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Themis Trading New White Paper:Exchanges and Data Feeds - Data Theft on Wall Street

Tyler Durden's picture




 

Must read for anyone who still has a shred of faith in the American capital markets. All hope abandon ye who read this. A true restoration of credibility in US equities, which are nothing than thoroughly fragmented and two-tiered as they stand currently, will require a complete bottoms up overhaul. Unfortunately for that to occur, the current regulators and even the current bought and corrupt administration will need to be replaced. Trade at your own peril.

Exchanges and Data Feeds: Data Theft on Wall Street

THEMIS -- Data Theft On Wall Street -- 05.11.10

 

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Tue, 05/11/2010 - 15:45 | 344331 Hughe Crapper
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Check

Tue, 05/11/2010 - 15:46 | 344334 vs18
vs18's picture

Repost from another thread:

Tyler, I was wondering if it was possible if you can post examples of HFT, quant, algo funds who do this on a daily basis? Link to their corporate pages, etc. I am just curious to see what these funds "look like" so to speak. If possible, write a detailed post on this community, that would be great.

Tue, 05/11/2010 - 18:23 | 344642 sushi
sushi's picture

How about posting the names of those firms profitable for 69 out of 63 trading days in the last qtr?

Wed, 05/12/2010 - 06:20 | 345649 Lungimaster
Lungimaster's picture

Sorry to join the discussion late.

Disclosing name wouldn't matter if front-running is what everyone wants to do implicitly or explicitly.

I would rather ask - why are people not switching to a 'fairer' exchange which does not tier its customers. Or why some exchange is not able to offer 'parity' as a feature. Liquidity may be problem today, but will not be if people demand parity.

Tue, 05/11/2010 - 16:15 | 344337 jbc77
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Why does the Zerohedge website crash on a daily basis? Several times a day?

Tue, 05/11/2010 - 16:22 | 344347 silvertrain
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 Cause the man is on a shoestring budget  like the rest of us in the real world.. Us newbies need to ante up for the veterans, and thats just what I intend to do..This site is worth a donation anyday of the week.. Now I trade pw for my porn sites with a guy I know down at the se i mean down the road..But I will pay for the truth..

 

 Ante up so the man can get a better server..

 

 Scott

Tue, 05/11/2010 - 16:26 | 344353 Mr Lennon Hendrix
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Because reality TV is boring, and soaps can only recycle plot lines during blue pill days to function.

Tue, 05/11/2010 - 16:24 | 344354 BlackBeard
BlackBeard's picture

Website traffic.

Tue, 05/11/2010 - 17:03 | 344463 Hulk
Hulk's picture

Once again, a lot of websites down again today, not just zh

Tue, 05/11/2010 - 21:10 | 345064 ColonelCooper
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Have you not noticed that it "coincidentally" happens around lunch time, market close, and quittin' time?  Why do you think?

Tue, 05/11/2010 - 16:19 | 344341 bonddude
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Nice shout by Joe Saluzzi for ZH on Bloomberg an hour ago.

Tue, 05/11/2010 - 16:20 | 344342 williambanzai7
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Mary Schapiro today:

Ultimately we may learn that the extraordinary disruption in trading , however it may have been triggered, was the result of a confluence of events which, taken together, exacerbated what already had been  a down day..."

She would'nt know a systemic risk if it's beady eye was staring her right in the face...

Tue, 05/11/2010 - 16:25 | 344357 faustian bargain
faustian bargain's picture

Mary Schapiro is a systemic risk.

Tue, 05/11/2010 - 20:18 | 344952 JacksCompleteLa...
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+1

Tue, 05/11/2010 - 16:28 | 344364 Papasmurf
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It wasn't a confluence of events, it was a deliberate market take-down.

Tue, 05/11/2010 - 16:26 | 344360 Common_Cents22
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Advise your kids who indicate an interest to work and succeed on wall street someday.  Don't get an MBA, get a computer science degree.  Wall street is no longer about finance, but rather about technology and software rigging the system.  Risk free, skimming a commission on every transaction in the billions.

Tue, 05/11/2010 - 16:30 | 344368 Caviar Emptor
Caviar Emptor's picture

They know what you trade, how often and how much. They know what you're short and what you're long. They have your lifetime stats on record. They know how much porn you download, who sends you email and text and what color panties you wear. 

Since all traders are potential sellers, and sellers are a threat to the economy of the United States, you can be treated as an enemy combatant. They can bust your winning trades without appeal. 

Tue, 05/11/2010 - 16:34 | 344384 Common_Cents22
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It's the google and facebook strategy.  I think they have learned from GS.  Information leads to profits.

Tue, 05/11/2010 - 16:51 | 344420 CapTool
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And if lieberman has his way after they bust you, they take away your citizenship

Tue, 05/11/2010 - 16:31 | 344370 Caviar Emptor
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Ooops Site acting up today.

Tue, 05/11/2010 - 16:31 | 344376 Fazzie
Fazzie's picture

 Those SOBs scream bloody murder if their strategy would be made public.

Tue, 05/11/2010 - 16:33 | 344381 Common_Cents22
Common_Cents22's picture

After reading about GS and JPM perfect trading record, it appears they've been scratching that ITCH a billion times a day.

Tue, 05/11/2010 - 16:37 | 344389 Pedro
Pedro's picture

Zerohedge is totally, ridiculously awesome.  This is one more papercut to the thieves on route to death by a thousand papercuts.  They really should have quit while they were ahead, but, enough is never enough.

Tue, 05/11/2010 - 16:39 | 344394 10044
10044's picture

Rumor has it that it was nassim taleb's shop shorting s&p on may 6, with barclays covering the trade that led to 1000 drop

Tue, 05/11/2010 - 16:45 | 344406 Montecarlo
Montecarlo's picture

I have this image of Nassim Taleb riding a black swan like Slim Pickens riding the bomb in Dr. Strangelove.

Wed, 05/12/2010 - 02:45 | 345513 faustian bargain
faustian bargain's picture

haha, that made me smile.

Tue, 05/11/2010 - 16:41 | 344399 Montecarlo
Montecarlo's picture

This is crazy - they're not even trying to hide it anymore.  I guess it's just a matter of days before my 401K and IRA's are confiscated.   

Tue, 05/11/2010 - 16:51 | 344418 Caviar Emptor
Caviar Emptor's picture

Hehe bet they've run that sim many times over at West Street and also at Treasury as a MMORPG :-)

Tue, 05/11/2010 - 16:42 | 344401 Tic tock
Tic tock's picture

lt's fundamentally unfair to blame the computers for doing their job, they have o union, no voice, to defend themselves. It's grossly unfair to round on algorithims which are just doing what they have asked to do - it's like bullying - it's not what Americans do. If you're going to blame someone for creating an asymmetric marketplace, blame the regulators, blame the people who regulate the regulators, blame conflict of interest and ultimately you end up blaming democracy..and freedom of choice. Would you rather lose the freedom to choose. Do you want Socialism -where there's state monopoly or jail? No? I didn't think so - now shut up.  

Tue, 05/11/2010 - 20:25 | 344968 mtguy
mtguy's picture

I'd rather have the freedom to buy and sell and not have the entire frickin HFT community know of it. "Freedom" doesn't exist when someone knows what you are doing - be it with your time or your money or...

Think I'll go count my gold bars and work in my garden.

Tue, 05/11/2010 - 16:46 | 344407 LongShortSally
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They are so blinded by greed that they couldn't even manufacture a few losses to try and make it look legit.

Tue, 05/11/2010 - 16:46 | 344410 Caviar Emptor
Caviar Emptor's picture

While Congress prattles on about what caused Thursday's crash, there's one thing I've figured out: In a thin market dominated (70%) by HFT which is mostly GS trading with GS for over a year, the flaw in the Marix happened when non-GS size sellers simply materialized in close succession.

As always, they thought they had it all figured out, air tight and unsinkable. Now that their little system had another near death experience so close after 08-09 they're covering their asses and hunting for witches with fat middle fingers. Anything to try and focus attention away from the fact that the casino nearly ran out of liquor. 

Tue, 05/11/2010 - 16:50 | 344417 CapTool
CapTool's picture

So basically the best plan is max my credit cards, buy gold and default since the fix is in every other way

Tue, 05/11/2010 - 16:53 | 344427 Fazzie
Fazzie's picture

 Didnt Bernie Madeoff have a perfect record too?

 

  Goddamn IBs have screwed the taxpayer, and are now cannabilizing their clients and cheating the decidely unsophisticated retail traders as well in the name of high bonuses.

 

 Well at least they arent gambling on the taxpayers dime, since gambling involves risk and they would rather just cheat.

 

  After the fake crash, the exchanges get to decide which trades were legit and at what threshold. The SEC should audit those algos and someone should foia the results. God knows how many cheating subroutines are buried in the code.

Tue, 05/11/2010 - 16:54 | 344433 CapTool
CapTool's picture

http://www.scribd.com/doc/26380253/Chicago-Fed-HFT-Risks  i think I have seen this before, but just a reminder, they have been warned about the risks, they are just ignoring them

Tue, 05/11/2010 - 17:08 | 344473 jms2112
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Ugh.

Tue, 05/11/2010 - 17:26 | 344517 MikeNYC
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My understanding is that prior to the maniacal growth in HFT, NITE was a long time large-scale buyer of the same order flow information.

The question is: which broker keeps order information confidential and does not sell it's retail customers out to the jackals? Any of them?

Tue, 05/11/2010 - 17:30 | 344530 drwells
drwells's picture

Send this paper to the casino owners in Vegas so we can watch them kill themselves en masse.

Tue, 05/11/2010 - 17:39 | 344551 Miles Kendig
Miles Kendig's picture

One more rendition of pimps & prostitutes...

Tue, 05/11/2010 - 18:51 | 344580 if
if's picture

So much for Icebergs.  Hazardous to the Titanic, easily detected by HFT.

Tue, 05/11/2010 - 20:15 | 344658 anonnn
anonnn's picture

Appropro to Themis Trading paper... Consider there are 2 kinds of "speculators": risk and riskless.

1. The first trades without inside-information. Always some uncontrolled risk. E.g., ordinary due diligence, opinions of alleged experts or touts, hot tips, impulsive feelings, etc. are subject to misestimation, mis-representation, fraud etc.

2. The second either gets or creates inside-information. Virtually riskless profits. E.g., gets advance notice [as from trusted friend] or copy of corporate media announcement [as from copy of embargoed, corporate media announcement to MainStretMedia] or creates and disseminates the information, whether true or false [as via magazine article, TV news commentator, opinion leader, etc.].

There are endless variations limited only by imagination and circumstances. Note that someone who plants information, true or false, becomes an insider by reliably predicting the effect.

Inside-information---[for trading purposes] defined broadly as any datum that is known before others know it [usu. general public], and can be used for profit or advantage over others.

Even 'private" or "personal" data can be included. A millisecond of time can be suffficient advantage.

Tue, 05/11/2010 - 20:06 | 344934 Occams Aftershave
Occams Aftershave's picture

in London in the 90's i shared offices with the author of 'Trading Reality'. Since then, I've fantasized about writing a novel where there is a secret Level 5 of Nasdaq which allows institutions to see all positions, stop losses, log trading styles, patterns, and if one is a big enough trader, route your account info to a prop trader to trade against you individually.

Now i see, it was not fiction, it is all true ! That's how it works ! OMG OMG OMG!

Tue, 05/11/2010 - 20:21 | 344959 skippy
skippy's picture

I enjoy noclip mode on my gaming platform too!

Skippy...admin rights = god like power = slap every player (some times just for fun...eh)

 

Tue, 05/11/2010 - 20:45 | 344984 litoralkey
litoralkey's picture

The NYSE Euronext is currently completing a new physical data storage facility in Mahwah, NJ to expedite the transmission of trade data.  In this facility NYSE Euronext has been leasing out server racks to various HFT traders and dark pools with the specific purpose of allowing the HFT trading groups almost instantaneous access to all hidden order flows moving over the NYSE Euronext platforms.  Intrafacility lag will be consistently under 2.5 milliseconds, and inter-location latency will be under 8 milliseconds for most locations in Manhattan.

The facility will begin live testing with the HFT traders in early July, and proposed to be operational by October.

 

http://seekingalpha.com/article/202908-nyse-euronext-q1-2010-earnings-ca...

NYSE Euronext Q1 2010 Earnings Call Transcript
May 04, 2010

Operator

Your next question comes from the line of Howard Chen with Credit Suisse.

Howard Chen - Crédit Suisse First Boston, Inc.

I just have a follow-up for Dominique, if we just focus on the current portfolio opportunity, what revenues and earnings does that contribute, assuming like you have a fully subscribed co-lo program, which it seems like you will?

Dominique Cerutti

Say it again?

Howard Chen - Crédit Suisse First Boston, Inc.

I'm just trying to get a sense of what revenues and earnings a fully subscribed co-lo program generates?

Lawrence Leibowitz

So we haven't disclosed the co-lo as a separate item, but it is included in all of our thoughts about where our revenues are going. So to be honest, we expected that the U.S. business will be fully subscribed and planned out accordingly. Obviously, that revenue won't be coming in until the data center is up. And so, it doesn't have a lot of 2010 impact anyway. But you'll see it as included in our Technology segment numbers.

Michael Geltzeiler

Correct. And it's a solid contributor, but that alone is not generating the GAAP between $350 million to $0.5 billion.

Lawrence Leibowitz

We've seen a couple questions about the premium of this service and to be honest, our pricing on co-lo is competitive. It's not premium. And that's not what we're using to drive our Technology business. We're using the market effect of having many clients in the same place and then buying other services. It's not that we're relying on charging them other pricing. In fact, the co-lo pricing is a filed schedule with the SEC, it's completely transparent. And we believe it to be in line and consistent with what our competitors charge.

Dominique Cerutti

And if your question was on more granularity, we want to go there. But basically today, in any of the Technology segment, we had three [indiscernible] transaction services, data centers, infrastructure services. Co-lo belonged to infrastructure services. As we said, working, finding Mahwah sold out. On plan on Basildon. And we will execute, we have no concern on that. The reason why we're seeing that is because we're holding the price, which is a reflection on the demand. We're seeing the reservation. So the revenue is flowing in this infrastructure subsegment, which we don't break down at this stage. And margin out [ph] our community. And back to what we were saying, we should see co-lo, and I was making the point in my introductory remarks, co-lo is a business you can sell, right? Getting renew on profit. But it's also the way of building the community that we are doing them to leverage to ramp up our services, and we have a plan of doing that. And we know it's working. I mentioned that we closed two significant deals in the first quarter. We cannot mention the client. And it's based on this all concept of having the clients working with us. And us being able to go to manage services and pool together our credibilities. And yes, we are the beginning of the journey. But all indicators are green at the moment. We don't have issues. Now it's still on us to execute is going to be a multi-year journey, but it's possible as I said.

 

 And my 2bit editorial: not only is NYSE Euronext unphased by the near market collapse last week, they are actively installing a system upgrade that will further remove the ability of small and midsize traders to functionally trade on the market.  These violations of the theories of open markets is one of the bricks in the wall being pulled out from under the financial economy in the United States and UK.

Tue, 05/11/2010 - 20:52 | 345022 Fraud-Esq
Fraud-Esq's picture

can the HFT also learn the IDENTITY of the trading account, or just all the numbers associated???

Tue, 05/11/2010 - 21:45 | 345114 AccreditedEYE
AccreditedEYE's picture

Thank you ZH & Tyler for this awesome info that we would find NOWHERE else. Jezus, between this and the "perfect trading quarter".... how the hell do we bring them down? If its code, then it can be cracked and broken...and massive profits lay in wait to the one that can do it. The problem is getting the size to do it. How can you fight government fueled firepower? I dream, I know. :(

Wed, 05/12/2010 - 01:06 | 345455 Apostate
Apostate's picture

I have no idea why this is a big deal. Front-running has been an accept part of the business for a very long time, especially among savvy institutional investors.

But the bright side is that this may lead to innovation in a foreign country. The United States is fucked. There is no reason whatsoever to think that it will recover, except perhaps in 20-30 years. The culture is too wretched. It will take an organized effort to systematically undermine the ratings agencies to force regime change without resort to violence.

The NYSE will always remain the whipping boy of the lame assed media establishment. I mean, New York literally relies on a cockamamie system of checks and balances to prevent the Puerto Ricans from burning down the Upper East Side. All the people in charge remember the 70s/80s - they want to just protect their neighborhoods from the "barbarians" that are kept conveniently on the dole. 

Wed, 05/12/2010 - 03:25 | 345525 Dr Hackenbush
Dr Hackenbush's picture

Another great white paper from Themis.  Though, I think it even runs deeper.  Day Traders especially, are marked, tracked and fleeced according to their pain threshold.  Every time you enter a trade, your a a fly in bowl of milk. They/It know(s) who you are, and probably EVEN what your margin is. 

They've conditioned everyone in this market to use loose stops or none at all.  And they really go after stocks with phony-high-volume.  We all know that the 'liquidity' providers are predatory gangsters, on the take, in the tank, with the rest of the scum-sucking-fucks, and help keep up this phony facade of a free market (tho we know for insiders only).

Anyone with half a brain (despite this market), knows the 5/6 "plunge" has something to do with these predators.  My theory is they got crossed up at two major supports levels within critical range of each other, at the critical time (100dma and the 666 trend line on Spy and ES). 

Purposely? Perhaps - No, Without a Doubt!!!

these crooks must be stopped

Wed, 05/12/2010 - 08:24 | 345790 youngandhealthy
youngandhealthy's picture

I still remember Freak-Friday of May 2009 when HFTs bought 200 000 E-mini contracts 15:59...I lost alot of money that minute.

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