HFT

Three months ago Zero Hedge, amidst a whole lot of hyperventilating, schizo-paranoid ramblings, managed to discuss sponsored, or naked access, as a key concern in the ongoing debate against HFT. Once again, we feel humbled that the WSJ (SEC) has decided to read between our disjointed commentary and make a prominent article (regulatory issue) of this critical topic.

Yet more dusty footprints of High Frequency Trading's shadow domination of markets emerges, courtesy of Matt Goldstein's latest column "The victims of high-frequency trading." Matt focuses on the blatant example of a self-perpetuating myth, driven exclusively by reinforcing algorithms in the April 27 collapse of Dendreon stock, which dropped by 70% in 70 seconds. Bloomberg did a good summary of the events that cost many DNDN investors hundreds of thousands in losses, and which now, five months after the event, the regulators have still not disclosed any additional data to bring this presumably aberrant event to closure.

A peculiar escalation developing in Chicago (what is it about that city) was today's development in the Citadel - Teza Technologies lawsuit. As a reminder, Teza is the firm run by former Citadel head of HFT and quantitative trading, Misha Malyshev, who got unmasked when it was made clear that he had recruited Sergey Aleynikov from Goldman, and was preparing to launch a quant trading group despite his non-compete with Citadel (which may very well be the reason for the entire Aleynikov fiasco after all). What was surprising in today's hearing was the proclamation by Citadel lawyers that Teza is a "veritable pirate ship of illegal activity."

In a leaked document of Goldman's internal defense of various trading practices including HFT and dark pools, before the SEC, the dominant force out of 85 Broad provides a very good if biased overview of virtually all issues that the SEC is currently evaluating and looking to address per the proddings from senator Kaufman.

Even we didn't realize HFT was so funny. A very insulted yet douchy Hal9000 may just skip gunning SPY at 9:35 am today.

An article today in Time magazine with the unassuming title "The Truth About High Frequency Trading" is the latest in the spin campaign defending High Frequency Trading. The story is well known- liquidity, and innocent market makers who only care about their spread without positional exposure or underlying bias. Yet a swift refutation of the puff piece comes from a place none other, than the New York Federal Reserve itself.

Don't forget, Irene is merely the messenger... for very conflicted market participants who want nothing more than to perpetuate the current system. Yet her book is, presumably, her own product, in which, if one were to actually read it, one would likely find some discussion of Flash. Keep in mind this particular messenger was never heard or seen before Flash became the hot topic de jour. One wonders why this specialist on fair "computerized daytrading" never pointed out her misgivings about Flash before her suddenly numerous TV appearances. Do remember: keep your messengers closer.

In print yesterday, today we present, in all its HD glory, the video of Senator Kaufman discussing irregularities in market structure and a proper holistic approach to financial regulation.

Also, the quant guru tells Kudlow to shove his "recommend a stock" game where the sun don't shine.

"The AFL-CIO, one of the Democratic Party’s most powerful allies, would like to assess a small tax — about a tenth of a percent — on every stock transaction."

Enjoy the ramp ladies. It is about to end

The Delaware Senator highlights his key concerns in the ongoing crusade for fixing a broken market where the shares of a bankrupt ward of the state determine the overall direction of a $14 trillion stock market.

A new page in the fight between HFTs and everyone else was turned recently, after Adair Turner, Chairman of Britain's Financial Services Authority, said that he would consider the implementation of a "Tobin tax" on banking transactions. As a reminder, James Tobin introduced the idea of the Tobin tax in 1971, as a tax on cross-border currency trade, which at its core was meant to moderate short-term speculation in currency trading. Its latest incarnation, however, would strike at the heart of the speculative bubble that has gripped global markets.

Lots of debate lately on the nature of the liquidity provided by HFT. Yesterday we presented the views of Pipeline and Reuters, today we highlight the opinion of Themis Trading.

An article in yesterday's Advanced Trading magazine, written by Pipeline executives Fred Federspiel and Alfred Berkeley, which was supposed to extol the virtues of HFT (or of the Pipeline product offering specifically, we were a little confused on that issue), ended up doing anything but, and in fact confirmed many of the concerns voiced with regard to high frequency trading in the blogosphere and in other venues.

Issues under attack include everything that currently lays the groundwork for a multiple-tiered market, including:

• Flash Orders
• High-Frequency Trading (with a juicy tangent regarding Renaissance Technologies)
• Co-location of Servers at the Exchanges and Other Venues
• Direct Market or Sponsored Access
• Dark Pools
• Liquidity Rebates
• Retail Order Flow