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Ron Insana On HFT
Hey Ron, didn't realize your new position as a contributing editor on CNBC came with the contributing title of "Portfolio Manager." Didn't Stevie put a one year kibbosh on that? But I digress... And in all honesty I am surprised that you seem to have the correct spin on things (as per letter below from Jim Cramer's failed media experiment TheStreet). When you say:
I'd prefer that regulators look into whether a firm like Goldman Sachs
(GS) unfairly
view [sic] order and information flow ahead of its customers and clients.
we are pleasantly surprised... Yet when you follow up by saying:
But the press won't touch that topic
we are totally ecstatic that you do not lump us into the definition of that derogatory word. Then again, feel free to do a search for "Goldman Sachs" here. Even an erudite portfolio manager such as yourself may learn a thing or two.
High-Frequency Distraction
By Ron Insana
Portfolio Manager
7/27/2009 11:40 AM EDT
The New York Times and The Wall Street Journal are taking aim at a new form of computerized trading known as "High Frequency" trading. The algorithm-based trading is allegedly an illegal form of front-running, as high-frequency traders hook into exchange computers and use "flash trades" to suss out incoming order flow and use the lightning speed of their own programs to jump ahead of customer orders. Critics argue that individual investors are at a distinct disadvantage for this reason and a variety of others. The proximity of high-frequency computers, which can be placed next to exchange computers for a fee, allows for an almost-osmotic transfer of information. Senator Charles Schumer (D, N.Y.) is asking the SEC to ban "flash trades," which are phony orders placed by high-frequency programs that aim to fool market participants into entering orders. The programs jump in front of customer orders and gain a trading advantage. If that is indeed what is happening, it qualifies as "front-running," an illegal practice on Wall Street. If high-frequency traders are just faster than everyone else and not illegally jumping in front of others or paying off the exchanges to get preferential trading treatment, then this new area of technology-based trading is no less legitimate than the use of the telegraph, the telephone, the ticker, computers, handheld devices or older-style "black box" or "dark pool" programs that give sophisticated traders the ability to simply trade faster. I'd prefer that regulators look into whether a firm like Goldman Sachs (GS) -- whose former executives continue to run the New York Stock Exchange (NYX) ; advised on the merger between NYSE and Archipelago, and formerly owned a portion of the combined entity; own Speer, Leeds & Kellogg, the largest specialist firm on the Big Board floor; and control the greatest number of seats in the equity markets -- unfairly view order and information flow ahead of its customers and clients. I am far more concerned about that than I am about the emergence of "high-frequency" trading. But the press won't touch that topic. It's easier to go after the dreaded speculators and dark pool traders than lose access to the most profitable and prestigious firm on Wall Street.
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you do have a special way with words........
You mean "extatic"? I love this site and Tyler's investigative reporting, which clearly mainstream media lacks or lags.
Mainstream media is not allowed to express themselves with the clarity of TD and/or Marla.
Regardless of whether i agree or disagree with the the premise of their posts, i am always amused (and generally enlightened). And i cannot say that about any MSM publication.
It has always struck me as ironic during my 54 yrs of existence that the MSM for the most part does not take full advantage of that magnificent provision in the Constitution's First Amendment about "...freedom of speech...."
I do except out those that have gone to prison for refusing to disclose sources as well as other journalists who have risked their lives to bring stories to the forefront.....
Indeed.
Do you like the way CNBC tried to make the whole issue about Flash orders only and pretended that colocation simply doesn't matter?
Kid Dynamite wrote an interesting article about HFT, flash, and his thoughts on them:
http://fridayinvegas.blogspot.com/2009/07/we-fear-what-we-dont-understan...
excellent article, a must read for those looking to learn about HFT (myself included)
A little bit of knowledge can be very dangerous. Kid Dynomite is taking his understanding of HFT and applying that to the GS apparatus. It doesn't work that way. It is obvious that the FR, Treasury and USG have given GS the keys to the American economy. Why else was AIG saved? Why is GS given bank holding company status to allow them to recieve federal aid, but the leverage ratios and VAR are not enforced? This is crony capitalism and congratulation to Zero Hedge for its tireless coverage. Kid Dynomite can write all the apologias for HFT that he has the time to waste. The simple fact is that GS is up to something and we often don't know exactly how a heist was pulled off until after the fact. Maybe HFT is a distraction. Maybe not. One thing is for certain. We do not have open, free and efficient markets and players like GS are gaming it every day. "Invest" at your own risk.
Tyler,
That's as close to a salute as you're likely to get from anyone working for MSM.
There are others who see what is going on too... keep up the fantastic work TD and Marla Great Site
http://www.thecorporation.com/
watching the corporation now... thanks for the link... don't know how i missed this one.
Some may be front running; some may be back-pedalling.
Cramer says the markets are overbought and are heading for a 3-5% slow pullback.
He's hedging. Clearly. I was shocked to hear him say that.
Are they preparing to scare money back into bonds?
You know it! And guess what this month is one of the bulkiest of months for debt issuance from the good o' US Treasury. You can see it now ...the pent up bears get a 'clear' breach of uptrend, Auctions don't fail, market retraces back up through that breach and takes out some new short stops... The 'new' risk adversion is to be short - retails have a contemporary and empirical belief that the market will fall like it did in 2008. The dumb money always references material events from the short term, and as such references events that are unlikely to occur asymetrically, ie short-term next to short-term.
The much lauded double dip is a macro event and not a price movement reference. We will get a time lag to push us out to MT before we see a reversal of any magnitude in my opinion.
I have stated this before, but may bear repeating:
The circularity of the situation is mind-numbing.
Are they watching you or are you watching them?
When do you stop being the anti-media and start being the media?
Outsiders get a period of time to observe, then they start their blog, then they start getting watched - then they better watch out.
As near as i can observe they have never been the anti-media. They have always been the media. Just their version with their rules.
Outsiders don't conform, they are conformed to.....
I was only referring to content, not criminal surveillance.
For example, CNBC is MSM. In the beginning, CNBC would broadcast a segment and Tyler responded, confirming/refuting the validity of it. His content was reacting to theirs, hence the term, anti-media. His posts were a reflection of their broadcasts.
As the site's popularity has increased, it would seem that the roles are reversing. He publishes a story about HFT, flash trades, economics,...and they pick up on it. Now, they reflect on his content. Therefore, at some point, he becomes a source of news, blending into MSM. The original lines between media/anti-media blur and the site becomes part of the machine. Something to wrap your head around.
That's why I asked, "Is he watching them or are they watching him?"
Valid point DS. The world is changing exponentially, eventually some type of a blow off top should be expected.
Interesting times; its fun to be a witness.
Like i said, outsiders don't conform they are conformed to.
Once the conformation process begins by definition ZH becomes part of the bigger media system. At that point you have effected change just by your presence. Then the really important work begins: how does TD and company lever up on its presence (without become subsumed within it) to actually change the financial/political system?
TD has made us aware. Now he has to translate the awareness into political action. This is where all the commentators on this site come in. Schumer may be a prick (name me a politician that isn't) but clearly he was made aware and prompted to act.
IMHO, the strategy, with respect to the media, is just the opening act.
well reasoned as usual lizzy
robespierre wasn't a prick. oh wait...he was the biggest prick of all.
"he has to translate the awareness into political action"
what does he owe you again? i missed that part.
what is his debt to you?
i have pictures.
Another day where firms with the absolute worst prospects rallied the hardest.
Pretty much a dead givaway that the market was going up today when favored junk plays like DRYS, HBAN, RF were up big in the pre-market and ran pretty much non-stop all day. Basically a sign that the little old ladies dropped their canes and kicked aside their walkers and ran pell mell towards the slot machines, knocking down the 240-lb. pit bosses in the process.
Never underestimate the motivation of an underinvested fund manager, patiently waiting for another correction but getting anxious. Evident today by some who threw in the towel and started buying all sorts of junk. The closer to Chapter 11 bankruptcy, the better.
Especially newspaper companies and homebuilders:
http://clearstation.etrade.com/cgi-bin/bbs?post...
Funny how everyone and their brother is saying the market is overextended and many are trying to pick tops. Even Cramer is being cautious tonight, telling everyone that this run is over.
Yet all I see are more buying setups where mo-mo players are simply taking profits on the likes of IBD Top 100 screamers like SNDA, SOHU and rotating proceeds over to beaten down areas like the banks.
I mean, what happens when these junkers grind up and clear the 200-day?
Banks:
http://clearstation.etrade.com/cgi-bin/bbs?post...
HMO's:
http://clearstation.etrade.com/cgi-bin/bbs?post...
Meanwhile, every day there seems to be a bout of panic selling in various commodity areas, as the whole world is deathly afraid of a vicious dollar rally spurred by some happy talk from Geithner or Hillary in China.
Best to keep your eye on these:
http://clearstation.etrade.com/cgi-bin/bbs?post...
And who would have thought that Ford would be hitting 52-week highs in the midst of a depression?
http://bigcharts.marketwatch.com/quickchart/qui...
Najarian was yelling as usual on Fast Money tonight telling everybody about the rabid call buying on WDC today as it hit a 52-week high. My guess is that this is the next mo-mo stock to get shanked:
http://bigcharts.marketwatch.com/quickchart/qui...
Who knows? Watch the overnight action here:
http://clearstation.etrade.com/cgi-bin/bbs?post...
The Junk Bubble
The Robo Review is always a delight, and helps with market indigestion and bitter after-taste. Thank you. It should be an official regular ZH feature/tonic.
agreed on the Robo Review......he phucking kills it every day and makes me laugh my ass off.
I follow the banks and everytime I see that pos RF up, I think about Robo.
Please don't stop Robo, you are too damn good!
I finally capitulated, and cleared out my short positions. Doing fundamental analysis on stock prices, P/E, P/B ratios, consumer sector surveys, earnings projections etc etc is pointless. Most likely the market will decline this week, but I am beyond caring. Given the dominance of the major Wall Street players, flash trading, colocation, god knows what else, and orchestrated squeezes, and other behavior, I think it is best to invest in a small business down the street, where one can see the books everyday if required, and get a clear feel for prospects, customer flow and order flow. I am planning to go to the local chamber of commerce, and start talking to local businesses to see if one could take up a partnership stake. Otherwise, investing with Wall Street is purely gambling at this point, and not about investing fundamentals. Bye bye Wall Street. Trade among yourselves.
Unfortunately, anon 16311, has once again fallen into the the sights of the shooters. Once all the small guys give up their short positions, look out.
http://seekingalpha.com/instablog/211159-squark62/18963-sds-sso-pairs-trade-commentary-july-24-2009
Remember, the loudest statement is the one not said. Remember, when everyone is jumping on the wagon you need to get out of the way. The guys who made money in gold, didn't start buying in the " Great run of 2007", they bought it when central banks were dumping it, ten years ago. When things were quite. You need to start listening to the silence! Turn your ear, where do you not hear? I know, but if I said it wouldn't be quiet anymore.
You are not alone in your capitulation. When the markets become a full fledged gambling hall and a bucket shop like the 1890 1910's , and oversight is tossed to the winds . And the banks own it and move it like "little gods" , it is time to move on to other sources of income . Good choice and more power to you . When Joe Six pack figures this same thing out , and stops believing " the lie" , and pulls his money from the "money changers lair" , then they will have their pain , which is well over due and deserved . May what the charlatan crooks practice in the markets , come down on them 100 fold o
i'm of the opinion that it is more bull trap than not.
I enjoy your comments Andy and appreciate your insights.
Durden has main-stream media penis envy!
i take that back. i'm very angry today because my dating service says i'm compatible with my aunt beatrice.
that was some funny shit!
you think that's clever
how's that working out for you
Insana's explanation of flash orders betrays his sophomoric understanding of the issue. There is nothing "phony" about a flash order. The order type certainly raises some interesting questions... but comments like Insana's are dangerously misleading.
How long exactly have you been watching CNBC?
re: Dangerously misleading?"
So the entire rally has been driven by computer algorithms designed to front-run rolling buy-ins.
This seems sustainable.
It's a new economy , it'll work this time..
Cramer is merely following Doug Kass' advice.
http://www.thestreet.com/story/10553720/1/kass-updating-the-model-portfo...
And Kass must have read ZH's "The End of the End of the Recession", because he has shape-shifted back into a 'bear' again overnight.
Americans don't think.
Therefore, they think they need people, who think they can think, to think for them.
Plus, it helps to be plugged into the system. Helps determine the right shapes.
Is this going to be the BIGGEST ever bubble blown out of complete nothingness by purely squeezing shorts till they have popped every pip...
what next?
THE ABYSS WAITS BELOW stupid FED fools
what next? get all the suckers in tips and then have a currency collapse. man i love it when a plan comes together.
yeh TD
numbnutts insana decided to believe his own bullshit and go into the hedgefund business in 2006. smooth move ex lax. he fucked up royally and decided to give his clients whatever money he had left, after this grand experiment and then he crawled on his fat stomach back over to CNBC and begged for his freakin job back. well boo hoo hoo ron. its nice to see your fat face back on the talmud vision......NOT!!!!!!
the only reason chuckie Schumer is whining about this, is because his crook friends in israhell and the offshore banks are losing money because these other crooks have their computers closer to the exchange computers and are cheating them out of their fair share of the loot.
I don't know if your postulation re: Schumer and his friends is correct or not but I do think what is true is that Schumer clearly recognizes that there is a populist type of uprising against wall st that is reaching/has reached critical mass and he sees a political benefit of being on the right side of that trade.
how about this info there Deadhead?
http://www.chartingstocks.net/2009/02/stanford-and-madoff-have-more-in-c...
Schumer has gotten lots of money from Madoff and Stanford.
Now he is whining about HFT? hmmmmm, as Denniger might say. the math doesn't lie....
Madoff moved money to Israeli bank?
http://www.rense.com/general84/mado.htm
giuliani, schumer and our dear old friend D' Amato, ties with Israeli Russian mob....
http://www.freerepublic.com/focus/f-news/1785427/posts
I could go on and on. My feelings on it are that it is almost impossible to have anyone in the New York area, that is clean. They are all dirty and if they are clean, they are silent if they want to live to be old men or women. So, I am afraid that everything schumer does is for a reason and the last thing he cares about is any of us, that is for sure. Someone is telling him to jump on this for some reason.
Why people are not in the street over this HFT outrage is beyond me.
But "sheeple" does come to mind!!!!
HFT can easily be used to prop up markets. No demand, simply trading with 2% of your buddy's.
Very hard to explain. Like trying to teach aircraft electrical systems to people. A fraud guide for dummies needs to be created.
"Front Running" is so analog, so yesterday, so indicative of those of you lacking the advanced skill set to appreciate being run over thousands of time a second. Embrace the modern marketplace and learn to love all of the liquidity it provides. Thank God for that chip in my skull.
In the old days a human being could grab some low hanging fruit,
Now, the fruit is picked , peeled, and canned, before you even notice it was there.
Well, if real estate doesn't work for Ronni and his Paps, a PM title might make him feel better and his Paps proud once again.
>When do you stop being the anti-media and start being the media?
There's always that possibility. And of being co-opted subsumed into the sausage machine. But if you're taking on Goldman Sachs, no need to worry about being establishment for a while.
But it is interesting the GS appears to have no friends now (except maybe in government.) That is a sea change.
Insana sure is a lousy writer. What a mishmash, reminds me of this guy from the 'NYSE Claims it Knows Nothink About Flash' thread. Same guy ya think?
"Yawn. What did this blog stand for again? "Err, Madison, Jefferson, they all would have hated high frequency trading if it were anonymous, or, er, flashed, or, um programmed."
The mocking tone is used because factual references to refute the inaccuracies of many posts on this site have simply been ignored or SHOUTED down. You and anyone else on this site are entitled to their opinion with one exception. You cannot have an opinion on a fact. One plus one does equal two. The sun rises in the east and sets in the west. Obama is the POTUS. You cannot have an opinion on topics such as this. You are either right or wrong. So when multiple posters take the time to write detailed examples of how flash orders and order routing work, reference and explain how high frequency trading works, or even the guy that keeps referencing the definition of program trading on the nyse website and it is all ignored, one can only assume that this site has devolved into the same useless shouting match and echo chamber that most such forums become when the masses get involved. A shame, really, as so many of the posts on other topics, analysis of papers, and original content were quite good. No longer the case with the HFTFLASHPROGRAMTRADING taint on the site now.
"
http://www.tradersmagazine.com/news/pipeline-blocks-high-frequency-tradi...