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 by Kevin Bunyan on Scribd

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Escapeclaws's picture

Fun video. Wish I knew who the speakers are aside from Harvey Pitt.

illyia's picture

Excellent information.

Thank you Tylers.

asteroids's picture

HFT is a tool. The real problem are the rules. The rules are broken. It leads to lawless behaviour. Unless its fixed. It will eventually lead to a disaster.

11b40's picture

The 2 are not mutually exclusive.

HFT should be banned, AND the rules should be both tighhtened and enforced.

What we have is not leading to "lawless behavior".  The lawless are in charge now and the disatser is fully underway.

MeelionDollerBogus's picture

WHY should HFT be banned? How about we ban quote-stuffing, really not just pretending, ban front-running, as in really jail people who do it rather than pretend it's a law/rule and not follow it (it's already illegal), and how about we actually really, not pretend, jail people for fraud?
You do all that and you'll see the HFT instability go away pretty fast.

Regular low-speed transactions are ALSO in danger, complete and total danger, from fraudulent balance sheets, total insolvency & over-leveraging that doesn't need any HFT at all. Leverage, speculation & capitalization levels are able to vary widely within the confines of the law, yet today that's apparently too "restrictive" for Fed/CB preferred markets.

Cut out fraud & other already illegal crime, actually enforcing laws & rules, and the tools are not so dangerous.

A flare is a tool. It can be used in a safe manner. Juggling it near the powder-kegs stored next to the nitroglycerin vats is NOT that safe manner. So let's just stop that.

Zer0head's picture

and by imposing their mathematical grid upon the world they enable those who wish to control it, whether it be financial markets or society at large - big data, calculations beyond the speed of thought and a population that is fast asleep- the opportunities are endless for the psychotically inclined

Tom_333's picture

Honestly this will go on until the US Ciwil War II get´s going...even then I´m not sure it will affect anything.The servers will sit that one out as well and just keep churning fiat zeroes

EnslavethechildrenforBen's picture

People still have money in the Stock Market?