Ghost Exchange

CalibratedConfidence's picture

It's no secret that high-frequency traders and those who employ bad or manipulative algorithms are swimming in pools of money.  Most of these guys making complex statements for computers to follow aren't even financially inclined, most are physicists, aeronautics engineers, and quants looking to impose math upon the world instead of deriving it from the world.  This form of trading has reversed the flow of finance.  At one point the stocks that make up an ETF would move before the ETF.  Now because of the speed at which computers can freeze the stock prices, calculate what they should be worth as an ETF, then act on the ETF we have the derivatives moving the underlyings (page 19 of the document embedded below). 

This creates an ass-backward market which the speed traders fucking love.  This way all they need to do is focus on on ETF instead of a plethora of stocks by ribbing its order book and arbitraging the latency delay across the outrageously fragmented US market place.  And as this new form of Wall Street crank spreads (which is the never-ending desire to push the Universe's limits on speed), the integrity and respectable aire that surround American capital markets dissipates until trading and price discovery are left for the Jon Corzines, Hold Brothers, and Congress' of the world. 

The following trailer from Ghost Exchange contains ample interviews from Exchange heads, to pundits, with real traders from both sides in between.  This trailer has been remade from the one released just a few months ago because the producers were taken back by the responses from the Wall Street underground and decided to go back and include Eric Hunsader of Nanex and Harvey Pitt, the one time SEC head.  One key note I've pounded home is that the Themis crew are THE ONLY ones who are sitting in front of monitors, turned on, and connected.  Give this a view (click picture to go to VIMEO site) then swing over and purchase Broken Markets and let the experienced Themis boys bring the readers up to speed.

 

 

Machine vs. Machine