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Work On Wall Street? Here's Why You Should Hate HFT - Santelli's Take On Vacuum Tubes
Yesterday's #Hash-Crash has brought the tough reality of just how entirely mechanized the so-called equity 'markets' have become in the US to every mom-and-pop who watch nightly news. Mainstream media is even discussing the correlations between JPY carry trades and equity indices now as CNBC's Rick Santelli notes "the high-speed casinos our markets have become". All things we have discussed for years. But there is one potentially fascinating insight from the ongoing robotization of the TBTF banking sector - Wall Street jobs are now at an all-time record low. Once again, it would appear, that cost-cutting demands (and a government backstop and huge subsidy no matter how bad the things are that you do) trumps any job creation. As Joe Saluzzi explains to CNBC's Rick Santelli in this excellent clip, the "liquidity is fickle" - the fake-tweet was a mere catalyst, he added, "we see these flash-crashes every day." The benefits for the major exchanges far exceed the conflicts of interest of these so-called "market-makers" who front-run their clients millisecond by millisecond.
"The desire is to drive the cost of executing a trade to its lowest point -- this means automating the system and getting rid of the traders."
Santelli's frustration on "the high-speed casino our markets have become"... "I can't believe this continues to happen. I thought [this would stop] after the flash crash."
Joe Saluzzi and Rick Santelli explain, in three minutes, what the SEC and CFTC seems incapable (or simply unwilling) of comprehending...
"We have all the diverse pools of liquidity that are real shallow - all owned by for-profit organizations like you mentioned. We used to have a market with deep liquidity with different types of investors. But now the liquidity centers get pierced easily because now it's the same trader and a lot of scalpers. We're seeing these flash crashes constantly and it's due to the structure. There is no doubt in our mind that the market structure that we developed over the last 15 years which was basically started by the SEC in the mid 90s has created this type of situation."
"Only 4% of the flow is coming from institutions - it's volume that is fickle."
So, let's get this straight; HFT provides no benefit of liquidity when it is most needed (as was clearly shown yesterday); pays no commissions; creates job losses; and increases volatility. But apart from that - the exchanges earn fees on the co-location centers...
As Saluzzi notes, perhaps the 'Stock' Exhcnages should be renamed 'Data' Exchanges...
Chart: Bloomberg
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and? this is news how? and the move to get out of paper and into physical, tangible assets continues...
At least with video poker you get free drinks.
One day in the near future it will just be hft and a ceo working in the company, everyone else won't be needed. We'll listen to Dimon, Blankfein et al on conference calls telling us how great the HFT programs are working sifoning profits and levitating markets permanently.
We'll listen to Dimon, Blankfein et al on conference calls telling us how great the HFT programs are working sifoning profits and levitating markets permanently.
That would be appropriate as they are among the last people to have any idea of how HFT works.
They're always going to layer the blame game on a junior anal-yst for algos gone wild, you doofus.
i will re-post this...yesterday when he was doing his walk setting up his segment, three guys were leaning against the rail without headsets or iwtfevers and when they got in camera range they started going old school like they were placing orders...except the orders they were giving were angered looks, along with a few italian fung gus and a few middle finger fuck yous...especially at the end when the guy looked straight into the camera and gave what i would assume was a sell order or fuck you....it was epic....
"HFT provides no benefit of liquidity when it is most needed" - of course not, markets are liquid when they are deep, and this HFT "stretching" of time makes them shallower
I find interesting that Santelli says "I expected this would stop" then this means he really expected self-correction. what the casino-called-Wall-Street would need is reform - the last thing that Wall Street currently wants
Exactly. Proven because the fix for this problem is as simple and straightforward as they come. EVERY TRADE COUNTS, NO EXCEPTIONS, NO CANCELLATIONS. Problem solved. Not gonna happen.
"The SEC started this ..." yeah, that's the ticket. The banks and brokers fought like crazy to stop this idea... not!
Their will be reform when the day traders in the house and senate lose thier shirts from a HFT program gone wild that drives prices down by 50% in a few hours/days. The SEC will naturally blame this on a hacker from china or russia and make Goldman and JPM pay a small fine and create some tighter regulation so this doesn't happen again. We will also get to see Dimon and Blankfein get yelled at on national TV by those great representatives which always look out for our interests.
God Bless America
"Data exchanges" = YES
Hal 9000, The Terminator, Robby the Robot - in a room - "beep-boop-beep", "click", "whir", blinking lights.
"I'm sorry Dr. Krugman, I can't do that right now".
beedeebeedeebeedeebeedee ok boss!
Don't forget Johnny-5.
Twiki meets his match...
http://www.youtube.com/watch?v=yptoaCKZ0Tw
a currency crash has a bit more implications than a stock crash. we are one step away from a full fledged disaster. strangley enough, the euro/XXX currency pairs ect... were not effected. only those associated with the JPY. this is strange to me i cant quite put my finger on it.
I also found it strange no one sold (or purchased) PM's (paper, of course) or the like but instead only dumped stawks...
yes very strange indeed. looking at the GLD gold ETF, it appears on my chart that it was not effected. wouldnt the algos be programmed to BUY GLD on panic news? seems like gold is being completely taken out of the equation (Paper gold that is)
seems one could (proably incorrectly) extrapolate that HFT'ers programming indicated what has value and what is overvalued by what was and was not sold? the programming is not random and may be telling...or not.*
*Fuck if I know.
yes my sentiments too. unfortunately only TPTB only know the answer to this. but intrigueing to say the least. soon enough tey will screw this game up FUBAR style and tip their hand. maybe then, the general public will wise up.
What I find disturbing is that the Stawkbotz viewed the AP Hack-tweet as bad newz and started selling stawks...
One of those implications is that money finds a place to go-- other than into other money...
- Newton's Third Law
Over the years I made a lot of money shorting the markets at several critical times.
I will not be doing it when the oppotunity arises this time.The action yesterday proves
without doubt that the next crash will be bidless,and no counterpaarty will be able to
pay on options, or anything else for that matter.
Russian roulette with all chambers loaded.
That's been my take for sometime. The market will simply vaporize in overnight trading.
Joe Saluzzi and Sal Arnuk are top guys in my book.
DavidC
.
To those who have not yet succeeded
HFT programers needed
It's a great deal
We train you to steal
Morals should be unimpeded
The Limerick King
Ah, I love this one. Thanks for all the great images. They are indeed superb! The mtgox panel seems appropriate here.
Banzai, that was beautiful!
"Joe Saluzzi and Rick Santelli explain, in three minutes, what the SEC and CFTC seems incapable (or simply unwilling) of comprehending..."
Or are they simply corrupt?
Not only do HFTs not take commission - they get PAID to trade. Well, at least when you're adding liquidity (i.e. limit order and not lifting or hitting the market).
In a casino the house always wins...
until it doesn't.
And some Syrian group claimed responsibility for the fake tweet.........yeah right....
the propaganda is so thick, one could cut it with a bit-coin
I am not familiar with trading forex myself, but I copy traders who also trade forex. I myself invest in gprecious metals and goldmining stocks. I think now is the time to buy them. They are dirt cheap now.
Miners will be eliminated as the banks and/or govs. take them over.
Hope you realize you're probably replying to a spambot...
It used to be they thought these flash crashes were bad...now its OK...nothing new..just "the way it is"....yesterday will start many many more of these..as those same computers will be used to hack into systems to play this game....there is a lot of money to be stolen with a 150 point drop on falsh info....just think if you could hack into Apples web page...or Tim´s tweets....easy money..and the tribe in NYC will do it over and over again..by this time next year hacking will be a daily trade....and the SEC will be looking at it of course...lol....
triple levered HFT crash etf coming soon.........
A triple Lindy?
I would love to hire one of the recently unemployed TBTF traders. I'm currently seeking to fill two positions: Crash Test Dummy and Punching Bag. The pay is $1.35 per day plus tips.
There's plenty of work for the unemployed traders, there's all kinds of part time minimum wage jobs out there.
I think we need to get some Mexican or Chinese farmer to do Santelli's job. Then when he refuses to compete with 2 bucks and hour he should be denied unemployment and forced to work 20 hours a week at Burger King. Let's see how the big mouth likes what he preaches.
When I was a trader all we did was make sure the technology worked so our clients could lose their money as freely as possible. I had no tech background and the writing was on the wall when they brought in the IT guys to build a platform to somehow make that job easier. It was stressful as hell sometimes, but not hard, and most days I just watched late night tv and tried to figure out why this was even a job.
Saluzzi stated 14% not 4% flow from institutions...just to set the record straight. Still....
As I've been saying over and over and over and over and over and over.
Stock market is a pure casino and poeple luuuuuuuve gambling, particularly poor people and middle class (who buys all lotery tickets?)
What have HFT and QE done:
They have priced out all gamblers. This is the same as a casino saying that the smallest chip would have to be $10k instead of $10.
Hence, do you want financial employment? No problem.
Make the DOW chip from 15k down to 4k- 6k. All suckers will come in and play.
Human labor is no longer the source of wealth. Government is the new source of wealth and the more closely connected you are with government the wealthier you get.
A primary reason why austerity works in the long run. These government workers who support the criminals in DC don't care about anyone else.
I think HFT machines are great. They create such a negative sentiment about the stock market that it opens the opportunity for more localized exchanges. Just a matter of time imo.
"opportunity for more localized exchanges"
Black markets suit me fine.
Please please please, consider to not disparage the venerable vacuum tube.
Certainly there must be a solid (sand) state device which may serve as the allegorical object for digital derision here.
After all, modern/contemporary computers are solid state devices.
Vacuum Tubez still have a place in my heart...
Minimum of 12 active in the sound system.
Maybe 30 in reserve.
Minimum of 12 active in the sound system.
Maybe 30 in reserve.
"Real liquidity" requires real fucking capital and real collateral. Good luck with that guys. All I see are paper promises.
Hopefully CONgress will revamp the tax code so that short-term capital gains are defined as 50.0 nanoseconds (ns) or less and taxed at the full tax rate while long-term gains are defined as 51.0 ns or more and taxed at 20%.
America... fuck yeah!
Rolling rolling rolling keep them doggies rollin.
The more fallout the better chance of bringing them to justice.
The more fallout, the more dependent the sheeple are on the state for sustenance, thus chances of justice decrease as the sheeple give in to the criminal state so that they may eat today.
What you say is true only within an environment where gov. does NOT yet have the population in a strangle hold. As evidence, I offer the "sequestration" where one can see very, very targeted "cuts" in order to make the masses (or should I say, "them asses") cry uncle.
I am reminded of Jim Rogers' warning that those guys should start learning to drive tractors rather than Lambroghinis.
Let's do an IPO on congress and the presidency. While you at it, supreme court too. They are trading stocks and bonds, making money one way or another. IRS too. IRS has cash flow, it will be a great one. This is capitalist free market, is this not?
Nature abhors a vacuum tube.
Saluzzi is a smart dude
Robots do not need a share of the bonus pool. Layoffs increase the slice of the pie for Dimon, et al.
So its back to open outcry under a Buttonwood tree?
(That was quickly killed by signals from clerks in windows of overlooking offices where those damn new-fangled private telegraphs had been installed.)
The govt is 100% responsible. As soon as they moved to penny pricing they moved the incentive for trading desks to take risk. There is no spread. The move first started with computers just updating the bid/ask since they move so often that its stupid for a human to do. Then this moved to some "intelligence" as to bidding and asking to scalp for a few pennies. This then evolved into HFT.
It will only end when there is a massive drop and there is no liquidity. Stocks bid at 30, offered at 70 type thing, last trade 56. Any time you get a flash like yest the bids/offers are removed. HFT only provides liquidity in normal market action. There is no guarantee they will be there (and they wont) if some event occurs.
The specialists were paid to always be there. The market makers were paid to always be there also through the spread. There are no more market makers. Specialists are there but really do not do much anymore.
Another side effect of removing traders is you have removed any and all opinions on risk - meaning the market used to be a pretty good barometer of risk. No longer. The HFT are in there day to day to scalp and make money. They do not assess anything. They do not think. They react to correlations that are created by other HFT but the correlations have no real causal relationship. It is there just to be traded. This creates a massive time bomb just waiting to happen. Right now Ben has the markets back - but it will not always be that way.
Santelli needs to tie QE into his segment when he talks about HFT. Bring up the reason why a person would want to invest in the market (ZIRP). Now we all know Santelli is against QE and Fed involvement in the market, but he should have tied it together. He said the government is not the solution, but also said it was better before the exchanges were publicly traded companies. Rick needs to make his mind up (regulation or no regulation).
Was there a stock market before the retail investor entered the market place? Yes. Will there continue to be a stock market without the Federal Reserve? Most likely. Without the interest rate being ZIRP, I don't think the interest rates the average bank account holder has would be too much higher. The economy died after the last financial collapse and the banks are too nervous about lending out money for a significant rise in interest rates to occur. They have no desire to see a repeat.
Now you could certainly argue that without any government involvement (no TARP and no Fed) that the market would have found a bottom, but the entire banking system would have collapsed along with it. The FDIC would have been insolvent and would not be able to pay out depositers' funds. So there would be a deflationary collapse (which is not a bad thing) and interest rate would still be very low. Meaningful economic activity would have taken years to occur and it would have taken years to claw our way out of this mess and it would have been just as ugly.
Without TARP, we would be in a depression, with TARP we are in a depression. The only difference being that the TBTF's are propped up and do not have to answer to anyone when they cheat to make their earnings. I will take no government bailouts (TARP and QE) any day of the week.
The biggest problem with HFT is synchronisation via Game Theory.
The opinions in the market are less diverse than they were 10 years ago and that makes the whole market more fragile and less resilient.
The thing about capital allocation via markets is that the majority opinion always wins no matter if it is correct or not.
So HFT is slowly learning to act in concert.
Also, HFT systems are developed with backtesting, so the more flash-crashes make it into the historical record the more HFT will learn to spot and join the flash-crashes. There is a distinct positive feedback loop for these episodes becoming more frequent.
No need for Traders perhaps, but a big need for salespeople who con retail investors to feed the ponzi scheme.
Derivatives Specialist: $14 hr, contract, I shit you not:
http://aol.careerbuilder.com/JobSeeker/Jobs/JobDetails.aspx?APath=2.21.0.0.0&job_did=J3J46Y63S7BR7GH5MK6&showNewJDP=yes&IPath=JRM0E
I'm just afraid of the time when these hft algos start having a chat with one another and become self aware...
SKYNET IS HERE MUTHAFUKKAS