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Senator Kaufman: "The Market Is Currently Heavily Fragmented And Dominated By High-Frequency Traders"

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Mon, 09/14/2009 - 21:19 | 69418 RobotTrader
RobotTrader's picture

Hi-Fi Robots are having a field day with this one....

Mon, 09/14/2009 - 21:26 | 69422 lizzy36
lizzy36's picture

rumor has the government looking to sell 34% of their stake.

Citigroup Explores Bid to Pare U.S. Stake


i wonder if that means that there would be 34% more stock available to borrow?

Mon, 09/14/2009 - 22:33 | 69456 Howard_Beale
Howard_Beale's picture

With the huge option trading in Sep today for C $4 calls (37000+) and $5 calls (100,000+) and the C $4 puts a mere 27000 after much larger volume yesterday, something is up. There's the possibility of a roll into Oct for the $5 calls at a 79000 volume today although intuitively it makes about as much sense as AIG at $55.90. And there was 76000 in volume on the Oct $4 puts which makes more sense in my own forecast but that means diddly-squat. I am short the regionals.

Furthermore, if the gov were to set the shares loose, it would keep C off the Reg Sho list for a bit more time (and it hasn't been there for a few weeks). Even AIG left Reg Sho the last 2 days. Amazingly squeezed out lemon, that AIG.

Mon, 09/14/2009 - 23:11 | 69505 mule65
mule65's picture

AIG was 65 cents and now it's 2 bucks after years around $60 -- not really so amazing.

Tue, 09/15/2009 - 07:56 | 69511 Howard_Beale
Howard_Beale's picture

My comment was that it was an amazingly squeezed out lemon--off Reg Sho for 2 days. The short squeeze was one of the best ever. Not VW, but pretty up there in terms of squeeziicious because of the reverse split.  Looking at post reverse split levels, the low in March was $6.6 and it zoomed up to $55.90. The locomomo's are having a field day with it.  Up 10% today again as the dash for trash continues in the yo-yo land of trading this piece of junk. The casino is open at all times with AIG stock.  I might add the company is worth next to nothing at the current market price of $41.10.

Mon, 09/14/2009 - 21:29 | 69426 lizzy36
lizzy36's picture

Wow, it would seem that the Senator had some assistance putting his thoughts down on paper.

Nice work, Tyler.

Mon, 09/14/2009 - 23:20 | 69509 Anonymous
Anonymous's picture

He He He He! That was nice of you to notice lizzy. Thanks for the outing!

Mon, 09/14/2009 - 23:58 | 69530 Anonymous
Anonymous's picture

He must be getting ready to start drafting bills for the senator.

Tue, 09/15/2009 - 08:38 | 69646 MinnesotaNice
MinnesotaNice's picture

Thinking like you Lizzy... when I was reading it I thought to myself "We now know who Tyler Durden really is"...

Mon, 09/14/2009 - 21:31 | 69428 AN0NYM0US
AN0NYM0US's picture

Separated at birth? I would suggest that the Senator and Charlie Sheen have about the same odds of a full hearing of their concerns.


from the letter above from the Senator:

"Mr. President, I have discussed a variety of questionable practices that deserve and I hope will receive a searching examination by the SEC and by Congress.  While some of these innovations have produced benefits, they have also created wide disparities between high-speed traders and average investors.  We do not have a clear accounting of all the costs and benefits of these recent market structure changes. "

and from Charlie Sheen just a few days ago on a different topic?

"Mr. President I am not suspiciously implying anything. I am merely exposing the documents and asking the questions that nobody in power will even look at or acknowledge. And as I stated earlier, I voted for you, I believed in your message of hope and change. Mr. President I have come to you specifically hoping for a change. A change in the perception that our government has not yet made itself open and accountable to the people. These are your words Mr. President not mine. The lives of thousands were brutally cut short and those left behind to suffer their infinite pain are with me today Mr. President. They are with me in spirit and flesh, and the message we carry will not be silenced anymore by media fueled mantras insisting how they are supposed to feel. Deciding for them, for 8 long years, what can be thought, what can be said, what can be asked."


Mon, 09/14/2009 - 23:21 | 69510 Anonymous
Anonymous's picture

Just when the depression ends twenty years from now we should actually see some action from Congress.

Tue, 09/15/2009 - 01:30 | 69573 keehotee
keehotee's picture

Sheen never spoke to POTUS.  The whole "interview" was imaginary- not sure what to make of it, except that I believe Alex Jones is a phony- i.e. an "asset".

Truth seems to be bustin' out all over.  By the way, twoof = truth, sorry.

Tue, 09/15/2009 - 02:13 | 69584 Anonymous
Anonymous's picture

(as to Alex Jones being an "asset")
Maybe. That was my first thought about 7 years ago.

I have watched him quite closely, but he has given a pretty good account of himself. Not like some of these guys who build up credibility for a few years just to throw it all away.

The Joker make-up was too much, and that might be the problem with how he is perceived, as too passionate. But if he didn't fill that role, you know someone else would.

Tue, 09/15/2009 - 08:00 | 69634 Anonymous
Anonymous's picture

Aye. Bewawe the twoof.

Mon, 09/14/2009 - 21:57 | 69443 Sqworl
Sqworl's picture

Here is an interesting prospective from the retail defense side:


Mon, 09/14/2009 - 22:08 | 69452 Anonymous
Anonymous's picture

5 billion shares traded on NYSE today, 2 billion on NASDAQ. That's 7 billion shares in a 6.5 hour trading day, ~1 billion shares per hour, ~180 million per minute, ~300K per second, 0.3 shares per microsecond. Figure the average trade is 200 shares, and you get 0.0015 trades per microsecond. Senator Kaufman claims you can have millions of trade per microsecond. Try an average of 0.0015. Only off by a factor of a few billion.

But hey, why worry about being factually correct when you have an axe to grind?

Who has their pitchforks left over from AIG?!?!?!?

Tue, 09/15/2009 - 11:50 | 69778 Anonymous
Anonymous's picture

Exactly, anon. Saw his claim of "millions of trades per microsecond" and it's ridiculous. Please get your facts straight, even if you're trying to scare people with big numbers. It's an outright lie. But then again, that's what politicians do.

Tue, 09/15/2009 - 13:25 | 69893 Anonymous
Anonymous's picture

Okay, so you seem to be picking on one mathematcial error in the speech, when you know the point he was trying to make. What did you think of the rest of the speech and all the important points he did make (in a substantive and rational voice)? I don't get the hyper-criticism of one little point when the gist of the speech was dead-on, in my view.

Wed, 09/16/2009 - 10:46 | 71026 Anonymous
Anonymous's picture

Being off by that magnitude isn't "one little point". If he overstates the scale of HFT by that much, who is to say he's not way overstating other aspects of the claims he's making. It's not ok to validate your claims with grossly inaccurate data.

Mon, 09/14/2009 - 22:14 | 69459 jbeyer
jbeyer's picture

Today, NYSE-listed volume was 5 billion shares, 2 billion for NASDAQ.  7 billion shares in 6.5 trading hours is ~1 billion shares per hour, ~18 million per minute, ~300K per second, ~0.3 per microsecond.  Assuming the average trade is 200 shares, that is 0.0015 trades per microsecond.  Kaufman throws around the suggestion of millions of trades per microsecond.  Off by a factor of a billion or so.


But who cares about being factually correct when you have a political career to further?

Mon, 09/14/2009 - 23:29 | 69516 Anonymous
Anonymous's picture

What about the other exchanges? Just HFT on NYSE?

So he exaggerated a little, that's why my girlfriend is so dissapointed!

Tue, 09/15/2009 - 00:22 | 69541 Anonymous
Anonymous's picture

So what's your point?

Tue, 09/15/2009 - 08:16 | 69638 Anonymous
Anonymous's picture

ya, you can make numbers say anything you want to...can't ya.


Tue, 09/15/2009 - 09:12 | 69668 Careless Whisper
Careless Whisper's picture

jbeyer, why are you assuming that trading volume is even throughout the day? It isn't. Look at the charts, most volume is in the first hour and last hour, sometimes, its just the last 10 minutes. Your analysis is completely flawed.

Tue, 09/15/2009 - 09:35 | 69683 jbeyer
jbeyer's picture

Careless Whisper, of course I realize that trading is not constant throughout the day.  But do you really believe there are instantaneous trading volume increases of a factor of a few BILLION over the average?

For the August FOMC release, the largest spike for SPY was a 1-second period in which 270K shares changed hands.  Assuming 200 share trades (which is actually way too low for a burst like that), that comes to 0.00135 trades of SPY per microsecond during what should be a period of enormous volume.  Using my prior calculation technique, and the volume of SPY on Aug 11th, we get 0.00003354 trades per microsecond.  So my estimation technique is perhaps off by a factor of 40 for the periods with most volume.  Senator Kaufman is off by a factor of a few billions.

Show me a period where there were millions of trades per microsecond and then you will be allowed to speak again.

Tue, 09/15/2009 - 11:21 | 69754 channel_zero
channel_zero's picture

Show me a period where there were millions of trades per microsecond

This is a common problem in client/server computing, sometimes called the 'thundering herd.'  Yes, it's real. This is why there are mainframes with n-way network connectivity.

Countless Engineering man-hours go into solving this problem regardless if your application is an http server or a trading platform.

Mon, 09/14/2009 - 22:22 | 69465 Anonymous
Anonymous's picture

8 out of the TOP Ten richest congress members are Democrat.


Yeah - We understand poor people - NOT!!

Mon, 09/14/2009 - 22:27 | 69469 Bthewee
Bthewee's picture

8 out of the TOP Ten richest congress members are Democrat.




Yeah - We Dem’s understand the poor people in this country - NOT!!

Mon, 09/14/2009 - 22:59 | 69494 Anonymous
Anonymous's picture

People who *are* rich tend to behave differently than people who *want* to be rich. Therein lies the difference between republicans and democrats.

Tue, 09/15/2009 - 09:16 | 69671 Bob
Bob's picture

Add the people who have no expectation of becoming rich--because they have both feet firmly in reality rather than some "American Dream"--and you've got pretty much all of society. 

It seems to be investment in a dream that separates the non-rich into identification with either of the two parties.  Not that, as you say, it matters which one at the end of the day. 

Mon, 09/14/2009 - 23:26 | 69513 Anonymous
Anonymous's picture

Shhhh! It's not a matter of understanding the poor people in this country as much as it's taking advantage of the poor people in this country to enrich ourselves further.

Poor people = uneducated masses = filthy lucre for us.

Tue, 09/15/2009 - 19:10 | 70462 Marshal Ney
Marshal Ney's picture

The Democrats actually have a higher percentage of voters with college degrees. But the Republicans vs. the Democrats debate has gotten so painfully tedious because even if I win the debate, all I've proven is that my thieves are less bad than your thieves.

Mon, 09/14/2009 - 22:43 | 69482 Anonymous
Anonymous's picture

Pretty sure that he's not talking about a "microsecond" as in 1e-6, rather more like the common "fraction of a second". It's more compelling that way. Also your time-averaged comparison is skewed because it does not account for spikes such as hft.

Tue, 09/15/2009 - 09:38 | 69686 jbeyer
jbeyer's picture

See my reply above to Careless Whisper.  I fully understand my method isn't perfect, but to be off by a factor of a billion over the average?

Tue, 09/15/2009 - 12:11 | 69801 Anonymous
Anonymous's picture

Okay, so you seem to be picking on one mathematcial error in the speech, when you know the point he was trying to make. What did you think of the rest of the speech and all the important points he did make (in a substantive and rational voice)? I don't get the hyper-criticism of one little point when the gist of the speech was dead-on, in my view.

Tue, 09/15/2009 - 15:25 | 70074 jbeyer
jbeyer's picture

My point is that if he can't be bothered to get facts like that straight, why should anyone trust his other opinions?  If some expert on CNBC made a glaring mistake, wouldn't you discount everything else that they say?

We've been through one of the most vicious economic downturns, caused by lax regulations on investment banks, regulated banks, derivatives, etc.  We've seen the largest Ponzi scheme in history sail under the nose of the SEC.  We've done NOTHING to fix those problems.  So why are politicians creating a strawman in HFT, and ignoring those much graver issues?

Tue, 09/15/2009 - 16:48 | 70231 Anonymous
Anonymous's picture

Kaufman's speech began by saying we need to fix the old problems and nip the new problems in the bud, that's why. You're being hyper-critical, I would guess because you're in the HFT industry in some way.

Tue, 09/15/2009 - 19:32 | 70483 jbeyer
jbeyer's picture

I run a LFT (low-frequency trading) hedge fund.  We use quantitive strategies, which refresh every 10 seconds.  We don't use and don't give a flying f!@# about co-location, powerful processors, flash orders, etc.  Our servers sit in central NJ with a laggy DSL line.  Every strategy we run is mean-reverting, so we dampen the market.  We NEVER follow a trend.  We will likely not be affected whatsoever by any potential new regulations that Kaufman is proposing.  But I'm being hyper-critical because I actually understand this shit, unlike TD and most of the other commenters here.  And I understand this is much ado about nothing, while we are ignoring much bigger problems.

I am disgusted by the role that Wall Street played in causing this crisis, and want to see regulations created that will help prevent a recurrence.  Fight for that legislation before you make a strawman out of HFT.

Wed, 09/16/2009 - 01:41 | 70809 theadr
theadr's picture

Close down Moody's and S&P for fraud.

Mon, 09/14/2009 - 22:56 | 69492 Anonymous
Anonymous's picture

Mr. Durden,

I'm sick of this one-sided bullshit you've been posting. Got a problem with co-location? Ok change that. But you post tons of populist one sided bullshit on here and you're beginning to sound like cnbc. In fact, like cnbc content, we could probably just trade contrary to most of the themes you post about and make a killling.

Tue, 09/15/2009 - 15:23 | 70069 Anonymous
Anonymous's picture


Tue, 09/15/2009 - 17:32 | 70315 MinnesotaNice
MinnesotaNice's picture

Dennis, Dennis, Dennis...

Mon, 09/14/2009 - 23:00 | 69495 Anonymous
Anonymous's picture

"Even worse, will they seek even further profit and exacerbate the downside?"

Will they????? No! They just couldn't. Say it ain't so Shane. Say it ain't so.

It's the whole damn reason stocks like ZOOM will be renamed to KAPUT when the market can no longer justify the sheer volume of new 52 week highs hiding under the radar because of the ridiculous weighting system used to mark indexes.

Adding fuel to the oxygen deprived fire is the fact that, from here on, because of the Lehman effect, almost nothing that reads 52 week high will remain from a year ago as the sand timer flips over and then shatters.

Soon, there will almost literally be no where else to go but down (or ever upward) and the lower it goes the more oxygen it'll find.

Unless the extent of the wealth destruction, the credit reduction and the implosion of leverage were all grossly deceptive exaggerations, there is no way to explain what we are witnessing without a show on Fox to "reveal" it.


Mon, 09/14/2009 - 23:42 | 69524 WilliamShatner
WilliamShatner's picture

Talk of a Tobin Tax on all trades made on Wall Street has been getting some MSM traction lately.
It's something I think everyone in the nation could get behind. Wall Street would mount a huge scare-tactic campaign against it and if it passed they just use it as an excuse to raise commissions and transaction fees.
Damned if you do, damned if you don't, but I'd rather we try and see what happens.


Tue, 09/15/2009 - 00:43 | 69552 Silver Bullet
Silver Bullet's picture

I agree.

At the very least, the rebate side of HFT would hopefully be less worth while for Wall Street.

Tue, 09/15/2009 - 07:16 | 69622 Anonymous
Anonymous's picture

Oh yeah, Tax it! That's always worked so well in the past.

Mon, 09/14/2009 - 23:47 | 69526 Anonymous
Anonymous's picture

HFT is a bogeyman.......

Tue, 09/15/2009 - 00:51 | 69556 andrew123
andrew123's picture

Does anyone really think this is going to go anywhere?  I think Tyler should find a very prominet journalist, if there was one, and become their deep throat.

Tue, 09/15/2009 - 02:18 | 69557 putbuyer
putbuyer's picture

This troubles me so deeply. Far away on the other

side, I feel far away. I don't know how much more

of this I can take.



And crown thy good with brotherhood from sea to shining sea

Tue, 09/15/2009 - 02:20 | 69585 Anonymous
Anonymous's picture

LOL at Ted Kaufman

"I hate the banksters, but these drug-running oil guys know whats up"

Co-sponsor of: "Enhanced Partnership with Pakistan Act of 2009"

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