Sucking 'Em Dry Bitchez

CalibratedConfidence's picture

The Industry Super Network released a study recently regarding the long-term effects of HFT "activities" on regular Mom and Pop investors highlighting a conservative range of loses between $1.6bn to $1.9bn annually.  This slow bleed is driven through,  well,  payment-for-order-flow which revolves around a desire to internalize (reference Part 2) various generic, simpleton style order types, you know the limit and market orders (See Rule 606 Reports).  As different brokers sell order flow, order-types not available to their front end clients are being used by their back end clients to pick off sub-pennies at a consistent level

The following chart will show:

  • Group A: Non-HFT investors (Investor A) whose orders are filled and thus receive price improvements from HFT.   
  • Group B: HFT who can quote up to four decimal points.   
  • Group C: Non-HFT investors (Investor B), whose orders were stepped ahead of by HFT, this group is left with unfilled orders.

And with this comes Jim Cramer (have you heard of his Charitable Trust?) and his gems of advice because after all, he's not here to make friends, he just wants to make money.  Via the shill outlet that is CNBC:

Individual investors should put limit orders, not market orders, underneath their favorite stocks. And he thinks corporate treasurers should make sure their buybacks have orders at every price down....Since the government has repeatedly endorsed high-frequency trading, Cramer said, it doesn't matter if it produces no value.

Now Cramer has even admitted that he has researched HFT very deeply and that even was claiming on May 6, 2010 that people should be buying Proctor and Gamble, although he had no idea the prices he was seeing, were anywhere from 30 seconds to 80+ seconds old (also note the video you can play, the evidence and times are right there, see for yourself).  Note in the written CNBC piece he mentions nothing of the order-types or the potential detriment to the integrity of Best Execution practices.  Anyways back to the May 6, 2010, during all this mayhem, people with the proper systems and with the orders-types coded into their platforms (because All-Or-None-Post No Preference Blind Limit Orders aren't offered standard on any Scottrade or or otherwise generic retail broker) take advantage of these "limit orders" because the price thresholds are now well known.  Given the performance of the NYSE Arca Equities Order Type Usage, it would be a safe to bet that Mary Jo won't try to stop this from continuing any time soon, regardless of the NASDAQ complete and utter fuck-up of the Facebook, Fleecebook, Fadebook IPO.   Bravo again to Jim for his expert work in helping people make money, just not the people he claims, not his viewers, another P.T. Barnum Show folks.  Good thing this one hasn't shown he is running a business taking subsidies from the Connecticut government based on the number of employees he has, hat's off to you too Keith McCullough.

Anyways, enjoy the read, it's a real stitch.  It's not very long and there are a couple pretty charts but one stands out to be particularly helpful:

Watch your back:


Fair Game or Fatally Flawed by calibrateconfidence

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orangegeek's picture

if you are in the scalping game, your battle is difficult.


If you trade dailys, this is not as significant.


This melt-up market is another story - the trend is counter intuitive - but then again, that's the markets.

Mediocritas's picture

Report is absolutely correct. I've been watching this sort of shit happening for years (first noticed my own fills degrading around the time of Island ECN appearing). There was a time when you could place a limit bid above the inside ask and have it fill up to limit (before sitting) with a partial fill at an averaged lower value than limit as you hit the stack on the way up. Try that now and I guarantee that every trade will occur right at limit despite there being a clear stack of orders below it. For managers who have to move volume on a clock, they have little option but to be fleeced this way and regulators couldn't care less: easy, easy money for the bots.

Nice to have a round number to quote on it.

What riles me the most is that, all across the OECD, peons have been forced into getting fleeced this way thanks to legislated compulsory superannuation because, you know, we're all too stupid to put something away for the future so it has to be mandated. One huge gift for the parasites, front-running the big, dumb compulsory flow that streams in from workers' pay-checks every day and has to be committed to purchases by managers who get paid on volume and settle for bad prices because it's not their money and a year end volume bonus awaits. A huge lumbering beast covered by nimble parasites sucking its blood.

The Oz government has now committed to increasing compulsory superannuation to 12% (to offset the change in flow as boomers cash out), and you can bet it's going to 15% after that. Dead heads cheer it as a victory for the little workers as employers have to stump up the extra cash. I get blank stares or hostility when I point out that employers will just employ fewer people, avoid payrises, pass on costs, etc, to avoid the hit and that, ultimately, the extra money being socked into super is just pumping up the parasites guts even more.

The Globalist / financialist superannuation agenda was/is the primary feeder for the shadow banking system. Suck money out of tranditional banking that may have been set aside for retirement or a rainy day, force it into investments where it no longer serves its old role as a basis for traditional credit extension. Inevitably that slack gets taken up by the shadow banking system's evolution into a provider of credit from the new "novel" sources, minus all the regulation that was refined from decades of traditional banking experience. What could possibly go wrong?

Superannuation may have arisen from good intentions but as they say: "the road to hell is paved with good intentions". Time to turn off the hose.

WTFUD's picture

It is blatantly obvious that Crambo and LiesMan are inside shills and recieve the biggest retainers from the bankstafed sludge. The look of awe and admiration from their colleagues, hanging on to their every word is sososo fucking funny iza gotta laugh.
It's pitiful /amusing that such a circus could induce any sane individual to Gamble one dollar in this rigged casino.
On HFT being legal with no sec/cftc lockdown serves as good warning to individuals and is a wonderful indicator as to the desperation and complicity rife in the system. No need for the warning danger jargon on the fag packet.

Ted K's picture

My favorite CNBC video of ALL TIME (well, 2nd favorite next to the Jeff macke on-air meltdown). Just press the play button after the link jump. Check it out and see, can you tell who the 2 biggest idiots are???? HINT: It's not the longest term CNBC veteran:

WTFUD's picture

Cramer''s a right cunt But he would be great invitee to any party for his sheer energy and enthusiasm in direct contrast to the sober or sombre Bernanke ( although never judge the book ). Like some of the great actors/ comedians ( leonard rossiter, tommy cooper etc ) he will pop his clogs live on stage.

otto skorzeny's picture

Any article with "bitchez" in the title is alright w/ me- bitchez

ebworthen's picture

Cramer this week was apologizing for a stock he recommended repeatedly for taking a beating and said: 

"A lot of people are mad at me about this one, I'm getting all sorts of angry Twitter comments and emails, all I can do is say I'm sorry, and that my charitable trust still owns it and will hold it."

Gee thanks Cramer; do YOU own it?  Did YOU buy it?  Did YOU sell it?

I wish I could remember the stock.

WTFUD's picture

I propose two candidates for the Benito Mussolini Garden Gnome figurines Or doorstop lookalikes;
1. Jim Cramer
2. William Hague

Ban KKiller's picture

How many ways from Sunday can the free market be rigged?

Free market?

steveo77's picture

Impeach Cramer!

DeadFred's picture

I really hope Cramer isn't going to be another Krugman and get more time on ZH than he deserves. I really really hope we don't get Krugman AND Cramer.


Just ignore them and they'll go away.

Stuck on Zero's picture

If you issue market orders you are toast.  You'll lose 5% immediately.  If you use limit orders you are screwed by flash trades.  Lets say you issue a limit sell a $45.00 of some stock that trades around $50.00.  Bingo.  Your friendly trader will flash trade at $45.00 and it's gone and the market is back to $50.00 in one millisecond.  Same with sell limit high. You are screwed.  Get all your money out of Wall Street.  Buy a farm, rent a building, just get your money away from the bandits.


AgLand's picture

I literally 'bought the farm' and couldn't be happier.

willwork4food's picture

I take great comfort in knowing our money finally went to a good home. Pass the spam please.

Motorboat's picture

Is Cramer Jewish? Are we allowed to ask the question here at Zero Hedge?

CalibratedConfidence's picture

you are allowed to use the internet to look up things for yourself:

Colonel Klink's picture

Hahahaha, I love it when it's stated to proudly in the first sentence.  Basically in YO FACE!  Yet us goyim aren't allowed to discuss it or we're racis or anti-seminal or somethin. (sic)

otto skorzeny's picture

CNBC shoul be renamed Tel Aviv Business Channel w/ all of the fucking yids on it.