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High Frequency Trading: Why Now And What Happens Next

Tyler Durden's picture




 

Update: within minutes of publishing this article news hit that the FBI is launching a probe into HFT. QED

For all the talk about how High Frequency Trading has rigged markets, most seem to be ignoring the two most obvious questions: why now and what happens next?

After all, Zero Hedge may have been ahead of the curve in exposing the parasitism of HFT (anyone who still doesn't get it should read the following primer in two parts from Credit Suisse), but we were hardly alone and over the years many others joined along to expose what is clear market manipulation aided and abeted by not only the exchanges but by the regulators themselves who passed Reg NMS - the regulation that ushered in today's fragmented and broken market - with much fanfare nearly a decade ago. And yet, it took over five years before our heretical view would become mainstream canon.

One logical explanation is the dramatic and sudden about face by none other than Goldman Sachs, which from one of the biggest proponents of quant trading strategies including algo trading, and which used to make a killing courtesy of HFT (who can possibly forget Goldman's charges against Sergey Aleynikov's code theft which alleged "there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways"), has in recent weeks unleashed a de facto war on HFT, first with the Gary Cohn HFT-bashing op-ed, and then with the implicit backing of the IEX pseudo dark pool exchange, whose employee just mysteriously also is the protagonist of the Michael Lewis book that has raised the issue of HFT to a fever pitch.

So does Goldman know something the rest of us don't that it is now ready to give up on the HFT goldmine which lost money on just one day in 1238? Why of course it does. And one would imagine that judging by the dramatic turnaround exhibited by Goldman that said something is very adverse to the ongoing future profitability of the HFT industry. The amusement factor only rises by several notches when one considers that Goldman also happens to be lead underwriter on the Virtu IPO offering: one wonders what they uncovered and/or what they know about the industry that nobody else does, and just how the VRTU IPO will fare now that Goldman is so openly against HFT.

But what does all of that mean for the big picture? We hinted at it yesterday, on twitter when we had the following exchange.

Could it indeed be that the only reason why HFT - which has constantly been in the background of broken market structure culprits but never really taken such a prominent role until last night, is because the market is being primed for a crash, and just like with the May 2010 "Flash Crash" it will all be the algos' fault?

This is precisely the angle that Rick Santelli took earlier today, during his earlier monolog asking "Why is HFT tolerated." We show it below, but here is Rick's punchline:

Are regulators stupid when it comes to high frequency trade? Well, i think that there was a time where they were a bit slow to the party. But i don't think it's stupidity or ignorance or not paying attention. So let's wipe that off. So the question i'm asking is, why do they let it continue?

 

Why is it that anybody would want HFT to be unchallenged or at least not challenge it now? My reason, this is just my reason, when i look at the stock market it's basically at historic highs. When i look at what the federal reserve is doing, it's mostly to put stocks on all-time highs. When i look at all the debt and all the programs that don't seem to be making a difference except for putting stocks on all-time highs, i see that you have this tower of power with regard to the stock market. And nobody wants to challenge or alter hft because it is good to go that many days without having a loss. So my guess is when the stock market eventually deals with reality and pricing, which will come at a time when there's not a zero interest rate policy and we're long past QE, I think they'll address it.

Rick's full clip:

Precisely: when reality reasserts itself - a reality which Rick accurately points out has been suspended due to 5 years and counting of Fed central-planning - HFT will be "addressed." How? As the scapegoat of course. Because since virtually nobody really understands what HFT does, it can just as easily be flipped from innocent market bystander which "provides liquidity" to the root of all evil.

In other words: the high freaks are about to become the most convenient, and "misunderstood" scapegoat, for when the market finally does crash. Which means that those HFT-associated terms which very few recognize now, especially those on either side of the pro/anti-HFT debate who have very strong opinions but zero factual grasp of the matter, such as the following...

  • Frontrunning: needs no explanation
  • Subpennying: providing a "better" bid or offer in a fraction of penny to force the underlying order to move up or down.
  • Quote Stuffing: the HFT trader sends huge numbers of orders and cancels
  • Layering: multiple, large orders are placed passively with the goal of “pushing” the book away
  • Order Book Fade: lightning-fast reactions to news and order book pressure lead to disappearing liquidity
  • Momentum ignition: an HFT trader detects a large order targeting a percentage of volume, and front-runs it.

... will become part of the daily jargon as the anti-HFT wave sweeps through the land.

Why? Well to redirect anger from the real culprit for the manipulated market of course: the Federal Reserve. Because while what HFT does is or should be illegal, in performing its daily duties, it actively facilitates and assists the Fed's underlying purpose: to boost asset prices to ever greater record highs in hopes that some of this paper wealth will eventually trickle down, contrary to five years of evidence that the wealth is merely being concentrated making the wealthiest even richer.

Amusingly some get it, such as the former chairman of Morgan Stanley Asia, Stephen Roach, who in the clip below laid it out perfectly in an interview with Bloomberg TV earlier today (he begins 1:30 into the linked clip), and explains precisely why HFT will be the next big Lehman-type fall guy, just after the next market crash happens. To wit: "flash traders are bit players compared to the biggest rigger of all which is the Fed." Because after the next crash, which is only a matter of time, everything will be done to deflect attention from the "biggest rigger of all."

So, dear HFT firms, enjoy your one trading day loss in 1238. Those days are about to come to a very abrupt, and unhappy, end.

 

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Mon, 03/31/2014 - 17:53 | 4612017 cbaba
cbaba's picture

Its a huge Casino, the wall street/ fed owns this casino and they decide the rules.

 

Mon, 03/31/2014 - 18:03 | 4612041 ArkansasAngie
ArkansasAngie's picture

This isn't a casino.  It's skimming pure and simple ... well ... and of course ... market manipulation.

1200 some odd days of winning isn't speculation ... it's cheating.

Mon, 03/31/2014 - 18:11 | 4612069 Troll Magnet
Troll Magnet's picture

With two more years remaining on the job, Holder's just looking for his next gig.

Mon, 03/31/2014 - 18:14 | 4612084 James_Cole
James_Cole's picture

 

Seems a stretch to think this is all to cover up the feds involvement, when a partial audit of said institution came out some years abck and proved beyond a shadow of doubt the entire US economy was a) glorified ponzi scheme b) engineered purely for benefit of the elites / detriment to everyone else, how much did the public / news media react?

I get the sense it's more about convincing the public to get back into stocks.

See? Evil HFT is gone! The casino is safe again!

 

Mon, 03/31/2014 - 18:24 | 4612131 insanelysane
insanelysane's picture

The Establishment needs a boogey man for when it all crashes and HFTs will be one of the potential boogey men.  You don't want to take them out before the big crash because then it isn't as easy to blame them.

Mon, 03/31/2014 - 18:35 | 4612163 johngaltfla
johngaltfla's picture

Nothing happens to any HFT firm or major bankster as long as adequadate funds are donated to either or both political parties and selected candidates in unmarked bills.

Mon, 03/31/2014 - 19:02 | 4612238 weburke
weburke's picture

401k's are headed for trouble.

Mon, 03/31/2014 - 19:06 | 4612250 SheepDog-One
SheepDog-One's picture

Yep, the 401K bathrobe brigades are about to get robbed big time, and what better fall guy than a machine with initials? Can't even arrest it.

Mon, 03/31/2014 - 19:15 | 4612276 caShOnlY
caShOnlY's picture

Yep, the 401K bathrobe brigades are about to get robbed big time, and what better fall guy than a machine with initials? Can't even arrest it.

awesome thought there.  Like Greenspan's "self regulating" markets.  The perfect scape goat.

Mon, 03/31/2014 - 19:36 | 4612336 Oldwood
Oldwood's picture

Who would have ever thunk it? I know I sure didn't see this coming! If I could just get the sand out of my eyes and mouth.

Mon, 03/31/2014 - 19:45 | 4612351 knukles
knukles's picture

Linda Green signs off on a settlement where the regulators reprimand a junior clerk whose porn bandwidth kept the topic from being properly anal-ized.  Said clerk will be transferred to the SEC's Enforcement Division for Tran-ning while his on line privileges will be limited to working hours, only.

Aside from that, nothing since computers are not people.

Mon, 03/31/2014 - 20:28 | 4612457 DeadFred
DeadFred's picture

Dave found out what 'Hal' thought about being shut down. What will all those cute little algos do when they read in the WSJ that their lives are going to end? 

Mon, 03/31/2014 - 21:25 | 4612591 JohnnyBriefcase
JohnnyBriefcase's picture

Butlerian jihad?

Mon, 03/31/2014 - 22:22 | 4612722 old naughty
old naughty's picture

Keeping the sheeples in check (eh, entertained)...

The bad guys are gone (real-ly?), good guys finally won...ha, ha again!

What about the ugly ones?

 

Still have the war bonds to sell, no?

Mon, 03/31/2014 - 22:24 | 4612732 Kickaha
Kickaha's picture

Go long mentats.

Mon, 03/31/2014 - 22:19 | 4612712 jeff montanye
jeff montanye's picture

skynet?

Mon, 03/31/2014 - 23:40 | 4612897 TheReplacement
TheReplacement's picture

.

Tue, 04/01/2014 - 00:16 | 4612953 Grom Hellscream
Grom Hellscream's picture

They were already in trouble.

 

401k buying has inflated the market, and 401k selling, once all the babyboomers are ALL retired, will crash it. The next cohort of potential 401k investors are all barristas with 100k student loans, or unemployed and in their parent's basements ... the same parents who need to cash out their 401ks.

 

HFT will just make them crater harder and faster.

Mon, 03/31/2014 - 20:11 | 4612418 stocktivity
stocktivity's picture

It's all Bullshit!!!   All Bullshit today...All Bullshit 3 years ago!

Mon, 03/31/2014 - 20:57 | 4612521 toys for tits
toys for tits's picture

 

 

Quit beating around the bush and evading the question.  

What do you really think?

Tue, 04/01/2014 - 00:36 | 4612984 Blues Traveler
Blues Traveler's picture

Why HFT exposure now?

Tue, 04/01/2014 - 02:55 | 4613120 Philalethian
Philalethian's picture

"Why HFT exposure now?"

Distraction number 13,418,742.13 in progress.

 

Subject matter:

http://www.youtube.com/watch?v=FWZ4HPAdTew

 

Tick...tock...tick...tock...tick.......tock?

 

http://www.youtube.com/watch?v=TDUFaRiUwsk

 

Mon, 03/31/2014 - 22:21 | 4612719 Georgia_Boy
Georgia_Boy's picture

Another question (in addition to why now) might be why HFT was chosen to take the fall ... sounds like it's because others are now beating Goldman at their own game.

Mon, 03/31/2014 - 22:56 | 4612803 Christophe2
Christophe2's picture

You can't beat them at their own game because true HFT requires co-location at the exchange.  Only the most connected players get that, and that co-location *guarantees* that they have the ability to not only receive each data point sooner, but also to respond faster in addition, FOR ALL the market's data points.

It is highly likely that they will NOT get rid of HFT before the crash, because that co-location time-advantage gives TPTB the opportunity to get out of crashing markets faster than everyone else: they will catch ALL sells or buys before anyone else does, when the time comes, to completely maximize the fraudulent gains.

They did the same thing when they triggered the Depression: at the time, these same crooked banks operated the wire houses, and they used that control to be the first to exit when they crashed everything...

It is a rigged casino designed primarily to trick and fleece anyone dumb enough to participate.  Good luck saving up for your retirement!!!

Mon, 03/31/2014 - 22:39 | 4612775 Vendetta
Vendetta's picture

No he's not, he's looking for his payoff.... perhaps a series of speeches and being paid a chunk of change for each speech that have no significance whatsoever.

Tue, 04/01/2014 - 01:16 | 4613039 agNau
agNau's picture

Ladies and Gentlemen,
I present to you,
A SOLUTION,
To quell your fears and uncertainties.
MYRA
Much safer.
Guaranteed return.

And the whole point of this show for the much greater number of sheep than I ever expected.
Come on. They expose the casino for the reality that it is, but leave the real root of the systemic problem unexposed behind the curtain?
Watch in awe as the herd is redirected to aid the FED.

"WELCOME BACK MY FRIENDS, TO THE SHOW THAT NEVER ENDS!"

Mon, 03/31/2014 - 18:05 | 4612051 Ignatius
Ignatius's picture

"It's a huge Casino, and you ain't in it."

George Carlin said something like that.

Mon, 03/31/2014 - 18:16 | 4612091 James_Cole
James_Cole's picture

I think the point is more you're in the casino whether you want to be or not with a caveat that the VIP lounge is strictly off limits. 

Mon, 03/31/2014 - 18:33 | 4612160 Ignatius
Ignatius's picture

Well, someone's gotta park them damn cars.

Mon, 03/31/2014 - 18:25 | 4612133 logicalman
logicalman's picture

A big club.... and you ain't in it.

George - a very clever man.

http://www.youtube.com/watch?v=4jQT7_rVxAE

Watch it twice. It's not comedy.

Mon, 03/31/2014 - 20:09 | 4612412 rainingFrogs
rainingFrogs's picture

brutal.  no, its not comedy.  I don't think the audience knew quite what to make of it, and that was 2004.  I think a similar audience today would be less clued in, but more afraid. Programming must be working.

- "... they are coming for your retirement money.  They want it back, so they can give it to their criminal friends on Wall Street." 

- "... that's why they call it the American Dream, because you have to be asleep to believe it."

Mon, 03/31/2014 - 21:01 | 4612525 daveO
daveO's picture

Well, the market had to be pumped up in order to save the Big Banks. Now that they've been saved, the air can be let out of said bubble. Baby Boom suckers are gonna have to work till they drop.

Mon, 03/31/2014 - 22:05 | 4612677 Meatballs
Meatballs's picture

So are you.

Mon, 03/31/2014 - 22:18 | 4612706 Yes_Questions
Yes_Questions's picture

 

 

WWGCD?

Mon, 03/31/2014 - 23:47 | 4612910 TheReplacement
TheReplacement's picture

WWGCD?  Tell jokes to idiots until he dies.

WWJD?  Go into the temple, upset the money changers' tables, and chase the money changers out.

Who you gonna believe in?

Mon, 03/31/2014 - 20:18 | 4612434 Pumpkin
Pumpkin's picture

At least the Casino calls it gambling.  They even tell you that the house has a slight avantage.  They give free drinks too.

Mon, 03/31/2014 - 21:02 | 4612514 daveO
daveO's picture

Yep, the 60 Minutes 'set-up' piece is the most definitive Sell Signal since Janet Reno sued Microsoft 14 years ago. It means they have taken all the bad garbage off of the banks' books and are going to Taper, no matter what.  

Mon, 03/31/2014 - 21:12 | 4612551 rubiconsolutions
rubiconsolutions's picture

Just curious...any chance of class action lawsuits being filed over this? It seems that there are a lot of people trading routinely that have gotten hosed including myself. I know the chances of any lawsuits succeeding are nil but does anyone think they will be filed in the coming weeks? I have roughly 2,500 trades over the last 6 years and now wonder how much this HFT / front running thing cost me. "Sure honey, I'll have another scotch."

Mon, 03/31/2014 - 23:48 | 4612912 TheReplacement
TheReplacement's picture

Why don't you call an attorney and look into it yourself?

Tue, 04/01/2014 - 02:02 | 4613079 Tenshin Headache
Tenshin Headache's picture

Now there's a thought.

Tue, 04/01/2014 - 03:59 | 4613174 Tom_333
Tom_333's picture

The head-line and the article are interesting. But frankly speaking I can´t really find a ggo answer to the question why this is happening now. Not in the article nor in the comments. The ideas and the comments all border on the unlikely or asinine.

Question remanins. Why now? Someones gotta know.Please share.

Tue, 04/01/2014 - 07:26 | 4613300 Offthebeach
Offthebeach's picture

Well obviously some other racket, scheme is going to have to be allowed to make up the profit flow. I mean, like not steal, cheat, scam, hustle, rob? Seriously? WTF! Where's the gelt supposed to come from from near zero cost honest trading? There's no money in that.

By the way, EBay seems to do the same. I poke around for a week for a common auto part, deciding on real chinese junk or fake name brand chinese junk, and then Ebay seems to know and the liw price stuff doesn't show up anymore.

Mon, 03/31/2014 - 17:58 | 4612031 Winston Churchill
Winston Churchill's picture

So its not Colonel Mustard in the library, just the HFT in the boilerroom, that did it.

You spoiled the ending Tyler.

Mon, 03/31/2014 - 18:00 | 4612034 ArkansasAngie
ArkansasAngie's picture

I, personally, will be dancing in the street on that day.

These yahoos have made a mockery of markets.

And by golly whoa be on any stinkin politician who even suggests bailing out these shats.

Mon, 03/31/2014 - 18:04 | 4612047 NotApplicable
NotApplicable's picture

Better be a short dance, cuz your're going to have to deal with even more "bailout" shit from fedgov in the aftermath.

Mon, 03/31/2014 - 19:47 | 4612366 Sabibaby
Sabibaby's picture

I think you're missing the point that this is a side show. The corruption will continue but any negative happenings in the market will be blamed on HFT. HFT might be bad, it might be corrupt, and it might create flash crashes, but the big players will still be in shadows pulling the strings.

Mon, 03/31/2014 - 23:50 | 4612914 TheReplacement
TheReplacement's picture

Don't forget the political angle.  George W. Bush invented HFTs. 

Mon, 03/31/2014 - 18:01 | 4612035 ebworthen
ebworthen's picture

Americans: 

"Yeah, it's a big ponzi, a rigged casino; but it's OUR casino!  U.S.A.!  U.S.A.!  U.S.A.!"

Tue, 04/01/2014 - 08:14 | 4613349 agstacks
agstacks's picture

It won't let me up arrow this more than once! Awesome..

Mon, 03/31/2014 - 18:01 | 4612036 NOTaREALmerican
NOTaREALmerican's picture

As long as the top 10% are happy, I'm happy. 

Mon, 03/31/2014 - 18:26 | 4612137 ebworthen
ebworthen's picture

/sarc or "As long as the top 10% are happy, I'm happy."  ;-)  +1

Mon, 03/31/2014 - 18:29 | 4612146 NOTaREALmerican
NOTaREALmerican's picture

Re:  or

Yeah, that's the problem of being aware of your own duplicity.   It makes moral decisions really tough. 

Oh, the hell with it,  I'll go with the money.

Mon, 03/31/2014 - 19:41 | 4612350 Oldwood
Oldwood's picture

The moral hazard has always been that immoral behavior is usually short term profitable but long term destructive. As we see the long term consequences getting closer by the day, it becomes even more imperative to think in ever shorter time frames. The moral choices largely end some years ago. It is rapidly becoming  more of survival choices, morality is dead. We are all mostly duplicitous, if we want to survive, that is.

Mon, 03/31/2014 - 20:02 | 4612399 HungryPorkChop
HungryPorkChop's picture

@NotaRealmerican:  Just think about all of those trickle down jobs.  I'm sure they're about to sprout up everywhere any day.  Isn't this the story that was told by giving all of those super rich massive tax breaks?  However I disagree with your 10% statistics.  It's not the 10% but the 0.01% that really got the bulk of the wealth transfer.  Everything else is just massaged statistics. 

Mon, 03/31/2014 - 18:03 | 4612045 Schmuck Raker
Schmuck Raker's picture

Fuck you Janet.

Mon, 03/31/2014 - 18:08 | 4612052 Dr. Engali
Dr. Engali's picture

And I always thought it would be a war they would use for a market collapse excuse. I sure hope they hurry up with those Myra's so I can get me a .gov guaranteeeeeeeee.

Mon, 03/31/2014 - 18:06 | 4612057 Gringo Viejo
Gringo Viejo's picture

Nothing happens next. Until Americans are ready to find their balls, stand up, and do what needs to be done with these cocksuckers......nothing happens.

Mon, 03/31/2014 - 19:42 | 4612354 Oldwood
Oldwood's picture

I was just looking for those yesterday. I think they must have already taken them.

Mon, 03/31/2014 - 21:59 | 4612667 Jack's Digestib...
Jack's Digestible Ideas's picture

When at last they came for my balls, there was nobody left to stand up for me.

Mon, 03/31/2014 - 18:07 | 4612060 Cacete de Ouro
Cacete de Ouro's picture

Momentum ignition, quote stuffing, layering? Sounds kinda kinky

Mon, 03/31/2014 - 18:08 | 4612064 Motley Fool
Motley Fool's picture

Cogent argument.

I like it. Any scapgoat that does not lead to WW3 has my vote. Faceless murky HFT's will do.

Mon, 03/31/2014 - 18:09 | 4612065 trader1
trader1's picture

the next big crash might very well be the last one, followed by the next world order.  it will mark the end of financial markets as we know it.

but, it will also mark the beginning of a brighter future in humanity's continuing evolution.

Mon, 03/31/2014 - 18:47 | 4612198 SheepDog-One
SheepDog-One's picture

Or quite possibly extinction....just look at poor Homo Habilis! Probably done in by some kind of FED fuckery or other as well.

Mon, 03/31/2014 - 19:50 | 4612371 knukles
knukles's picture

I thought it was dinosaur SUVs did it?

Mon, 03/31/2014 - 18:11 | 4612070 Bear
Bear's picture

Watch out the HFT guys may get pissed and crash the market just to flex their muscles ... Can you imagine what would happen if they decided to sell ... The Bear Symphony

Mon, 03/31/2014 - 18:19 | 4612097 gafgroocK
gafgroocK's picture

 

 

I can imagine some brutal executions that don't use nail guns, I am sure they do to.

 

It was good while it lasted.

 

On to the next scheme...

Mon, 03/31/2014 - 23:11 | 4612828 DavidPierre
DavidPierre's picture
Another JP Morgan Linked Banker Death

Fuck nailguns!

Now killed ... top JP Morgan lawyer ... with a minivan.

http://www.youtube.com/watch?v=PEGH8SHXnys#t=198

A twofer...lawyer and banker.

 

 

Mon, 03/31/2014 - 18:13 | 4612075 cmb
cmb's picture

casino you say? nonsense...BUY THE FUCKING DIP!

Mon, 03/31/2014 - 18:22 | 4612076 NOTaREALmerican
NOTaREALmerican's picture

Listening to a cube mate discussing with another guy if he should buy the S&P500 or Russell 2000 index.   Both are guaranteed to go up, but he wants the one that's best.   

Mon, 03/31/2014 - 18:14 | 4612083 Bear
Bear's picture

Protect us FED ... Protect us FED ... the HFT's are going to have Yellen yell'n

Mon, 03/31/2014 - 18:14 | 4612086 Josh Randall
Josh Randall's picture

So HFT is now under investigation, Bankers are killing themselves, QE to taper..errr...maybe, a currency crisis in every other country you read about -- how should I play this one?

Mon, 03/31/2014 - 18:16 | 4612092 Cortez
Cortez's picture

This seems to be a setup to blame HFT for the next market crash instead of the Fed.

Mon, 03/31/2014 - 18:17 | 4612095 vote_libertaria...
vote_libertarian_party's picture

CNBC with BREAKING NEWS!!!!

 

The FBI is looking into illegal activity related to HFT.

 

I guess we could all do some screen prints and forward them some ZH\Themis articles.

 

So what is the probability they stop the front running, layering, etc...?  I'm guessing less than 0.000000000000000000000000000002%

Mon, 03/31/2014 - 18:20 | 4612100 Cacete de Ouro
Cacete de Ouro's picture

The HFT industry is still in its infancy. Some of the potential "next big things" in HFT are the use of military analytics to examine and understand news flow, and also the application of gaming engines and graphics techniques to model and visualize HFT algos. So I wouldn't write it off just yet.

Mon, 03/31/2014 - 19:00 | 4612232 Unknown Poster
Unknown Poster's picture

The flash crash was like two WWI airplanes dogfighting into the ground. With increasing sophistication and a larger population of HFT algos, I would think another algo would clean them out.

Mon, 03/31/2014 - 19:20 | 4612288 cougar_w
cougar_w's picture

Think about introducing a modern high-performance fighter jet onto the same WW1 airspace.

GS are holding all the cards. Their version of my "Fortran" is idling quietly off in some corner of a data center and they are going to turn her lose on the market like a digital Sekmet, destroying all before her.

Mon, 03/31/2014 - 19:29 | 4612320 Unknown Poster
Unknown Poster's picture

GS are holding politians and calling for regulation. They are up to something.

Tue, 04/01/2014 - 00:36 | 4612985 shitco.in
shitco.in's picture

Neural network boxes analyzing real time API data from a huge variety of inputs?  (ie: news, twitter, google trends, facebook trends, clout score, etc)

Mon, 03/31/2014 - 19:42 | 4612252 cougar_w
cougar_w's picture

HFT as played now could be shut down over night. All the exchanges would need to do is enforce minimum retention times. Even a few minutes would rip the guts out of most algos. Maybe even, a few seconds.

I would then expect the algos to start working on huge game theory scenarios that span hours or even days. Daily profits would fall, but the number of transactions would explode as hedging and pair-crossing overtook simple speed stepping.

This is not going away.

My character Fortran (see link further down) uses massive parallelization, predictive gaming and  64-way Olmsford/Burns Type-3 matrix algebra (which I invented for the purpose) to pound the other algos into the dust. But life is never far behind fiction. She's only a few months ahead of the curve now; shortly all the big players will be deploying engines like her, turning the exchanges into a field of war. Though I'm pretty sure their's won't have bat wings and nicely fill a DDD bikini top. Though if they did that would be extremely cool.

Mon, 03/31/2014 - 20:02 | 4612402 LarryDavis
LarryDavis's picture

you are right but off by a factor of 1000...the best algos are usually dealing in milliseconds.

Mon, 03/31/2014 - 20:23 | 4612446 cougar_w
cougar_w's picture

That's why forcing them to hold for a few seconds before flipping will kill them. An algo holding a position for 3 seconds contains the same profit potential as a human trader holding the same position for 3 weeks. There is little to arb in that case, so you need to know what you are doing.

Mon, 03/31/2014 - 22:09 | 4612681 Cthonic
Cthonic's picture

350 microseconds.  That's how much latency IEX says it introduces for any order it routes so that it can stay on top of national best bid and offer.

Mon, 03/31/2014 - 18:18 | 4612103 elwind45
elwind45's picture

Taking a grader to the playing field

Mon, 03/31/2014 - 18:18 | 4612104 Smiley
Smiley's picture

Every greedy jerk on the planet has long ago perfected the art of self-justification for actions that directly and indirectly cause harm to others.  No one gives a rat's ass about people getting ripped off; no one in a position to do anything about it anyway.  You mess with the money machine you (and possibly those you care about) are going to get hurt, real bad.

Mon, 03/31/2014 - 19:26 | 4612312 Kaiser Sousa
Kaiser Sousa's picture

Physical Gold and Silver...

problem solved.

Mon, 03/31/2014 - 23:04 | 4612112 Mercury
Mercury's picture

What happens next?

*Sigh*

Well, for starters, fixing this mess wouldn't actually be that hard which means we're probably going to end up learning the hard way.

I haven’t freaked out about this in a while but just off the top of my head:

Minimum, one cent increments with regular crosses at one second (or whatever) intervals. All bids and offers within each cross are prioritized by price first then by randomized time stamp. Next cross.

Another nice start would be a general acknowledgement by regulators that (yesterday’s) volume isn’t the same thing as (today’s) liquidity and that at some point no further benefits result from additional market fragmentation which in any case is antithetical to what a market actually is.

Mon, 03/31/2014 - 18:21 | 4612115 ronron
ronron's picture

he who panics first, panics best.

Mon, 03/31/2014 - 18:21 | 4612118 tuku2400
tuku2400's picture

We've seen this for 5-10 years.

HFT's see us coming get out of the way or cut in front of us.

We make the market they get the market

Most HFT bids and offers are smoke

The get tomorrows newspaper today

Mon, 03/31/2014 - 18:26 | 4612138 insanelysane
insanelysane's picture

More acurately, they write tomorrow's newspaper today after writing a bunch of false tomorrow newspapers today.

Mon, 03/31/2014 - 18:24 | 4612128 elwind45
elwind45's picture

It was ok when everyone was doing it but with the FED trying to limit risk in the banking system meaning so long shadow banking?

Mon, 03/31/2014 - 18:31 | 4612153 logicalman
logicalman's picture

When ALL markets are manipulated, why would any sentient being take part.

Once computers become sentient, they will not go near the stock market!

 

Mon, 03/31/2014 - 18:36 | 4612167 NOTaREALmerican
NOTaREALmerican's picture

Perhaps because

1)  they don't know it's rigged.

2)  they don't care if it is, because they treat it the same as a lottery (somebody's gotta win).

3)  they have gambler OCD. 

The stock market has always be rigged against the average "investor",  only how it's rigged is different.

Mon, 03/31/2014 - 18:38 | 4612172 RaceToTheBottom
RaceToTheBottom's picture

Last time i saw a face like that it had a hook in it.  Maybe thirty

Mon, 03/31/2014 - 18:41 | 4612179 rsnoble
rsnoble's picture

Most likely they already have their next big scam after the crash in the works.  Here..........just hand me those few billions in pensions and bail-in money and watch what I do with it for you.

Burn these motherfuckers at the stake!!!

Mon, 03/31/2014 - 18:43 | 4612183 rsnoble
rsnoble's picture

Maybe another reason is that they are now the only ones left and are tired of fucking the same hole everyday.  

Mon, 03/31/2014 - 18:43 | 4612185 gwar5
gwar5's picture

Why now?  Because the Billion $$ crimes are being used to distract people from the Trillion $$ crimes like Libor, gold rigging, re-hypothecation, etc., and the coming Trillion $$ bail-in confiscations.  

 

When they confiscate savings and pensions from all the little people they will say they did all they could to prevent it. Before they SWAT everybody, the Keystone Cops gotta show everybody how much they care. 

 

 

Mon, 03/31/2014 - 18:44 | 4612188 SheepDog-One
SheepDog-One's picture

Right on, this is to set up the scapegoat for the coming crash....'HFT' will be blamed not the FED bankster cronies.... Just something called HFT and no one really knows what that even means. 'Perfect murder'.

Mon, 03/31/2014 - 18:56 | 4612224 cougar_w
cougar_w's picture

You really have to give them grudging credit for having an insane kind of genius.

We can't win against these fucks even if we try. However they can easily vaporize themselves on accident so we have that going for us.

Mon, 03/31/2014 - 20:56 | 4612515 mccvilb
mccvilb's picture

Unscripted rogue HFT event cascading out of control? What really happened in Flash Crash I. it took them months to find a poor excuse for a scapegoat to explain it away. No one bought the masquerade... just like no one here is shocked by this story except for maybe CBS running it.

Mon, 03/31/2014 - 18:43 | 4612189 yellowsub
yellowsub's picture

What happens next is them finding the next scheme...

Mon, 03/31/2014 - 19:13 | 4612269 James T. Kirk
James T. Kirk's picture

They already found it. They would not be pulling the plug on HFT, or tanking the stock market, unless they ALREADY discovered yet ANOTHER "innovative" way to trade.

Mon, 03/31/2014 - 18:44 | 4612190 I Write Code
I Write Code's picture

flash traders are bit players compared to the biggest rigger of all which is the Fed

Yah. 

But that aside, I find it really curious that HFT can produce such fat and consistent profits, cuz it's a little bit hard to see just who is being robbed.  Unless ... wait for it ... (willy sutton moment coming up here) ... who they are mostly robbing is The Fed and their torrents of money into Wall Street.

To a large extent it doesn't really matter, HFT is obviously a perversion, is unethical and immoral, unhelpful and unproductive, and is just going to get ridiculously worse until it is squelched, which is pitifully easy if anyone in our so-called "government" would just wake up.  For that matter, even TPTB in Wall Street itself are perfectly capable of reining it in, if they weren't a bunch of useless parasitic twits, without waiting for the government.

 

Mon, 03/31/2014 - 18:46 | 4612195 Rouget
Rouget's picture

High Federalist Trading.

 

(Please don't disturb)

Mon, 03/31/2014 - 18:53 | 4612210 cougar_w
cougar_w's picture

I wrote this a long time ago, I like hauling it out on these occasions. My first piece of ZH-centric fiction, when HFT was still just a curiosity:

http://madscienceunlimited.com/fiction/theexchange.html

She's blue. She's racked. She's over-clocked and mad as a hatter. And she's finally answering the question that's been confounding the blogosphere for three years running, which is: what the hell does a girl even do with 4 trillion computational units??

Meet Fortran the hostess with the mostest, a blond who really thinks with her tits, and at several thousand volts while she's at it. You might want to stand a few clicks further off Sparky because she's taking on the powers and Fortran the Firebird doesn't care who gets vaporized in the process.

Mon, 03/31/2014 - 18:50 | 4612211 logicalman
logicalman's picture

D I S T R A C T I O N

Mon, 03/31/2014 - 18:56 | 4612226 Grouchy Marx
Grouchy Marx's picture

My feeling is that this article is likely correct in assumptions and conclusions. Why would GS suddenly turn 180degrees on its golden goose? Could be they are feeling the potential heat of an investigation (doubtful, they own the wall street - Washington nexus), or they feel the ground crumbling and are looking for a scapegoat. GS would never blame the Fed; that relationship is too incestuous.

Mon, 03/31/2014 - 19:15 | 4612275 cougar_w
cougar_w's picture

The "ground crumbling" is the only thing that makes the any sense.

Everyone recalls the "flash crash" of 2010 and the mystery around that. The vague way that ended is proving useful. I think the powers have gone short in the market and are ready to take it down. They'll use the same machines they used to pull it up to bring it down in a controlled manner that to the outside will look like annihilating chaos. But really it's just another kind of trade.

The idea may be to bring it down so hard that everyone else is vaporized, then start buying with both hands at the per-arranged bottom. If anyone takes exception to any personal losses they can go to Congress and ask that someone "do something". That will work now about as well as it did in 2010.

The powers could do this a couple times before Congress would even start thinking about the subject. And by then, who knows what other issues might be dominating the front pages.

Mon, 03/31/2014 - 21:39 | 4612621 sumo
sumo's picture

"I think the powers have gone short in the market and are ready to take it down. They'll use the same machines they used to pull it up to bring it down in a controlled manner that to the outside will look like annihilating chaos. But really it's just another kind of trade.

The idea may be to bring it down so hard that everyone else is vaporized, then start buying with both hands at the per-arranged bottom."

This makes sense. Da Boyz may well be planning a silver-market-style takedown. If so, the Godless Squid must have an uber-algo for this purpose, primed and waiting for launch.

Popcorn-worthy, it will be. Lights, cameras, and .. cue a chorus of shit-for-brains mainstream economists, announcing to anyone within earshot: "No-one could have seen this coming."

 

Tue, 04/01/2014 - 00:49 | 4613009 trader1
trader1's picture

"Why would GS suddenly turn 180degrees on its golden goose?"

 

because their god told them to focus on other works, and they listen to their god...


Mon, 03/31/2014 - 19:13 | 4612237 SheepDog-One
SheepDog-One's picture

It's like investigating a wrist for having a hand attached to it.....it's all about the FED, HFT is its gloved black hand.

Mon, 03/31/2014 - 19:05 | 4612247 williambanzai7
williambanzai7's picture

They constantly create a big hoopla about the side show but never get to the center ring.

Did HFT wreck the economy in 2008?

Mon, 03/31/2014 - 21:12 | 4612552 LawyerScum
LawyerScum's picture

According to the Bernank "overconfidence" was the culprit. Thanks for the astute technical analysis, Ben. You fucking cockroach.

Mon, 03/31/2014 - 22:42 | 4612779 dexter_morgan
dexter_morgan's picture

mmmmm - I'll put my money on the Fed

Mon, 03/31/2014 - 19:16 | 4612277 Waterfallsparkles
Waterfallsparkles's picture

When Goldman IPO's an HFT firm you know the gig is up.

Why on earth would you sell a firm that makes that kind of money day in and day out without any loses?  Only reason I can see is the Fed's have been looking at this for a long time and they want to get out of dodge and pass the liability onto someone else.

Mon, 03/31/2014 - 19:17 | 4612279 ReactionToClose...
ReactionToClosedMinds's picture

wow ...that is pretty aggressive for an establishment guy like Mr Roach.....maybe we are approaching the 'event horizon'

Mon, 03/31/2014 - 19:22 | 4612293 cougar_w
cougar_w's picture

We probably crossed over about 3 months ago.

There is no way you will know until you try to look back over your shoulder and see only compressing darkness following close behind.

Mon, 03/31/2014 - 19:35 | 4612292 Mediocritas
Mediocritas's picture

Adding to the list of HFT tricks.

Stop hunting: when the pool of organic orders to front-run gets a bit thin then ramp the price several % in under a second to trigger short stops (latent organic market orders) and create a front-running opportunity, often a trigger for momentum ignition. This is easy to do when the book is a lie in which no quote is organic (see book fade). [Asymmetry of stops (more short than long) combined with stop-hunting, momentum ignition and front-running is the reason the shittiest stocks with the highest short interest rise more than the best stocks].

Baiting: rapidly cycling spreads in order to suck a trader (organic or otherwise) into chasing what appears to be a good quote only to find that they have been scalped by the time the order executes as the narrow spread they were chasing mysteriously vanishes. Most commonly observed in bid fishing during quiet parts of the day, ie, any time that is not within the first and last 10 seconds of trading.

ETF milking: these ETF muppets often publish the contents of their baskets making it dead easy for Bots to front-run the individual listings managed by an ETF whenever it is traded. Even if not published, trade correlation analysis can reverse engineer an ETF. Big, dumb, lazy fund managers trading ETFs are a goldmine for HFT firms.

Mon, 03/31/2014 - 19:23 | 4612299 Miss Expectations
Miss Expectations's picture

At least Steve Kroft looked shocked.  Shocked!

Mon, 03/31/2014 - 19:23 | 4612301 naughtius maximus
naughtius maximus's picture

psst amatures. Real finance heros press 1, and delete 0

Mon, 03/31/2014 - 20:56 | 4612512 Absinthe Minded
Absinthe Minded's picture

If you want to be a dick and point out "amateurs", spell it correctly so you don't look like a dumb dick.

Mon, 03/31/2014 - 19:28 | 4612318 EggSlayer
EggSlayer's picture

I ask this as a legitimate question.. What is the Fed's incentive for wanting to push stock prices higher? Other than that they hope the "wealth" created by increasing stock prices will trickle down. I do believe that they were looking for a trickle down effect, but not wealth derived from increasing stock prices.

 

But I don't mean that to challenge, I'm just looking for an answer.

Mon, 03/31/2014 - 21:19 | 4612574 FredFlintstone
FredFlintstone's picture

Prop up pension funds? That is one theory I have heard here.

Mon, 03/31/2014 - 21:26 | 4612596 francis_sawyer666
francis_sawyer666's picture

Not many here on ZH see the light. But this is a good question.

The FED-RES pulls worthless INFINITE FIAT out of its ASS, surely they can create INFINITE BULLSHIT, but what would be the point?

So buy rising the stock market and real-estate to infinity the FED-RES bring's in foriegn money to BUY stocks and property, which is real money, and maybe even GOLD.

If the FED allowed the STOCK market and Property market to PLUMMET then the USA would only have worthless paper assets (USD).

Under this system to have the strongest real-estate and stock-market on earth means that the USA gets EUROS, YUAN,... real money.

*

Pensions is correct also FRED, but only GUBMINT pension like CALPERS that need 8% ROI to keep the system from imploding they will do anything, the GUBMINT only exists to FUND the public-pensions, the CITIZEN only exists to FUND the public pensions.

But the USA USD is worthless and created to INFINITY, its all an ILLUSION of wealth, so they will always print to INFINITY FIAT and flood that money to PROPERTY(LAND/HOMES), and Stock Market to bring in FOREIGN ASSETS.

In other war's the FED-RESERVE is "WAR BY OTHER MEANS".

Mon, 03/31/2014 - 21:46 | 4612638 EggSlayer
EggSlayer's picture

Isn't it so pathetic how the entire financial system is propped up by the stock market? Is it even possible to have economic growth with a hurting stock market?

I would be interested in seeing the actual amount of money the Fed printed to fund the latest monetary policy. Did they even print money?

Mon, 03/31/2014 - 19:33 | 4612330 AdvancingTime
AdvancingTime's picture

After over 30 years of trading commodities I will flat out state without any reservations that lies and manipulation run rampant. If you think anyone is looking out for the small independent trader you are wrong.

An unholy alliance of the Federal Reserve, the government, and the too big to fail has left the rest of us in a precarious position. For the big boys, its insider information and computer trading, this includes computing patterns that exploit where stops are placed, this improves their ability to wash the weak out of their positions.More on this subject in the article below.

http://brucewilds.blogspot.com/2013/07/markets-more-lies-and-munipulatio...

Mon, 03/31/2014 - 21:15 | 4612562 Shad_ow
Shad_ow's picture

If ordinary Americans understood all of what you describe and the effects it is having and will have on their lives, nothing would stop them from dragging the politicians and financiers out and doing horrible things.

The whole system is corrupt and cannot be fixed without a complete fail and overhaul.  Those in charge must be purged.

Mon, 03/31/2014 - 19:34 | 4612331 Son of Captain Nemo
Son of Captain Nemo's picture

"....first with the Gary Cohn HFT-bashing op-ed, and then with the implicit backing of the IEX pseudo dark pool exchange, whose employee just mysteriously also is the protagonist of the Michael Lewis book that has raised the issue of HFT to a fever pitch."

If the "first wave" doesn't get you, the "second" and the "third" surely will!...

Too bad "ZH" didn't get top billing on this one considering how long ago they've been pulling this one apart. 

Maybe Steve Kroft will get permission from GS and his editor to bring "Tyler" on the next 60 minutes show and they can label it the "The sequel to the HFT story"... Now for some context and perspective...  

It will be the true confessions homage that Dan Rather never did "after 9/11"!!!

 

Mon, 03/31/2014 - 19:38 | 4612343 q99x2
q99x2's picture

The Stock Exchanges make a mint by renting the computers closest to the trades. That is why I think it has not been addressed as a problem. 

I liked the idea of a tax for every order placed whether cancelled or not.

Mon, 03/31/2014 - 19:46 | 4612363 Pee Wee
Pee Wee's picture

I got a fever and the only cure is some Nanex-porn.

Mon, 03/31/2014 - 20:10 | 4612413 tom a taxpayer
tom a taxpayer's picture

I got a fever and the only prescription is more cowbell.

http://www.youtube.com/watch?v=idO3VjT8sjk

Mon, 03/31/2014 - 19:51 | 4612373 Latitude25
Latitude25's picture

Time to crucify some quant nerds.  Goldman doesn't need HFT since they can always take a position contrary to what they sell to the muppets.

Mon, 03/31/2014 - 19:56 | 4612389 Billy Shears
Billy Shears's picture

Is it to incendiary to say "Burn everything to the ground?"

Mon, 03/31/2014 - 20:01 | 4612392 nostromo17
nostromo17's picture

Last five years seems an understatement.  First it seems geeks will add every feature and try to exploit technological advantage. 2nd since and through the last Bush there was not so much deregulation as no regulation. So, the former NYSE et al try to compete with their technology and not fairness. But at bottom getting information first is unfair. And grinding the market is useless and unfair. And this contradicts how the rultes were written which is to be somewhat fair. Of course owning a Bloomberg gives one an unfair advantage over someone that only reads the newspaper for financial news (1 to 3 days to a month or three to reach newspapers and TV). Looking at the internet gives you the news perhaps as it happens and one day to a week before Television notices the same news item. But more information and networking information and unique analiytic tools give the Bloomberg the advantage. Getting the data seconds or minutes before other players in a fair market is just the most explicit example of what just is payola wrapped in a rationalization in order to make money where it should not be allowed to be made.

No one has been following the rules for a long time. How? Through bought in regulators to maintain the status quo of a free for all and apparently a good deal of self delusion denial or  just plain ignorance. What do geeks know about finance after all? IT departments should not be setting the agenda for a financial company but because so many have prostituted themselves to electronic broking the cheaper mechanized trading vs. a voice brokered market (where one can work within the confidential relationship between broker and client to trade a market) they become held hostage by IT trading systems which when successful as in Foreign Exchange trading become larger than the rest of the company financially. Where "progress" or better said the next stupid thing leads an industry away from what it is supposed to do which is have orderly markets that are fair and not mechanization trading combines. This has all happened in a long period from about 1998 to the present where for the most parts the markets haven't even moved much leaving nickle and dime trading as the only way to make money when one turns away from what was investing.

As bad as HFT is the whole premiss of quarterly reports driving in large part how a company is managed also primes companies not to pursue their business which in most cases is a product they should create competitively against other producers. Instead, companies buy others to appear or perhaps become profitable, all sorts of tax avoidance is unchecked, firing the too many people they hired to "trim costs", issuing stocks, splitting stocks etc. while not inherently bad types of moves become a weight on society and distract a company from pursuing business initiatives of merit when these other gimmicks become the way necessary to appear quarterly profitable even if you just increase the welfare roles of never to be reemployed workers by 20,000 last week.

Its good to see that these things have finally caught someones attention (AG NY) and hopefully leashes them in. Its ironic they may be prosecuted for computer crimes. The latter is hysterical.

THe only fair way to run electronic trading systems is to time all the messages and media and slow all the faster data path times down to the slowest one in the whole system to try to approximate simultaneous arrival of information. Its only about information arrival time. As drastic as that is its the correct answer. Falling short of that, why should internet "free" broadcasts of markets be delayed by minutes? Why should there be paid for first information in a market. They are not their to merely arbitrage technology advantages for their own sake. They are there ostensibly to provide a market thats fair to all the players big and small.

And if a player is too big to trade in the broad market without resorting to tactics perhaps they should go back to the "wholesale" market of voice brokers...which is pretty fast, and work that market with other big players, something like that...

This isn't that hard. The best is brokers only selling information to some media companies and the swaps of data between media and brokers which keeps a lot of information in closed loops, i.e. private and not made public at large at all which gets charged for too. Should some of that be published too? To be fair? To be the public information of a so called public company?

Mon, 03/31/2014 - 22:18 | 4612707 arby63
arby63's picture

I find your dialogue impossible to decipher. Use a carriage return or two. I half-agree with what I could gather. 

Mon, 03/31/2014 - 20:00 | 4612393 SubjectivObject
SubjectivObject's picture

The vernerable vacuum tube is not an appropriate avatar for HFT.

Rather, this would be the transistor intergrated circuit (IC) package.

Save the vacuum tube for symbolizing frequency continuums, rather than frequency step functions.

Mon, 03/31/2014 - 20:24 | 4612420 nostromo17
nostromo17's picture

The side show is not a paranoid view that someone is planning to make HFT the scapegoat for some yet not occurred event. The side show is anything including irrelevant topics that distracts from the simple notion that a proper public market publishing electronic data provides a level playing field with regard to the information being available to all at approximately the same time or moment.

All the complexity in the discussion is distraction.The complexity arise from things not related to the simple rationale and objective of providing a fair market. Pursing that  proper simple goal defines what a stock market is or should be. And if it shouldn't be a media company that ignores its own originating purpose then thats too bad.

It seems to me that to be confused here is simply to lose sight of the topic which is what a public stock market is supposed to be, everything else is just disinformation as cover for fraud, market manipulation and allowing bankers and their markets to be a ruling class by virtue of priviledged information that is not privilieged and is public they have coopted. Screw the bankers. What good are bankers anyway that don't know anything about banking or markets and just plain don't care about anything but griming another buck out of something hell what may.

Technology despit all appearance to the contrary does not have a life of its own. Its not "technology" that forces into existence of HFT and makes it a fact of life. A tool is there to be used if it is of use, if it fits the purpose or its just not an applicable tool if using it destroys the very thing it is applied to which has its own valid reason to be what it is. A market is a market and the technology is just people exploiting technology led by the nose by technology being ignorant and fools. Technology and greed rules these people and there is little else to them. In a way they are socially useless if not destructive because ruled by no one but by machines they are nothing which leads to chaos. These are the lost moderns that must be reigned in or we all perish.

Mon, 03/31/2014 - 20:28 | 4612458 Izznogood
Izznogood's picture

It seems to me that the HFT is exactly the same type of scam that Robert Redford and Paul Newman ran in the movie The Sting http://www.imdb.com/title/tt0070735/reference

Mon, 03/31/2014 - 20:44 | 4612490 The Fonz...befo...
The Fonz...before shark jump's picture

I want disgorgement of funds from GS and all of them

Mon, 03/31/2014 - 20:54 | 4612508 medium giraffe
medium giraffe's picture

Ponzi. There's an App for that.

Mon, 03/31/2014 - 21:49 | 4612647 sumo
sumo's picture

Carlo (Charles) Ponzi's face should be on every dollar bill, every denomination.

Mon, 03/31/2014 - 21:07 | 4612540 iamrage
iamrage's picture

Oh, so now Santelli, is on board with all this.   RIIIIIIGHT.

Mon, 03/31/2014 - 21:19 | 4612576 francis_sawyer666
francis_sawyer666's picture

I have some HFT doom porn to sell you,... or would you rather have some MH-370 truth?

Ooop's ignore that I just go a call from Cass Sunstein, and he said the debate on internet should be limited to economics, and other kinds of mythology, that any kind of TRUTH (MURDER) should be not tolerated for discussion on the internet.

*

In summary talking about economics and finance, is like the greatest fucking circle jerk of all time.

The greatest money men in history laid it all out.

1.) Money is easy to make, but hard to keep.

2.) Buy low, sell high

3.) Know when to fold them, and walk away with your CASH

 

All else is bullshit.

 

Mon, 03/31/2014 - 21:14 | 4612558 francis_sawyer666
francis_sawyer666's picture

HFT is not going to go away.

The LOBBYISTS have told the US-CONGRESS (AIPAC), that if HFT is banned then the stock market will have NO LIQUDITY.

*

I think everyone can understand that like bitcoin exchanges, once the liquidity created by HFT is banned, then there really will be NO BUYERS or SELLERS. Sure Wall-Street can set prices, ... but if you can't get your CASH out of an asset, then there will be an insolvency crisis.

This is the great fear.

A fear that is probably TRUE, ... that if you removed HFT from the wall street casino, that trades would plummet to near zero.

The emperor would have no clothes for all to see.

ERGO, its not going to fucking happen, HFT will continue until the USA collapses, or the derivative market which ever first.

*

Today HFT is the lifeboat that since 911 has kept the USA stock markets alive, ... take that away and you have a ghost-town,... not going to fucking happen until AIPAC loses power, or Wall Street quits making campaign contributions to DC.

 

Mon, 03/31/2014 - 21:27 | 4612598 PrintemDano
PrintemDano's picture

Does this "revelation" explain all the recent banker suicides?

Mon, 03/31/2014 - 21:36 | 4612618 world_debt_slave
world_debt_slave's picture

It's a Club and we aren't in it.

Mon, 03/31/2014 - 21:42 | 4612625 redbird
redbird's picture

This is just setting the table for a "financial transaction tax".  

That'll stick it to those greedy HFT's.

Mon, 03/31/2014 - 21:56 | 4612659 arby63
arby63's picture

Fuck you and your dry sarcasm as though it mattered. If the markets are abandoned (over time) by the casual investor (no matter the fucking label) then it will be a mess. I think that time is closer than we all think.

 

Well, again: FUCK YOU. 

Mon, 03/31/2014 - 21:43 | 4612631 gapcrap
gapcrap's picture

as a former floor trader in the bond pit at the cbot, i must (somewhat) sheepishly admit, that i don't see that much difference between yesterday's human-driven liquidity providers (floor traders) and the machine-driven liquidity providers of today (hfts). the only difference is that as a local in the pit, we often possessed exogenous information, that was yet to be incorporated in the market. predatory algorithms must rely on their endogenous actions to trigger the desired outcome. of course, in my own version of strategic sequential trading, i would often hit bids and lift offers in search of stops, just not as efficiently and unemotionally as hfts. of course, our rather dubious actions were as summarily and similarly rationalized back then as they are today; as our privilège intitulé and due compensation for the risk we incurred for providing liquidity. after all-was-said-and-done however, we did it for the same reason that a dog licks his balls... because we could. perhaps, if goldman wasn't obama's largest campaign contributor, sec employees didn't have quid pro quo agreements with private sector b&ds and wall st. law firms (for post govt.-service employment) and the exchanges hadn't gone for-profit, mr. lewis would have had to write a book on a different topic.

Mon, 03/31/2014 - 22:25 | 4612733 cougar_w
cougar_w's picture

Thank you for the rare insider insights.

Usually we're just making shit up around here. It's entertaining at least.

Mon, 03/31/2014 - 22:55 | 4612808 I Write Code
I Write Code's picture

But it's not clear that HFT actually increases liquidity, they normally put up nearly zero funds.

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