1215095 - The Flash Boys Mystery Solved

Tyler Durden's picture

Submitted by Sal Arnuk and Joe Saluzzi via Themis Trading,

The blog posts and defenses of high frequency trading in the past week have come with dizzying high frequency. They have taken the form of blog postings by knowns (Larry Tabb) and unknowns (Scott Locklin). Reuters, who sells high speed data, has a very influential blogger (Felix Salmon) who criticized the book before he read it. Bloomberg, who also sells high speed data, has a blogger (Matt Levine) who defends high speed trading almost daily. Modern Markets Initiative – the HFT Lobbying Group – has been writing/tweeting a blog post per hour criticizing Flash Boys. Even Irene Aldridge has weighed in very negatively on Flash Boys – again, without even reading the book. She has even gone so far as to accuse Michael Lewis of taking a secret payoff to write an anti-HFT book.

Boy… some guys say the R-word “rigged” and Charlie Munger’s rats in the granary start to panic and squeal! Flash Boys has struck many a nerve; the truth can be a bitter pill at times. And of course, the pro-HFT defenses are all made by many who are very, very staked in the status quo of our market structure.

Now, bloggers using twitter is one thing; conflicted insiders using television to make their HFT defenses are another. Manoj Narang is such a conflicted insider – which brings us to the number 1215095, which is the title of this morning’s note.

Flash Boys closes with this paragraph:

The application to use the tower to send a microwave signal had been filed in July 2012, and it had been filed by … well, it isn’t possible to keep any of this secret anymore. A day’s journey in cyberspace would lead anyone who wished to know it into another incredible but true Wall Street story of hypocrisy and secrecy and the endless quest by human beings to gain a certain edge in an uncertain world. All that one needed to discover the truth about the tower was the desire to know it.

Michael Lewis is referring to the microwave tower in Pennsylvania with the FCC license number 1215095. It is located in Potter Township, PA (Lat: 40.849278 Lon: -77.710778) The tower is used to beam stock quotes between Chicago and Cartaret, NJ faster than even the fiber optic cable laid by Spread Networks (which Spread laid because it wanted to make faster the transmission of the same stock quotes than the prior mechanism which included slower fiber cable routes). Many now argue that the microwave networks being deployed to speed up stock quote transmissions are actually makes the Spread Networks fiber route obsolete.

Who owns this tower? What about who owns this tower is mysterious, conflicted, and hypocritical?

Manoj Narang, or the entities he has stakes in, owns the tower. The application for the microwave device was filed by Converge Towers LLC, which is located at 770 Broadway, Second Floor. And while Converge Towers LLC is a subsidiary of BCG Cantor Fitzgerald, the application was filed by a misses Elizabeth Kim, who works at Thesys technologies (BCG Cantor – Thesys partnership?) (This is an interesting blog post you should look at by the way… particularly the comments section).

Who is Thesys Technologies? Thesys is an affiliate of Tradeworks, the Red Bank, New Jersey HFT operation that was hired in 2012 to license the MIDAS system to the the SEC. MIDAS, if you recall, is the data solution involving fast feeds that gives the SEC its ability to monitor quotes and trades at the same speeds the HFT firms do. Tradeworx not only provides the SEC with the fast feeds to view the limit order book as HFTs do, it also provides the analytic tools, and the framework and context to draw conclusions. MIDAS also powers the SEC’s market structure website, which consistently puts out analysis that demonstrates that HFT is not the villain it is portrayed to be.

Read this NYT 2012 article by Nathaniel Popper about Narang’s firm, and its relationship with the SEC. From that article:

-          MIDAS was created by Manoj to “help regulators respond to critics of high-speed trading.” This bias in its deployment perhaps explains what some might view as HFT-friendly findings by the SEC to date.

 

-          MIDAS cost the SEC $2.5 million up front, plus recurring fees. It is rumored to be higher than that, with the scope of the program  much larger than initially reported.

 

-          The S.E.C. will still not have the complete picture; it won’t have information on the trades executed in dark pools. MIDAS does not provide that.

 

-          The Tradeworx- SEC initiative is supposedly  managed by Glenn Nixon – who came from the Princeton Physics program.

 

-          Tradeworx makes a ton of money selling data and technology to other trading firms, including microwave towers that beam trading data to Chicago, a faster method of transmission than fiber optic cables.

Manoj’s Tradeworx and Thesys is also partnered with NASDAQ. They just recently signed a major deal that would allow them both to sell algo-testing to NASDAQ’s high speed clients, starting this year. This is in addition to the microwave thing…

With that Tradeworx – Thesys –  Manoj – Midas – NASDAQ context, watch Narang tell Bloomberg Television that speed matters less in today’s markets than it ever has in the history of markets. (15:35 in). So says the man selling speed to the SEC (the American taxpayer), HFTs, and Stock Exchanges. You can’t make this stuff up. It would be humorous if it were not so sad.

Is it any wonder that the SEC has trailed other law enforcement and political entities in examining flaws and abuse in our markets?  The tools that they have procured are sold to them by an HFT firm. That HFT firm makes even more money selling microwave high speed trading transmission to other HFTs and exchanges. You would think such in-your-face conflicts would have made the SEC think twice about their partnership with Tradeworx. You would think the SEC would especially be embarrassed by the appearance of bias from one of their partners/representatives tainting the Flash Boys debate on public television, as Manoj has done all of last week. You would think that the SEC, a body so interested in proper disclosure, would have something to say about Manoj not publicly disclosing his relationships with so many that are entrenched in the status quo.

Sigh.

What is the answer to Michael Lewis’s riddle at the end of Flash Boys? Who owns the Pennsylvania tower with FCC license number 1215095? Tradeworx does. Manoh Narang does. The creator and SEC-entrenched high speed data seller does. 

There were actually two words thrown around in the media all of last week. One of them was rigged; the other was shame. Perhaps this week we all should focus on the S word, and forget the R word.

PS – Please do not let it be lost that Lewis did not come out an tell you who owns the tower with FCC License No. 1215095; he wanted you to care enough to find out yourselves. Change will come only if you care enough to dig, and talk, and be vocal. Powerful.

- See more at: http://blog.themistrading.com/1215095-the-flash-boys-mystery-solved/#sth...

 

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Goldenballz's picture

I wonder if HFT happens in other Exchanges like in Mexico, Brazil, etc...

Deathrips's picture

Shut it down, next banker to "commit suicide" did it.

 

RIPS

 

Edit: Smoke- you beat me to it...

James_Cole's picture

Hell of an entertaining book. 

gmrpeabody's picture

Apparently, the 5 voters out of every 100 who are paying any attention to this is less than required to produce shame.

Did I say 5...? 1 or 2 is probably more like it.

Manthong's picture

“Slower Fiber Cable”  ??  

Um.. I think a critical technical issue is missing here.

In the real world, a long distance microwave RF tower network cannot exceed the performance of an optimally installed fiber network.

It's a bandwidth and switch thing.

 

The latency and disadvantage of a “slower” (HA HA) long haul fiber network has to be engineered in.  

How do you pronounce "QWERTY"?

gmrpeabody's picture

Not to mention they'll have a real reason to blame it on the weather.

(the sales brochure only mentioned distance..., not speed)

Manthong's picture

Headline:

"Unexpected Fog Causes Crash"

.. in works in the Maritime world.

Divided States of America's picture

you cant trust anyone (manoj) who looks like a ferengi (quark)

Oh regional Indian's picture

Looks like many Indian's swinging a lot of power in teh US. Preet Bharara (Indian American) investigatiing the "weeasel" in th eHFT story Manoj Narang (Indian American). Ironic...

 

The slow and steady take over of America. Strange....

Joe Davola's picture

Axion's will make the microwave towers obsolete!

Xibalba's picture

If I ever see that Manoj cat, I'm gonna spit in his direction

Skateboarder's picture

Come on ORI, no real Indians play around and get 'power' over here. These fools is all whitewashed - Bharara, Jindal, Harris, this Narang piece of gawbage. They're either benign enough to pass American muster, or they get thrown under the bus (Rajaratnam, but I understand he was Sri Lankan).

Don't really give a fuck what color this douchebag is - he's a piece of shit.

Oh regional Indian's picture

True that Skateboaorder. Those are whitewashed Indians. I'm sure you get to see plenty of the real thing in the Bay Area.

Say, if you are looking for a change, get in touch?

via my blog: aadivaahan.wordpress.com

 

I've just launched into something very interesting. :-)

 

ori

Lewshine's picture

The HFT boys are also integral in keeping the market at these nosebleed levels. Kill the algo's and this fraud of a market would plunge 30% in a day.

You can watch these sell offs and see where the machines draw the line in the sand.

Don't pay any attention to "100 / 200 day support levels" - You will get killed by the machines chasing theory...Without an explanation!!

 

 

alexromanl's picture

I believe a whole industry begs to differ.  There is an over 3 millisecond advantage in the NY/Chicago route if you go RF instead of fiber. As the attached suggests, you can't ship gigs of data, this is just for trade execution; and, you can't use your run-of-the-mill cell-phone tower equipment, you ought to use "military-grade" settings.  This is not cheap, but highly profitable in my opinion. 

http://www.cielonetworks.com/site/white-papers.html

redpill's picture

Think of the time and capital spent on this endeavor that provides ZERO value to our economy.  This shit makes real estate agents look like the most productive members of society.

Bangin7GramRocks's picture

Exactly! This is the real crime. The entire industry produces nor provides anything to society. Billions of dollars wasted to steal from other investors. What a wonderful financial system we have here.

disabledvet's picture

maybe that's why REIT's are still the best performing asset class YTD.

I think we may have reached "peak political motivation" here...but we'll see.
My personal view is that to avoid war in Eastern Europe (generalized...first time since WWII) is that when everyone agrees territorial integrity in Europe is inviolable that a "coalition of the willing" means business and isn't afraid of saying so in public.

70 years of peace that has only known 2000 years of war strikes me as more than enough reasons to put this genie back in the bottle.

I do fail to see the gain in making threats but not following through.

I do give credit to President Putin et al in this regard..they are not afraid to simply start something and call it nothing.

And indeed..."flight ME 370, flight ME 370" it all is.

SoilMyselfRotten's picture

But, but, Bennie buttboy said it added liquiditiy

Griffin's picture

This problem has been a menace for quite some time now.

http://www.telegraph.co.uk/finance/markets/8700226/Lord-Myners-calls-for...

 

Those HFT parasites will rape this market until its dead and then eat the corpse.

Its a bit optimistic to imagine that those banksters that have destroyed the US economy and caused problems all over the world might at some point feel shame.

Shame is a feeling reserved for the slaves, like fear and feeling small.

 

 

 

y3maxx's picture

...Minoj next to embrace the Nail Gun/Jump from an Office Bldg suicide.

Kirk2NCC1701's picture

Manoj Narang is NOT Jewish?  WTF!?  I thought everything was their fault.  Just kidding, ok.  So lighten up, homeboys.

But, I suppose that he is a dual citizen (Indian & US).  Literally.

Stoploss's picture

The site is gone too.  404

Ralph Spoilsport's picture

I think they just posted a garbled link above. Try this link to get to the article - http://blog.themistrading.com/1215095-the-flash-boys-mystery-solved/

Edit: It was working 10 minutes ago. (shrugs)

NoDebt's picture

It's working inside the US.

So, I guess that means its working now.

seek's picture

Remember that they're fucking with guys that are dropping significant fractions of a billion dollars to drop their latency by 2-3 milliseconds.

Someone with that kind of network bandwidth and tech expertise and most importantly, the sociopathic belief that they're above the law, can easily take out a small blog site.

Is it down link 

ShorTed's picture

Yes, these guys are trying to export it globally.  Fat profit with n risk (to them at least).

HellFish's picture

It's spelled Cateret, not Cartaret.  Dump either way.

ParkAveFlasher's picture

Actually, it's Carteret.  Dump is correct.

Tom_333's picture

Why did a book strike a raw nerve. Evyrone I talk to has known about this for years. And it´s not like it hasn´t been written and debated before this book. Why the all this outburst of feelings? Now? What with this "probe" by FBI...? This just doesn´t make sense. Soon they´re gonna squeeze the kidney stone of wisdom that the markets in toto are rigged. So what? Everyone already knows. Has to be something else.Things falling apart and blames to be placed. Or something like that.

newdoobie's picture

Because Mike makes the subject enjoyable to read about. Average schmucks don't read stories unless it has a personal touch. He's a much better author than trader lol

Iam_Silverman's picture

"Why did a book strike a raw nerve."?

Good question.  I wonder if this will have the same effect of a movie that parodies muslims.  Will there be mass protest in New York?  Will the UN and some embassies be stormed and their ambassadors killed from bunga-bunga?  Someone needs to make sure that the Wall Street Terrorists are held at bay!  Does Blackwater also supply armed guards stateside?

Clowns on Acid's picture

The answer is a resounding YES. Just not as many actual trades / volume.

Seasmoke's picture

Pull the fucking plug !!!!

McMolotov's picture

Pull the fucking (shitgum) trigger.

ebworthen's picture

Yes, whatever happened to Shame?

It served a very useful purpose.

Bring back the stockade and public humiliation.

flacorps's picture

Shame would imply a certain unwillingness to interact with the community at large (in some sense perhaps a defense mechanism to avoid being spat upon and harangued).

However, if you're in the .01% you need not interact with the public at large, and your peers will toast your success with Dom and Cristal and there is no more need for shame.

At some point though you may wish for a cast-iron collar.

Herd Redirection Committee's picture

The only thing sociopaths fear is being exposed as sociopaths.

No sociopath has ever been rehabilitated in human history.

scraping_by's picture

Shame's a perspective thing. When Harvey Pitt, Shrub's choice to run the SEC announced the SEC would be a service organization for the stock market, he laid out the measuring stick for all official actions. Now, the SEC would be ashamed to get in the way of accumulation, whatever the reason.

Mainstream college economics now measures everything is money. More good, less bad. Those who worship money have a religious fervor so settling for less is a sin. And nobody wants to be a sinner, right?

AmericasCicero's picture

Ohhh, focus on the "S" word...I guess I don't need this whetstone after all.

McMolotov's picture

The Big Club doesn't give a shit about shame.

ParkAveFlasher's picture

"That's why I'm richer than you." - Mr. Shame, Himself, spoken out loud

Dr. Engali's picture

Shame...Lol... Like they give a fuck. The bankers held the country hostage as they stole 750 billion dollars for a bail out, then they rewarded themselves with the largest bonus season ever. Shame my ass.

Grande Tetons's picture

For a good time call 867 5309. 

https://www.youtube.com/watch?v=axLRUszuu9I&feature=kp

If they right it on the bathroom wall...it is for pulbic use. No revelation here. 

 

gjp's picture

Stole a lot more than that.  Both before and ongoing.  Shame left the building ages ago.