New York Stock Exchange

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).

...Although once the debate moves away from Flash to its natural progression into dark pools and ultimately HFT, watch out below: "Any move to restrict high frequency trading could have a significant impact on exchanges’ transaction fees as well as revenue earned from co-location; there is also the chance that efforts to restrict HFT in the equities world could bleed over into other asset classes as well, including futures. We view potential regulatory changes as a net negative for exchanges, but it is far too early to assess the impact of potential regulation on these two issues."

The clock is now ticking on the rigger Echange - Broker/Dealer oligopoly

From an interview earlier with NYSE's Larry Leibowitz, who is surprisingly vocal against Flash trading. Larry - since the NYSE does not engage in Flash trading, can you please indicate whether or not the SLP program provides advance notice to Goldman Sachs ala Direct Edge's ELP program. Regardless, the escalation in the ECN wars is starting and should be a very interesting one to follow, especially now with a toothless and clueless Mary Schapiro stuck in the middle.

The blind leading the blind.

Great recap piece in the New York Times on whether or not Wall Street is picking the pockets of "non-club" investors (read - the guys who do not generate 80% returns with a Sharpe > 5.0 - can someone explain how risk/return works again). The consensus sure looks good for class action lawsuit lawyers.

The piece also recognizes the tremendous contribution that Zero Hedge's readership has had in this ongoing debate, once more highlighting the interactive nature of new media and how crowdsourcing is the new dominant paradigm for Media 2.0. 

Here is the link.

Additionally, should it be odd that Direct Edge, the company in the eye of the Flash hurricane with its ELP program, has the following reported ownership structure:

Yes. Direct Edge is an independent broker-dealer owned by a consortium that includes the International Securities Exchange (“ISE"), Knight Capital Group, Inc., Citadel Derivatives Group, The Goldman Sachs Group, and J.P. Morgan. Knight Capital Group was originally the sole owner of Direct Edge and the firm was spun off in the third quarter of 2007 when Citadel and Goldman made investments. With a 31.54% stake, the ISE is currently the largest shareholder of Direct Edge, followed by Knight, Citadel, and Goldman, each with 19.9%.

And here are the latest ruminations out of Max Keiser, who takes on a curious angle in his most recent Goldman Sachs attack

There has been (finally) a lot of attention to program trading, a theme Zero Hedge has been focusing on for 4 months. This week, the NYSE finally switched over to its new methodology of providing program trading, which, as Zero Hedge announced previously, involves the decommissioning of the DPTR and the delay/cancellation of implementation of "the proposed redefined program trading account type indicators (J and K)."

"Lots of feedback on the high frequency trading issue"

Goldman Sachs has redeemed those pesky TARP warrants that have been generating so much consternation to PR offices across bailed out Wall Street. Well, van Praag scratched his head on this one, and this light bulb came on: I know, we will put a subheader for what a great benefit to taxpayers out inability to repurchase the warrants for 1 cent was.

T2's Whitney Tilson on Themis Trading and Zero Hedge

There is a curious article in the latest edition of Traders Magazine. It is curious mostly because it was allowed to be published, as it definitively peels off the cover of what truly happens at the pantheon of stock exchanges, that dominated by a private club of select high frequency traders, who obtain better and faster pricing than everyone else, and where the group of "select few" is seemingly legally allowed and even encouraged to front-run the "every-one else" (you, dear reader, are most likely in the latter camp). If you ever wondered why HFT generates profits of over $20 billion a year, please read this article.

The only benefit from Sergey's recent brush with Goldman Sachs, a/k/a the FBI, seems to have been an increased curiosity if not awareness in this most nebulous topic by pretty much everyone with an even remote interest in Wall Street... a 500% increase over one month in fact.

Continuing the series of State Street presentations on relevant market topics, the latest piece "What are the Implications of the Growing Use of Electronic Trading" focuses on the nuanced difference between "real liquidity" and "liquidity hazard", depending on whether one is a price taker or market maker. Yet based on limited available public disclosure, non-premium clients of the NYSE and other PT-espousing exchanges have no visibility of who and under what conditions any given broker/dealer and quant become one or the other. And while merely a few years ago HFT was less than half of traded stock volume, recent data indicates high frequency trading now accounts for over 70% of US volume, and thus it is important to reasses what is the relevant set of data disclosure by dominating broker/dealers. The risk is palpable - as State Street itself notes, there is "equity capital at risk."

Goldman principal PT shares transacted increased by over 40% from the prior week: 550 million to 765 million, clocking at near 50% of total NYSE principal volume - about par for the course.

A recent story in Advanced Trading goes after some of the minutae of High Frequency Trading and provides a glimpse of the total value that HFT may provide to behemoth PT powerhouses such as Goldman Sachs. The article presents a very valuable perspective on just why HFT is so critical these days, especially when cash traders go for 6 hour Starbucks breaks between 10 am and 3:30 pm: "high frequency trading firms, which represent approximately 2% of the 20,000 or so trading firms operating in the US markets today, account for 73% of all US equity trading volume. These companies include proprietary trading desks for a small number of major investment banks, less than 100 of the most sophisticated hedge funds and hundreds of the most secretive prop shops, all of which operate with one thing in mind—capture profit opportunities by being smarter and faster than the closest competition." And as the market keeps going up day in and day out, regardless of the deteriorating economic conditions, it is just these HFT's that determine the overall market direction, usually without fundamental or technical reason. And based on a few lines of code, retail investors get suckered into a rising market that has nothing to do with green shoots or some Chinese firms buying a few hundred extra Intel servers: HFTs are merely perpetuating the same ponzi market mythology last seen in the Madoff case, but on a massively larger scale. When it all blows up, the question is whether the SEC will go after the perpetrators of this pyramid with the same zeal that it pursued Madoff himself. We think not.

CIT Group Inc. says it sees ‘no appreciable likelihood’ of U.S. government support in the near- term. Talks with the government over aid have ceased, the company said in a Business Wire statement.