Did Cliff Asness Just Blame Zero Hedge For Starting The Anti-HFT Movement?

Tyler Durden's picture


Five years ago, we were the first to bring the world's attention to the staggering profitability of several firms that engaged in 'high frequency' trading that presented themselves as 'liquidity providers' and suggested (in our ever so humble way) that mark liquidity was in fact shrinking and this could lead to a 'black swan of black swans' long before the flash crash was even dreamed of. Fast forwarding to today, after hundreds of articles, not only is the mainstream "getting it" but such behemoths as Cliff Asness - who happens to run one of the world's biggest quant funds - are forced to pen a WSJ op-ed to explain it's all a fallacy and blame a lowly blogger (or digital dickweed) for starting all this naysaying five years ago.

Asness explains in the WSJ Op-Ed...

A few nights ago, CBS's "60 Minutes" provided a forum for author Michael Lewis to announce that Wall Street is "rigged" and for the sponsors of a new trading venue called IEX to promise to unrig it. The focus of the TV segment was high-frequency trading, or HFT, an innovation now over 20 years old.


The stock market isn't rigged and IEX hasn't yet generated a lot of interest. In our profession, what we saw on "60 Minutes" is called "talking your book"—in Mr. Lewis's case, literally.

Forgive us for a moment as we note, in passing, that for someone to accuse a person of talking their book, when that someone has a more than vested interest in computerized, "quant" trading whose success is a function of its secret sauce remaining forever in the dark (Mr. Asness may deny running a HFT shop but there is of course no way to verify this externally) and where the lines between one HFT strategy and another is a very thin if lucrative one, is somewhat hypocritical.

A gentle reminder of what the HFT firms do here

But Asness puts the blame for this tornado of trading tumult squarely at the feet of...

The onslaught against high-frequency trading seems to have started about five years ago when a blogger made a wildly exaggerated claim about one firm's HFT profits.

So there it is, thanks to a blogger (Zero Hedge) five years ago, the reality of the US equity market's 'rigged' nature has been dragged kicking-and-screaming into Joe "I'm long TWTR" Sixpack's living room by Michael Lewis, Brad Katsuyama, Nanex, Themis and a host of other reality-seekers.

Of course, we'll give the last word to Mr. Asness:

Our bet is that high-frequency trading comes out on top as it offers more investors better execution. But we have zero problem being proven wrong by the marketplace.


How HFT has changed the allocation of the pie between various market professionals is hard to say. But there has been one unambiguous winner, the retail investors who trade for themselves. Their small orders are a perfect match for today's narrow bid-offer spread, small average-trade-size market. For the first time in history, Main Street might have it rigged against Wall Street.

Indeed... or perhaps, just perhaps, Asness realizes that Goldman is on to something and his 'firm' and its kind are about to scapegoated out of existence.

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Tue, 04/01/2014 - 22:30 | 4615947 NoDebt
NoDebt's picture

Stop it.  I'm getting all misty.

Tue, 04/01/2014 - 22:31 | 4615950 swanpoint
swanpoint's picture

U Bitchez!

Tue, 04/01/2014 - 22:33 | 4615953 massornament
massornament's picture

Yeah... I blame you guys too... YEAH TYLERS!!

Tue, 04/01/2014 - 22:40 | 4615960 wee-weed up
wee-weed up's picture

Three cheers for the Tylers!

Now watch out for drones, guys!

Tue, 04/01/2014 - 22:44 | 4615976 ZerOhead
ZerOhead's picture

"Our bet is that high-frequency trading comes out on top as it offers more investors better execution"


So if I understand this correctly... these HFT outfits spend billions each to compete against themselves for micro-second advantages to better execute more investors? 

Yup... that sounds about right.

Tue, 04/01/2014 - 22:48 | 4615987 HoofHearted
HoofHearted's picture

So let me see if I get this right?

There's one guy talking his book against another guy talking his book...and then there are the Tylers who don't seem to gain too much by writing about HFTs...well, except that we all fall for that shit and then they have lots of loyal readers to see the chicks in t-shirts that we're supposed to buy through GoogleAds. (Have any of you bitchez bought any of the t-shirts? Anyone else want to buy the girl that takes a pill to forget about caring or whatever it is she was doing? I thought so.)

So, who you gonna trust?

Tue, 04/01/2014 - 23:02 | 4616008 francis.sawyer001
francis.sawyer001's picture

There is a lot of comedy here, but the funniest part is that anyone that mattered in this game would waste one nano-second on this site of adolescent circle-jerkers.


Most of the commenters now have a 2+ year life and essentially are the same person saying the same stuff, over&over,

All is a fraud on HFT yes, but all is a fraud on ZH as well to feed shit to google and generate nickels.

Funny that 'truthiness' gets you banned on ZH,

But fuck, its hypocrisy to point to the flaw in others, when your own shit stinks so bad.

Tue, 04/01/2014 - 23:06 | 4616019 Skateboarder
Skateboarder's picture

I said all I had to say, i.e. I lamented. Then I shat the fuck up. Now I just make silly comments.

All is null and void except the things you produce and the memories you make happen.

Tue, 04/01/2014 - 23:19 | 4616054 mickeyman
mickeyman's picture

Tyler keeps misspelling "Assness"

Wed, 04/02/2014 - 01:58 | 4616268 fonestar
fonestar's picture

And fonestar is the biggest virtual dickweed on the digital dickweed blog.

Wed, 04/02/2014 - 10:45 | 4617259 El Diablo Rojo
El Diablo Rojo's picture

To Hoofhearted:  I have purchased several t-shirts for the wife and I from that website.  Yes, I find them funny.  But I also stopped all the popup ads too.  Someone posted Ghostery and I have it on every computer. 

Being on a website you are bitching about, that's really funny.

Tue, 04/01/2014 - 23:21 | 4616057 NoDebt
NoDebt's picture

Ok, Frank.  Fair enough.  So I gotta ask... what are you still doing here, then?

Tue, 04/01/2014 - 23:30 | 4616078 Skateboarder
Skateboarder's picture

Fascination with the abomination. Even hedgless_horseman is watching from the sidelines, I'll bet. What happened to our fearless Texan friend?

Wed, 04/02/2014 - 10:40 | 4617243 El Diablo Rojo
El Diablo Rojo's picture

I miss his garden/ cheese/ dinner plate pictures.  They were so out of place that they fit perfectly.

Wed, 04/02/2014 - 15:24 | 4618334 fedupwhiteguy
fedupwhiteguy's picture

Ditto....I was wondering the other day where he went too. I've noted before that quite a few of my favorite commentators have been leaving the confines of this site. I miss them all.

Tue, 04/01/2014 - 23:30 | 4616079 tarsubil
tarsubil's picture

It's like I just saw a ghost.

Wed, 04/02/2014 - 09:57 | 4617064 MontgomeryScott
MontgomeryScott's picture

Who put that crab there?

What crab?

That one, right there! Crabs are smart. They always work in pairs!


Frankly, I enjoy ads with women wearing skimpy t-shirts, unlike some (who enjoy ads with men wearing leather, who usually post using names close to, but not the same, as those whom you might recognize; from their official desks in the bunkers of Haifa and Alexandria).

You think you saw a ghost, but, um, you saw an AVATAR of them.

Wed, 04/02/2014 - 01:55 | 4616263 hobopants
hobopants's picture

I love the entitlement mentality seen here. What makes you think whoever runs this thing owes you an ad free open forum?It's their site and they can run it how they like. You don't like it? The internet is a big place, go elsewhere. They seem to be doing a good job respecting the first amendment judging by the fact that the obnoxious shit you're posting is still here.

Wed, 04/02/2014 - 10:04 | 4617098 MontgomeryScott
MontgomeryScott's picture


So, one week 13 hours...


Don't feed it.

Wed, 04/02/2014 - 02:26 | 4616312 infinity8
infinity8's picture

I'm w/Skateboarder and, nickels is better than pennies, no?

Wed, 04/02/2014 - 08:28 | 4616684 Agstacker
Agstacker's picture

Have you never heard of ad blocker you fucking moron?

Tue, 04/01/2014 - 23:42 | 4616109 dogbreath
dogbreath's picture

my dog

Tue, 04/01/2014 - 22:51 | 4615988 fonzannoon
fonzannoon's picture

some notable quotes from the article 5 years ago

"The market is going up until it isn't. That's all I know."


"TD, your observations may be correct, but if you follow them through to the ultimate conclusion you'll understand why it doesn't matter. 

The US stock market is too big to fail. It is our bank, our life insurance, our retirement plan, our college savings fund, the retirement plans of our police forces and our firefighters. It's our hopes and dreams and worst fears all rolled up in a big ball. That's how this depression is different from the 30's. This time the stock market can't be allowed to drag along the bottom for a couple of decades, or even for 5 years. 

Inflation of course is worse, but it's like a force of nature in the eyes of the public. Everyone will get their payoff and they'll gripe about the fact that it buys nothing. But that's minimal compared to the outrage they'd feel in an outright default. When it comes to theft, people think in nominal terms, not real terms. 

So when push comes to shove, our government will use Goldman and others like them to sustain the stock market, at any cost. It's just dollars. And if the players don't like their marching orders, well then, as Mr. Obama said, it's pitchfork time."

Tue, 04/01/2014 - 23:02 | 4616000 ZerOhead
ZerOhead's picture

Actually if I remember correctly he said "I'm the only thing standing between you and the pitchforks".

This tells you a lot about where his loyalties are.


Tue, 04/01/2014 - 23:19 | 4616056 Al Huxley
Al Huxley's picture

I'm not sure that the owners care that much about the life insurance, retirement plan, college savings funds, police andfirefighter retirement plans, etc....

Tue, 04/01/2014 - 23:24 | 4616065 NoDebt
NoDebt's picture

Well, when you put it that way it sounds all bad and stuff.

Wed, 04/02/2014 - 03:25 | 4616366 StychoKiller
StychoKiller's picture

After observing a few Nanex dissections of what HFT is and is doing, I bit the bullet and cashed out my IRA , eating the penalties and taxes.  Then the flash crash in May 2010 proved my conclusions were sound:  There ain't NO WAY to win against the 'Bots!

Wed, 04/02/2014 - 07:31 | 4616539 BigJim
BigJim's picture

 So if I understand this correctly... these HFT outfits spend billions each to compete against themselves for micro-second advantages to better execute more investors? 

Yes, funny, isn't it... these HFT shops come into the market without having any 'product' to sell, and walk away with billions in profits, and yet somehow aren't engaging in zero-sum extractive activities.

Wed, 04/02/2014 - 07:42 | 4616550 Ghordius
Ghordius's picture

if it's profitable... it must be good and proper  /s

Tue, 04/01/2014 - 22:38 | 4615963 Looney
Looney's picture

I betcha, in five years Zero Hedge will be also blamed for Ukrainians joining Russia and living well above the EU standards…  ;-)


Tue, 04/01/2014 - 22:50 | 4615991 ZerOhead
ZerOhead's picture

But firstly it will be blamed for everyone leaving and not paying the IMF bankers.

Tue, 04/01/2014 - 22:43 | 4615968 ZerOhead
ZerOhead's picture


Tue, 04/01/2014 - 23:18 | 4616053 holmes
holmes's picture

I blame Bush.

Tue, 04/01/2014 - 22:46 | 4615984 Freddie
Freddie's picture

Another reason why I cancelled WSJ and Barrons back in 2006 or maybe earlier.  F***ing joke newspapers.  Pro-amnesty, pro-NWO.

Wed, 04/02/2014 - 00:09 | 4616153 ReactionToClose...
ReactionToClosedMinds's picture

am very close to doing what you did (have subscribed to both since late 1980s) ......in fact my wife is sick of me bitching about  how they've changed.    But I figure I gotta read 'conventional wisdom' somewhere......and the NYTimes editors are just too lazy for my tastes (not even getting to their over-the-top agenda bias).   WSJ is like reading B'berg anymore ...why are they following that mistake?

Wed, 04/02/2014 - 01:43 | 4616254 mccvilb
mccvilb's picture

All the newz that's fit for jooz.

Tue, 04/01/2014 - 22:50 | 4615992 dtwn
dtwn's picture

I like Michael Lewis, I read the Big Short and enjoyed it.  I haven't read this latest book but looking forward to it.  That said, I doubt that Michael gives ZH a shout-out, which is much deserved and probably should be given in the interest of journalistic integrity and full reporting.  


Would be really nice to see ZH and their version of truth/reality hit the mainstream (or close to it).  However, knowing what I know about people (sheeple), they can't and don't want to handle the truth.  Plus, paradoxically, if ZH really hit the mainstream, would it destroy it in a sense?


Anyway, it's too late to think about such things.  The longer the sheeple slumber (and the longer the criminal politicians and oligarchs keep this farce going), the longer I have time to prep.

I tip my glas of cheap whisky/coke to Tyler(s) with this small victory of the truth being revealed and hitting the mainstream.  Even if full recognition/credit isn't fully documented.

Shit, it'd be kinda funny if Micheael Lewis was one of the Tylers. . . . . .

Tue, 04/01/2014 - 23:04 | 4616016 Rubbish
Rubbish's picture

He doesn't appear to have a fetish for obese chicks in thongs.


Gold Bitchez

Tue, 04/01/2014 - 23:08 | 4616026 RaceToTheBottom
RaceToTheBottom's picture

A double Irish Jamesons to thank the Tylers for pushing these issues.  While the SEC and the FBI will do nothing this time, Eventually after a few more decades of doing nothing, people will start getting mad and doing something about it.

Wed, 04/02/2014 - 00:23 | 4616175 holdbuysell
holdbuysell's picture

"Would be really nice to see ZH and their version of truth/reality hit the mainstream (or close to it)."

I think it already has when you have magnates and the established MSM attacking ZH. I believe it's only a matter of time before more people gravitate to the blogosphere and find the quality sites for news, knowing that the MSM is a bunch of shills and propaganda.

I was thinking the other day that it would be interesting to see the relationship mapping of all the blogs, with the hypothesis that the high quality ones are gradually congealing together through shared stories and analysis. The hypothesis is that they connect to the MSM only to grab facts that require capital to obtain but provide helpful input to detailed analysis for one to critically consider the full picture.

ZH does exactly that and its connected sites do similarly.

As far as the MSM talking heads, they are in deep denial for as Upton Sinclair said, to paraphrase, 'it's difficult to get a man to understand something that his salary depends on him not undertanding.'

Tue, 04/01/2014 - 22:33 | 4615954 NoDebt
NoDebt's picture

"Nobody puts Zero Hedge in a corner."

(Double-dipping with comments here tonight)

Tue, 04/01/2014 - 22:34 | 4615955 JustPrintMoreDuh
JustPrintMoreDuh's picture

Damn you digital dickweeds!

Tue, 04/01/2014 - 22:42 | 4615973 Mr Pink
Mr Pink's picture

It appears we have all graduated from internet trolls to full fledged digital dickweeds. I feel so proud

Wed, 04/02/2014 - 05:12 | 4616441 Incubus
Incubus's picture

took me 15 years to move up from internet troll to digital dickweed. 


It's all downhill from here.  This is the peak of my life.

Tue, 04/01/2014 - 22:35 | 4615956 ArkansasAngie
ArkansasAngie's picture

If this doesn't take those SOBs down ... well ... geez ... let me put my tin foil hat on and ... la la la la la la


Tue, 04/01/2014 - 22:35 | 4615958 dexter_morgan
dexter_morgan's picture

This HFT stuff seems to be a ruse to take blame away from the Fed, these firms just haven't gotten the memo yet?

Tue, 04/01/2014 - 22:37 | 4615964 NoDebt
NoDebt's picture

It is, Dex.  But you take your victories where you can when you're not in "The Club"

Tue, 04/01/2014 - 22:55 | 4615999 francis.sawyer001
francis.sawyer001's picture

Well Obama's term is almost over, the masses want
blood and no banker has gone to jail.

So why not at the 11th hour criminalize computer trading,
and then pick a NSA player like IEX to be the
appointed 'honest man', and wipe out all the other

Look at it this way, NSA now has all INTEL, the next
logical step would be for NSA to handle all trading.

This guy Nakafuckayami, is just like Snowden a
fucking PROP, then so are all the people on the MSM screen.

Tue, 04/01/2014 - 22:36 | 4615961 sleepingbeauty
sleepingbeauty's picture

How dare you (Tylers) shine a light in our dark little corner.

Tue, 04/01/2014 - 22:38 | 4615965 Cognitive Dissonance
Cognitive Dissonance's picture

Funny how every exchange wants to talk about narrowed spreads and no exchange wants to talk about front running and other HFT techniques that nickle and dime.....OK, penny and two penny every trade they can find.

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