potential to purchase an unlimited number of commodity futures per category or item, gives the traders and houses extraordinary ability to manipulate things.
Then there's that LIBOR rate rigging: (Madam Brown explains it far better than moi!):
http://www.counterpunch.org/20...
Of course, being able to purchase an unlimited amount of naked swaps (or uncovered credit default swaps) is what precipitated the global economic meltdown (and NO, the subprime market was but a drop in the bucket where securitizations of debt were concerned, and even then 5/6ths of the subprimes were corporate or wealthy individuals).
Of course, then there's the FOREX market rigging, precious metals markets rigging, virtual naked stock short selling thanks to the DTCC's Stock Borrow Program, and . . . .
You obviously neither understand FPGA programming, HFT, dark pools and the Internalization Business, nor the many, many other ways they do what they do. You follow that bank lobbyist, Paul Krugman, right?
Clue in, sonny. . .
http://www.counterpunch.org/20...
. . . which President John F. Kennedy even mentioned the possibility of rising, along with other circumventions on foreign banking, and offshoring monies to avoid taxation - - - and then President Kennedy was murdered.
you have also correctly and succinctly described the present Fantasy-based Finance Sytem in Amerika today!
. . .their Intenalization Business, which is the epitome of insider trading.
How is buying stock only to sell it a second later adding liquidity? If that HFT was not there the original seller would wait an extra second? HFT don't add liquidity since they are not there to buy stock. They add overhead since they want to buy then sell at almost the same time with a small cut for themselves. That is not liquidity since the market already needs to be highly liquid for HFT to even work at all. I don't call up my stock broker and yell at them because my stock sold in one minute verses one second. Ok fine don't call brokers anymore... whatever.
If information wants to be free, why does my internet connection cost so much?
A friend of mine has been actively managing his own stick portfolio for twenty years. He's invested thousands in software over the years he uses to execute trades. After years of "playing the market" he told me a couple years ago that he thought the market "was rigged somehow". It seemed to him that many times he found a good prospective investment, someone else always beat him to it and prices would increase before he had a chance to make his trades. Something seemed fishy to him. Well ... now I know his instincts were on the ball (and so does he). Doesn't surprise me though. That's the way capitalism works - find some way to fuck the other guy and make more for yourself. The markets are completely amoral. There is no moral basis to capitalism.
"Those who can make you believe absurdities can make you commit atrocities." - Voltaire
"Completely false. This does indeed describe front running,"
Since what I was describing was front running, which is specifically what was alleged, then your comment doesn't make any sense.
Enable 3D printed prosthetics!
your a fucking idiot if you believe half of the bullshit you spewed. you sound just like htat guy tom sosnoff. my friend listens to his pocast and sends me clips and he says the same shit you said almost word for word. maybe you ARE sosnoff? ive lost $1000's to hi frequency traders and i have brokerage statements to proof it. you either have a iq of 12 or you are a fucking hi frequency trader your self here to spread your're fucking bullshit about being good for the stock market!!!
Wouldn't this abuse be easily fixed by instituting a random variable latency into every trade, assuming that unfair advantage is speed and speculation, Either that or hack the connections of HFT houses so their communications are delayed, in a random way. There are ways to disrupt their business model.
Yes, I should have said 'milliseconds'. And also as I said, any competent broker has techniques for avoiding the problem, the first step in which is not to attempt to place a huge order across multiple exchanges within near-millisecond frame simultaneity.
This posting is provided 'AS IS' without warranty of any kind, implied or otherwise.
This sort of activity is an extremely small part of what an HFT does, and not all HFTs do it. There is no "gaming" the system, they provide a valuable service, which is why the exchanges provide the mechanism for it. Valuable to the exchanges at least.
This posting is provided 'AS IS' without warranty of any kind, implied or otherwise.
Feel free to buy an institutional broker a few drinks and ask about the techniques I reference. There's a whole branch of the business that specializes in managing large orders so that they stay price neutral.
This posting is provided 'AS IS' without warranty of any kind, implied or otherwise.
I am sorry, you are wrong on both counts. Attempting to anticipate orders that span exchanges is not illegal. Nor does that qualify as front running. Bear in mind that each exchange is a wholly separate private entity. Front running, by standard as well as legal definition, only refers to activity within a single entity, basically it means an organization trading advantageously against orders submitted by its own customers.
This posting is provided 'AS IS' without warranty of any kind, implied or otherwise.
Self-correction, I was referring to the illegal form there. However, other forms of front running involve proprietary (non-public) information as well. Acting on public information isn't front running.
This posting is provided 'AS IS' without warranty of any kind, implied or otherwise.