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A Rare Glimpse Inside The NY Fed's Favorite 'Quote-Stuffing' Hedge Fund: Citadel
As regular readers are well aware, when it comes to "more than arms length" equity market intervention in New Normal markets, the New York Fed's preferred "intermediary" of choice to, how should one say, boost investor sentiment aka "protect from a plunge", is none other than Chicago HFT powerhouse, Citadel. Recently we discovered that the true culprit behind the May 2010 Flash Crash was not Waddell & Reed, but quote stuffing. The most recent revelation for Citadel is that quote stuffing is not just some byproduct of some "innocuous" HFT strategy, as none other than the Nasdaq has now stated on the record, that the most leveraged hedge fund (at 9x regulatory to net assets), and the third largest after Bridgewater and Millennium, used quote stuffing as a "trading strategy." The following 2 clips give a sense of what goes on from day to day inside the firm that trades more volume than the NYSE every day...
HFT in action...
Is HFT a good thing or bad thing?
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Kevin Henry , incubator?
When Ken Griffin, founder of Citadel, was asked if he thought wealthy people had too much influence on politics he explained "I think they actually have an insufficient influence. Those who have enjoyed the benefits of our system more than ever now owe a duty to protect the system that has created the greatest nation on this planet."
Or in other words: "God's work".
@ 1:38 "When you click 'send' from your TD Ameritrade account, there's a good chance that Citadel's computer sees it" - No comments are necessary there.
Also notes the display server glitch around 1:30 - This is the Stone Age; Thank you, Intellectual Monopolies.
So basically citadels hft algo infested hq must also be pretty high up in homeland security's national infrastructure protection plan.
When he said that, he was talking about drafting the FSA into the military (I guess it's really a "graft" not a draft) and having them march into the ISIS/Ruski Meat Grinder..
They OWE a duty to protect the system.
Scumbags, douches, sociopaths. The new normal
Playing video games for pleasure with PlayStation Network is one thing
Setting world food and commodity prices by playing video games is another thing.
No wonder Putin and Jinping are trying to get out of the system asap.
The market ultimately does, because those flashing green and red symbols and TA from fib levels to MAs ultimately are predicated on the UNDERLYING COMMODITY. So they can only mess with so much, as imbalances would get exposed. Markets always find their way to properly price things, even if they have to do it on the black market.
The big issue is government intervention in the markets, not high speed traders. Regulations that price out would be SME sompetitors and thus make moats for the entrenched is one example, as those TBTF corporations then get monopoly status and people are poorer as they have less options. That is one effect of inflation, the malinvestment and deterring of investment by newcomers, thus leaving us with the old. This is why I'm not bearish stocks and don't think it is a stock bubble; it's a dollar/debt bubble. Short the hopium via PMs, land, agriculture, guns, and companies with international exposure to countries with resources and that are liberalizing economically and that save. Shorting via VIX ETFs or whatever is asking for trouble; just look at how it is now 100% proven the Fed buys ES.
There is no market.
HFT market is no market, it is a war zone.
In a war you don't expand the economy, you eliminate the adversary. HFT is destructive.
People like Jinping, Putin, BRICs are leaving the battles to go other places to actually trade in peace.
As they should. I hope they desert the dollar. It will be better for these people to get out of this mentality that trade 'needs to be facilitated by the USD'.
I think you are conflating the rigged nature of markets which is correct, as far as COMEX shenanigans and above all Fed intervention in so many aspects, with simply some people doing something that is not particularly noble, but just is what it is: people trying to get a scalp. Markets are comprised of diverse participants seeking to hedge, speculate, etc., and then there have to be a few market makers who aren't going to do it for free. Nanex et al are great for exposing bad business pratices so more people become aware, and hopefully find alternatives.
The most basic way of illustrating my point is that, for instance, oil cannot trade anywhere below some critical #: say $30. If it does run beneath that, it won't be there for long, as it showed when it went to 32 up to 115 and is spending most of its time in the mid 90s. Gold, too, and IMO especially silver given its industrial and medical uses, its reality and supply/demand/scarcity will assert itself and make fools of those who try to use SLV and GC futures to make the tail wag the dog.
Collapse of USD as world currency would cause at least 50% drop of USA standard of living.
That won't occur without a major, major, major war
Not saying it's likely to happen tomorrow in some thousand-sigma event. I'm saying it would be beneficial to the productive out there to stop giving up real wealth for fiat paper whose supply is ever increasing.
At the EOD the Fed can nominally make things look like they're 'fixed' for who knows how long, but no matter what, the real economy will deteriorate due to the malinvestment and debt levels spurred on by this ZIRP-fed 'lock in low rates now' mentality, like we see in sovereigns selling half-century debt notes.
CBs cannot print purchasing power, as you have said many times. And they cannot print gold, so they are limited in the manipulation they can do to the PMs, as a delicate balance gets disturbed with mining production and industrial uses. I hope the markets usurp-back the Fed and this whole Keynesian illusion blows up and reality returns.
drop the keynesian, this is a misleading rhetoric that send the reader back to the silly demo/rep paradigm
even, doesn't make any sense to state over & over that qe is keynesian : germany is following a social-keynesian eco model since the ww2 & they refuse any QE;
in the mean time, usa, uk or Japan have been following 100% the neolib model & they went massively for QE.
otherwise your posts would be real interesting
a keynesian intervention, considering the state of usa economy would have been to nationalize public services (transport, health care, education, energy, water, waste management) while raising moderately (in a first phase) taxes for the working middle class with the goal of improving the quality of those services while bringing their cost down (and/or proportional to income) with the obvious consequences :
* big deficit for the state (but surely not more than with qe that is more or less public wealth transfered directly to the pocket of the banksters)
* better quality of life & more purchase power for the people to create (true) growth
* less power for the 1% that were owning those nationalized public services to create profit only
then taxes/people participation to use the services run by the state would raise as growth would increase to reduce the state deficits until complete recovery.
thats' what keynesianism is about : the state providence that endure some loss when things are bad & recover them when things are better & that's what a keynesian stimulus/intervention would be in a neolib country where everything is privatised.
what happened in usa with qe is not keyneisan : they are socialising the loss of the 1%, killing the middle class in the process while the fundamental idea of the keynes model is that the state should protect the middle class & the most important services that fuel the economic activity (good worker is healthy, educated & commute comfortably) & certainly not the banksters (the parasites of the economy), from financial markets high & lows & uncertainties.
As its is what would happen in us if economy was to crash for good ? -> no more transport, nor schools, nor hospitals. nothing but chaos... (& a bunch of smart asses explaining to whom want to listen that it's because of keynesianism & not those psychopath that are ready to kill us all to retain their power)
What a charming and quaint faith you have in the ability of tiny minded little government bureaucrats to accomplish the wonders you set forth in a utopian dream,notwithstanding the continuing evidence of their ability to produce only Unintended consequences...
i never implied that !
you've read it so worng as i was just & merely demonstrating how inaccurate & a rhetoric mistake it is to call usa/uk/japan qe a keynesian policy
so let me quote my last sentence :
"& a bunch of smart asses explaining to whom want to listen that it's because of keynesianism & not those psychopath that are ready to kill us all to retain their power"
So glad that the nations best and brightest give thier lives to such meaningless nonsense. A complete waste of human capital. I'm sure there's nothing else in this world that these people could be using their talent and education towards.
Exactly, although if they are just good at what they do as far as finding ways to what ultimately is simply scalping the same as the ticket people for sports games, then it is what it is. My issue is when they get privileges that don't come from the marketplace, but through regulators and the government. And that indeed is going on, so keep the anger at the intervention in the markets.
What regulators?
Best and brightest? Hah!
Did you forget the sarcasm tag or am I slow this morning? Do you really think these people would be altruistic and productive if they were dropped in an ideal society? Society is just the sum of all people and society currently has way too many scavengers and parasites to be longterm sustainable. These people are not victims just trying to survive, they ARE the problem. The reason societies become like this is because scavengers and parasites out-breed more productive people.
Interesting way to look at it -Sort of like,"coincidences too coincidental to be coincidental."
What's the problem... it's just the latest SIM game....
Interestingly enough those two guys remind me of drone 'pilots' in 'action'.
add to that, they know it in advance what the FED is going to buy or sell short and you got a WINNER ... good luck trading for the rest ... but again in all fairness it is their casino, you choose to go and play, the same way you go and play in Vegas, the only difference the odds of winning here are much lower.
I remember a 60 minutes piece on Vegas and one of the guys had tried Wall Street and he figured it right away, he said those guys are worse than us ... I think Al Capone had said the same thing .... the crooks know the smell of it
Rothchild had a good quote in reply to a british "general" question on tell me how i can make money ... it is difficult to make money but more difficult to keep it ... thats about covers it, not in the club stay out of the game.
Bad haircuts. That's a good sign.
FUCK YOU JAMIL !!!!!!!!!!!
Seasmoke. I love TYRANT.
Jamil did the "end around" on Barry...
Old news Tyler. Extremely relevant. Most Americans have a memory of a gnat.
Nanex Flash Crash - show the evidence.
I think the HFT stuff is overblown. Most people are not dying to make every last penny when they enter into a trade. Let the HFT devour each other naturally if they keep up and increase corruption. The solution as with any other market is alternatives, and in this case, bourses. The issue is the onerous regulations that make it hard to have alternative exchanges, given the de facto monopoly these big exchanges have. Moar regulation won't solve anything. It's like gold manipulation. I fully believe they are actively seeking to keep illusion of 'all is well' via odd hours dumping of futures notionally of millions of ounces, and the 6 margin hikes by CME as silver hit $50. It's obvious. But the COMEX would be irrelevant if enough people woke up about the Fed and inflation and got PMs and exposed the divergence between phyzz/paper and made COMEX obsolete. The solution is not SEC or CFTC. The solution is let the market work, and it is admirable what these guys like the NANEX guy do as far as unearthing 'conspiracy theory' as fact WRT the Fed buying ES and other stock-derived futures. That is a free market watchdog superior to any bureaucrat who even if well intended has the wrong motives/incentives.
Taxing HFT thus is another dumb idea. As with anything, don't play the game if you don't want to. Exchange physical stock certificates with others if you so choose. The reality is that the markets are more and more not real people allocating capital but robots based on mean reversion statistics that are self fulfilling propheices, essentially. As I said, let them devour each other and kill off retail, what they probably view as prey.
They have to have an incentive to make markets, too. I just want unfettered capitalism, and have watchdogs people can voluntarily pay for, like Yelp with restaurants, or other ratings agencies that aren't co-opted.
Unless you are highly levered and every single tick matters, this is a non-story. Much bigger issue is the dearth of volume which will naturally kill off HFT eventually. Along with the central banks intervening.
There are always in many different sectors people seeking to make a scalp. Look at the ticket people at ball games. Just because they have developed a sophisticated way of doing so doesn't make it evil. I'm not saying it is a particularly admirable profession; I'm just trying to re-direct the anger to where it belongs: the statist intervention in markets. More SEC means more corruption and more regulations that kill would be competitors from getting on the scene to take away volume from the big firms. Unintended consequences in action.
I have no anger. Suggest you read the article link above. Don't live by a day to day paycheck. Sounds like you do.
As far as I'm concerned, Wall Street can combust into flames. It will teach many people about old money values vs. new.
Blows a kiss.. sucks to be you.
As someone who believes in the blessing of free markets, I am trying to make a point that this idea that there should be taxes on HFT or bans, is completely hypocritical. The issue is statist intervention, period. We all know what a joke much of Wall Street is, full of financial engineering and deviation from timeless standards such as GAAP, and this is all abetted by the Fed.
I agree with the statist comment. We all have an inherent solution to solve the issue. Struggling with yours. Will keep my door open to discuss in future. Sleepy, can't think clearly. Off to bed! Besides, I'm in the Zerohedge blogging doghouse.
;-)
Why are you setting the premise at "bans or taxes"?
Why not just have an even playing field for everyone
No, you can simply choose not to play.
I don't think you've put 2 and 2 together today. Reread all the ZH posts for the last 24 hours. The central banks will be able to create trading volume and fix prices ad infinitum with the power of the printing press and the willing blindness of the regulators (government). It's not a matter of "sophistication", it's a matter of counterfeiting via fiat. Many players need to have their heads lobbed off, not just SEC members.
Only when a currency war combatant calls a stop to this by enthroning gold again as real money, will we see any change in the status quo. When a scalper sold ticket to a ball game and was paid with a handful of silver coins, there was nothing immoral about it except for some archaic law blocking private commerce. It was true value for true money. Now we have false money for exaggerated value and a blind house detective letting it all pass.
Agree 100% about sound money. The intervention by the Fed and government will make everyone but the connected poorer, and eventually (hopefully) the connected/perpetrators of the crimes, too, will pay the price as the John Galts of the world stop playing the game and indeed, 'Go Galt' so we can see just who is actually 'adding value.'
This particular issue with HFT has little to do with gold, though. This is about extremely sophisticated scalpers deriving an ever-diluting edge. It's somewhat analogous to how Bitcoin gets mined, as to increase the supply, one has to make it harder to mine by showing that the current obstacle can be beaten, so the new algos to mine bitcoin become harder.
My problem is if their edge is given by the government, which is the case here as they get instructions/privileges from the Fed and other CBs. In that case it is no different than insider trading. And in that case, I should say, too, that while I am against insider trading, I am against statist intervention in the market place, and that means laws outlawing insider trading. I believe the markets are better self regulating than could any bureaucrat, and whenever you create the illusion of 'protection/security'/regulation, you create places to be exploited by cronies, and you create bubbles as people abdicate responsibility of say doing their DD on banks as the FDIC just says, 'we'll guarantee depositors.' I believe that in a true free market insiders would get exposed and people would hopefully boycott them and stop doing business with them, as in a market anarchy setup, reputations are immensely important, as no statist entity can prop you up. And inside trading laws means these 'official announcements' are periods where stocks move 10+% a lot, and for the actual long term investors, this is a big issue becuase that is a huge move, whereas maybe if the bad news slowly got out, the market wouldn't price it in so violently at once as occurs nowadays with afterhours. I'm not saying there wouldn't be de facto standards as far as how people expect corporations to report, and use GAAP, etc. I'm pointing out that moar regulation (and anyway regulation, period) is not the solution. It exacerbates the problem.
FFS, there are no regulators doing anything to enforce exisiting law.
And HFT is pure theft.
And you don't see HFT as being one of the reasons for a lack of volume. In real life I don't buy from scalpers.
HFT is only a problem for those who join a firefight freely with a knife.
But as soon as you use limit orders, there is no problem. Don't be stupid to play their game - play your's!
Except airlines have no fiduciary oblgations to customers. Brokers can't take orders and publish/sell that info, especially to parties taking an opposite position. They should just execute the order.
HFT is like a first-class airline ticket, if the cashier at the airport takes your order for a ticket but hands them to a scalper standing there.
It's the option manipulation that is so destructive. They abuse infinite leverage and pros to create epic imbalance. We can end it all. Have everyone you know sell float scams (obvious bubble stocks like AMZN, TSLA and my favorite Wall Street financing ponzi, NFLX), raise physical cash and buy physical gold. Let them but worthless stocks while your network accumulates real assets. We end the Fed by converting the bubbles the Central Banks are creating into gold.
The best of the best of the heartless!
None of this would be possible if these people had to play their games with real money.
But, since gold is below "1300", there really isn't enough real money in the world to "play" with.
Until the day there is.
There is more than enough and "They" know this... "They" are scooping it up at cheap prices while they still have the ability to artificially keep it low....
My Grandfather was a truck mechanic.
The result of his labor was obvious - the Milk gets delivered and doesn't spoil.
Can someone explain the results of these HFT fucks efforts?
They make a shit ton of money for themselves, and a bigger shit ton of money for their employers.
What exactly are they producing, and for whose benefits?
What if they all just stopped doing what they are so busy doing?
What terrible thing would happen?
For HFT f***s, substitute Blackjack dealers and croupiers and then you get your answer.
those that control the game control the money.... they do not want to give up their advantage
what are these assclowns doing anyway? pretend to read thousands of operations per minute and collect a paycheck stealing money? All the work here was done by the engineers, architect and programmers that turned to the "dark side" and created the network infrastructre, programs and algorithms to steal money... Everything is automatic, is like the guys at the floor of the NYSE prenteding to shout orders.... just a dog and pony show, so people think there are actually human beings participating in the stock market
Who cares? Let the free market reign. If it's not completely in control then we're causing distortions that will fix themselves eventually. It would be great to have a perfectly free market all at one time but I don't think it ever has or ever will happen on a large scale. That being said, inequities that happen, such as HFT, will be corrected when Mr. Market sees fit. His rational/irrational behavior will always correct incorrectnesses in the markets!
Citadel lost 53% in 2008.
So, Citadel's eventual fate is bankruptcy.
All it takes is some new firm to invent some new computer designed specifically for these fill order tasks and the arms race will hit an exponential point where profitability will be impossible through de-centralization of computer power.
In 20 Years, a computer running out of someones basement will probably be able to out-pace what these HFT'S run . . . very few HFT firms will be around then.
The speed of light is constant in a medium.
the race is not to the swift, nor the battle to the strong, neither yet bread to the wise, nor yet riches to men of understanding, nor yet favour to men of skill; but time and chance happeneth to them all.
Now I can understand how and why all those Commie-pinkos of yester-year were so intent on sending certain "intellectuals" and "elites" to re-education camps or the gulag.
Frankly, most folks would be tolerant, peaceful and congratulatory if the market was a real market.
But it's not.
Complements of these guys.
Sometimes society just has to scrape the dog shit like these guys and their families off the collective shoes.
I don't think they are producing anything of value. There is no net good to the economy, just a group of middlemen who have placed themselves between buyers and sellers and added a new tax on the market. Sure the added cost to each transaction is small, but when taken as a whole, the tax becomes significant. They are stealing capital. You can always tell a society in decline by the number of people involved in non-productive schemes and gambling. When the system is broken, that's all that's left to do.
how does citadel, and these hft traders make so much money, just by using tax-dollars, backed by the fed. as their own, and taking a cut of the trillions of dollars of all americans 401 k transactions?
i guess their just socking a little away before the MYRA'S, and the GATES come down on the MMA'S.
i've read articles that state 50% of the value of equities will disappear in a few short days when the games end, and before you can get a broker, or 401k rep. to answer the phone.
So can someone explain in what way HFTs are different from what traders always has been doing?
For asking that impertenant question, you will be absorbed
HFT arent traders at all. Traders have opinions about the market and have ideas.
HFTs are skimmers. They dont know what THEY are going to do until THEY SEE what your order wants to do.
SKIMMING. STEALING.
HFT is a massive scam, and should be stopped. unfortunately it wont happen, too much at stake.
The crooks in Washinton won't be stopping this anytime soon. In an investigation about two years ago 60 Minutes uncovered evidence of several instances of insider trading among prominent government officials. In a hurry then to save our public servants from embarrassment, President Barack Obama jumped on board. "Send me a bill that bans insider trading by members of Congress," the president declared in his 2012 State of the Union address. "I will sign it tomorrow."
The bill sailed through the Senate on a 96-3 vote, passed the House 417-2 and Obama promptly signed it, noting that its disclosure, and accountability requirements would apply to and demand transparency from virtually everyone in government who had access to inside financial information. Now this has been undone, my tip off was a April 27th 2013 Chicago Tribune editorial that reported Congress had voted to repeal part of the STOCK Act that recently became law. More on this subject in the article below.
http://brucewilds.blogspot.com/2013/04/washington-insider-trading-is-bac...
I've no issue with HFT. Its tech and the only evil it will bear is from a human side. I get the argument that once a critical mass is breached, it can influence the market probably in a negative way. I sure the Fed as well as the ESF is using this in self serving ways.
If you define war in broad terms as opposed to just military conflict, yes. The best way to take the U.S. military down several pegs is by fatally undermining the ability of the government to afford men and materiel. That is the avenue one should expect, because it is, by far, the most effective and, globally, less destructive means to win the conflict that appears to be setting up.
Did you see anybody in those clips that looked....I don't know.....happy???
Those people epitomize soulless lives
I used to trade 100's of orders and tens of thousands of shares per year. Over the last 5 years my average is 15.83 trades and 879 shares. This year, YTD, I have 1 trade for 5 shares. Those were real orders, real money - I presume the PHDs have already figured out the consequences of playing with themselves in dark pools.
Apart from the fat paycheck, where is the job satisfaction for these people. I would hate to work there, staring at those screens all day with some prick looking over my shoulder. I never made a lot of money, but I can drive through a neighborhood and see nice houses I helped to build, or go out on the Bay and see people enjoying themselves on boats that I had a hand in building. Some things money can't buy.