Algorithmic Trading

Tyler Durden's picture

Must Read: Fear And Loathing On The Marketing Trail





Today, everyone believes that market price levels are largely driven by monetary policy and that we are all being played by politicians and central bankers using their words for effect rather than direct communication. No one requires convincing that market price levels are unsupported by real world economic activity. Everyone believes that this will all end badly, and the only real question is when.... There’s absolutely nothing sincere about the public sphere today, in its politics or its economics, and as a result we have lost faith in our public institutions, including public markets. It’s not the first time in the history of the Western world this has happened … the last time was in the 1930’s … and over time, perhaps a very long period of time, a modicum of faith will return. This, too, shall pass... It’s the public markets where faith has been lost, and that’s why the Golden Age of the Central Banker poses existential risks for firms and business strategies based on trading activity within those public markets.

 
Tyler Durden's picture

What Has Driven The VIX Higher In The Past?





A nervous peace prevails in the financial markets as central banks sit on their throne, fingers at the ready on the liquidity switch. As UBS' Bhanu Baweja notes, most volatility buyers have been 'rolled' into their graves. As they have explicitly targeted risk premia in addition to rates, a lot more hangs on the monarchs of monetary policy today than it has in previous cycles. While growth and inflation are both low, they are not necessarily uncertain; and although every crisis is different, certain patterns tend to repeat and certain events have reliably driven volatility higher.

 
Tyler Durden's picture

High Frequency Trading: All You Need To Know





In the aftermath of Michael Lewis' book "Flash Boys" there has been a renewed surge in interest in High Frequency Trading. Alas, much of it is conflicted, biased, overly technical or simply wrong. And since we can't assume that all those interested have been followed our 5 year of coverage of a topic that finally has earned its day in the public spotlight, below is a simple summary for everyone.

 

 
Tyler Durden's picture

The Real Reason(s) Why Steve Cohen Is Much, Much Richer Than You (In Steve Cohen's Own Words)





The types of “research” SAC may acquire include, but are not limited to, the following:

  • reports on or other information about particular companies or industries;
  • economic surveys and analyses;
  • consulting services regarding products, technologies, issuers or industries;
  • non-mass-marketed financial publications (delivered in hard copy or electronically);
  • computerized pricing and market data services;
  • pre-trade and post-trade analytics, software and other products that generate market research, including research on optimal execution venues and trading strategies;
  • advice from brokers-dealers on order execution, including advice on execution strategies, market color and the availability of buyers and sellers (and software that provides such market research);
 
Tyler Durden's picture

"The Market Is Rigged" - Michael Lewis Explains How HFTs "Screw" Investors Every Day





It was almost excatly five years ago to the day, on April 10, 2009, that Zero Hedge - widely mocked at the time by "experts" - began its crusade against HFT and the perils of algorithmic trading (which of course were validated a year later with the Flash Crash). In the interim period we wrote hundreds if not thousands of articles discussing and explaining the pernicious, parasitic and destabilizing role HFT plays in modern market topology, and how with every passing day, markets are becoming increasingly more brittle, illiquid and, in one word, broken. Or, as Michael Lewis put it most succinctly, "rigged." With Lewis' appearance last night on 60 Minutes to promote his book Flash Boys, and to finally expose the HFT scourge for all to see, we consider our crusade against HFT finished. At this point it is up to the general population to decide if this season's participants on Dancing with the Stars or the fate of Honet Boo Boo is more important than having fair and unrigged markets (obviously, we know the answer).

 
globalintelhub's picture

Being educated above your intelligence in Finance





How many people in the financial services industry understand how the financial system works?

We've all experienced it, we are dealing with someone who has all sorts of masters degrees, PhD's, and doesn't know the Federal Reserve is a private corporation, and even doesn't know the product their company is selling.

In the spirit of professionalism, we must keep these quotes anonymous, but certainly if you have survived long enough in Finance or read the Financial news regularly, you will not need any references because you've probably heard it before.

 
Tyler Durden's picture

HFT Algos Force Institutional Investors Off-Exchange





Having discussed market microstructure and the parasitic impacts of high-frequency-trading for the last 5 years, it comes as no surprise that the block-trade-sniffing algos have had very significant impacts on the way institutional investors trade now. As WSJ reports, in fact the big boys are conducting more "upstairs trades," in which deals are executed among big institutions, bypassing the broader market, because the proliferation of algorithmic trading and other structural issues, including the fragmentation of the market, are hurting their ability to get the best prices and execute large trades quickly. While the concerns aren't all new, big investors say the cat-and-mouse games are growing more elaborate - and counterproductive - by the day.

 
Tyler Durden's picture

Another 2 Year Old Zero Hedge Story Goes Mainstream, And A Glimpse Inside The BLS' "Frontrunning" Data Room





Those who did not read Zero Hedge in March 2011 will be shocked, shocked to learn that yet another "news" service, one owned by Deutsche Börse, was merely disguising as an HFT-facilitating, instanews disseminating, speed roadblock removing provider, who just happened to charge $375,000 per year for its frontrunning services. The firm in question, as the WSJ reports today, was "founded by an investment firm and now owned by the Deutsche Börse stock exchange, Need To Know News has operated with an overriding mission: sending data directly from the government through high-speed lines to financial firms that are able to trade on it instantly. Some have paid $375,000 a year for the service." Of course, those who did read Zero Hedge in March 2011 will already know all about Deutsche Boerse's "news dissemination" strategy which was covered here first with "Alpha Flash: For All Your Nanosecond, Collocated, Algorithmic Frontrunning Needs" in which we tongue-in-cheekly asked "Ever feel like your nanosecond algorithmic frontrunning skills are becoming obsolete? Unable to scalp even a few extra pennies from illiterate orphans, widows and kittens armed with REDIPlus 9.0? Despair not, for Deutsche Boerse [and Need to Know News LLC] has Alpha Flash just for you."

 
CalibratedConfidence's picture

Haim Bodek's Presentation To TradeTech On HFT And His Controversial Findings





"I am going to hit on some of the landmines that you can encounter within order-matching engines, and then I am going to give a forecast on, at least from my perspective, what’s going to happen over the course of 2013"

 
Tyler Durden's picture

Fed Hiring HFT Expert With Emphasis On "Systemic Risk"





Ever feel like you can't put that math PhD to good use anymore and make money scalping ahead of order flow, sub-pennying and frontrunning retail in normal and dark pool markets because volumes are just off 1929 levels? Then the Chicago Fed has an offer you just can't refuse. And since money printers can't be choosers, the Fed may also have a spot for those who tried their hand at the New Media (i.e., churning slideshows): "Develop presentations and clarify complex issues for broad audiences." Yet what is most interesting is the following requirement: "Interact with highly informed and technically skilled outside stakeholders while preserving the reputation and credibility of the Reserve Bank." We'll just let that one slide...

 
Tyler Durden's picture

Sergey Aleynikov Suffers The Full Wrath Of A Vindictive US Judicial System





'Commingle' hundreds of millions in client funds which are subsequently stolen rehypothecated as collateral by JPMorgan while your firm goes bankrupt as a result of your idiotic prop trading decisions, and what happens? Your toughest choice is whether to vacation in Fiji or St Barths. That said, being former CEO of the world's biggest TBTF hedge fund also known as Goldman, a former governor and senator, and most importantly bundler for the president of the "transparent" administration certainly helps. On the other hand, be a lowly algo trader and quant programmer working at the aforementioned hedge fund, and having dared to "steal" secret trading client code what can "manipulate markets" and what - you get the full wrath and anger of the FBI, the Federal Court System, and now the Supreme Court.

 
Tyler Durden's picture

The End Of 'Orderly And Fair Markets'





Capitalism may have bested communism a few decades ago, but exactly how our economic system allocates society’s scarce resources is now undergoing its first serious transformation since the NYSE’s founding fathers met under the buttonwood tree in 1792.  Technology, complexity and speed have already transformed how stocks trade; but As ConvergEx's Nick Colas notes, the real question now is what role these forces will play in long-term capital formation and allocation.  Rookie mistakes like the Twitter hack flash crash might be easy to deride, but make no mistake, Colas reminds us: the changes that started with high frequency and algorithmic trading are just the first step to an entirely different process of determining stock prices.  The only serious challenge this metamorphosis will likely face is a notable crash of the still-developing system and resultant regulation back to more strictly human-based processes.

 
Tyler Durden's picture

Flash Crash Mystery Solved





Below are portions of a comment letter submitted by R.T. Leuchtkafer to the SEC on April 16, 2010, just 3 weeks before flash crash. The second paragraph in the excerpt below, unknowingly describes exactly how the flash crash was started. The letter goes on to alert the SEC on the dangers of High Frequency Trading (HFT), phantom liquidity and other concerns.

 
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