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Flash Boys' Michael Lewis Warns "The Problem's Not Just HFT, The Problem Is The Entire System"
As HFT shops begin to turn on each other, it seems appropriate to reflect on the impact that Michael Lewis' Flash Boys book had on exposing the ugly truth that many have been discussing for years in US (and international) equity (and non-equity) markets. As Lewis concludes, after explaining the attacks he has suffered from the HFT industry, "If I didn't do more to distinguish 'good' H.F.T. from 'bad' H.F.T., it was because I saw, early on, that there was no practical way for me or anyone else... to do it. ... The big banks and the exchanges [have] been paid to compromise investors’ interests while pretending to guard those interests. I was surprised more people weren’t angry with them."
Authored by Michael Lewis, originally posted at Vanity Fair,
When I sat down to write Flash Boys, in 2013, I didn’t intend to see just how angry I could make the richest people on Wall Street. I was far more interested in the characters and the situation in which they found themselves. Led by an obscure 35-year-old trader at the Royal Bank of Canada named Brad Katsuyama, they were all well-regarded professionals in the U.S. stock market. The situation was that they no longer understood that market. And their ignorance was forgivable. It would have been difficult to find anyone, circa 2009, able to give you an honest account of the inner workings of the American stock market—by then fully automated, spectacularly fragmented, and complicated beyond belief by possibly well-intentioned regulators and less well-intentioned insiders. That the American stock market had become a mystery struck me as interesting. How does that happen? And who benefits?
By the time I met my characters they’d already spent several years trying to answer those questions. In the end they figured out that the complexity, though it may have arisen innocently enough, served the interest of financial intermediaries rather than the investors and corporations the market is meant to serve. It had enabled a massive amount of predatory trading and had institutionalized a systemic and totally unnecessary unfairness in the market and, in the bargain, rendered it less stable and more prone to flash crashes and outages and other unhappy events. Having understood the problems, Katsuyama and his colleagues had set out not to exploit them but to repair them. That, too, I thought was interesting: some people on Wall Street wanted to fix something, even if it meant less money for Wall Street, and for them personally.
Of course, by trying to fix the stock market they also threatened the profits of the people who were busy exploiting its willful inefficiencies. Here is where it became inevitable that Flash Boys would seriously piss off a few important people: anyone in an established industry who stands up and says “The way things are being done here is totally insane; here is why it is insane; and here is a better way to do them” is bound to incur the wrath of established insiders, who now stand accused of creating the insanity. The closest thing in my writing life to the response of Wall Street to Brad Katsuyama was the response of Major League Baseball to Billy Beane after Moneyball was published, in 2003, and it became clear that Beane had made his industry look foolish. But the Moneyball story put in jeopardy only the jobs and prestige of the baseball establishment. The Flash Boys story put in jeopardy billions of dollars of Wall Street profits and a way of financial life.
Two weeks before the book’s publication, Eric Schneiderman, the New York attorney general, announced an investigation into the relationship between high-frequency traders, who trade with computer algorithms at nearly light speed, and the 60 or so public and private stock exchanges in the United States. In the days after Flash Boys came out, the Justice Department announced its own investigation, and it was reported that the F.B.I. had another. The S.E.C., responsible in the first place for the market rules, known as Reg NMS, that led to the mess, remained fairly quiet, though its enforcement director let it be known that the commission was investigating exactly what unseemly advantages high-frequency traders were getting for their money when they paid retail brokers like Schwab and TD Ameritrade for the right to execute the stock-market orders of small investors. (Good question!) The initial explosion was soon followed by a steady fallout of fines and lawsuits and complaints, which, I assume, has really only just begun. The Financial Industry Regulatory Authority announced it had opened 170 cases into “abusive algorithms,” and also filed a complaint against a brokerage firm called Wedbush Securities for allowing its high-frequency-trading customers from January 2008 through August 2013 “to flood U.S. exchanges with thousands of potentially manipulative wash trades and other potentially manipulative trades, including manipulative layering and spoofing.” (In a “wash trade,” a trader acts as both buyer and seller of a stock, to create the illusion of volume. “Layering” and “spoofing” are off-market orders designed to trick the rest of the market into thinking there are buyers or sellers of a stock waiting in the wings, in an attempt to nudge the stock price one way or the other.) In 2009, Wedbush traded on average 13 percent of all shares on NASDAQ. The S.E.C. eventually fined the firm for the violations, and Wedbush admitted wrongdoing. The S.E.C. also fined a high-frequency-trading firm called Athena Capital Research for using “a sophisticated algorithm” by which “Athena manipulated the closing prices of thousands of NASDAQ-listed stocks over a six-month period” (an offense which, if committed by human beings on a trading floor instead of by computers in a data center, would have gotten those human beings banned from the industry, at the very least).
On it went. The well-named BATS group, the second-largest stock-exchange operator in the U.S., with more than 20 percent of the total market, paid a fine to settle another S.E.C. charge, that two of its exchanges had created order types (i.e., instructions that accompany a stock-market order) for high-frequency traders without informing ordinary investors. The S.E.C. charged the Swiss bank UBS with creating illegal, secret order types for high-frequency traders so they might more easily exploit investors inside the UBS dark pool—the private stock market run by UBS. Schneiderman filed an even more shocking lawsuit against Barclays, charging the bank with lying to investors about the presence of high-frequency traders in its dark pool, to make it easier for the high-frequency traders to have the pleasure of trading against the investors. Somewhere in the middle of it all a lawyer—oddly, named Michael Lewis—who had devised the successful legal strategy for going after Big Tobacco, helped file a class-action suit on behalf of investors against the 13 public U.S. stock exchanges, accusing them of, among other things, cheating ordinary investors by selling special access to high-frequency traders. One big bank, Bank of America, shuttered its high-frequency-trading operation, and two others, Citigroup and Wells Fargo, closed their dark pools. Norway’s sovereign-wealth fund, the world’s largest, announced that it would do what it needed to avoid high-frequency traders. One enterprising U.S. brokerage firm, Interactive Brokers, announced that, unlike its competitors, it did not sell retail stock-market orders to high-frequency traders, and even installed a button that enabled investors to route their orders directly to IEX, a new alternative stock exchange opened in October 2013 by Brad Katsuyama and his team, which uses technology to block predatory high-frequency traders from getting the millisecond advantages they need. On October 15, 2014, in a related development, there was a flash crash in the market for U.S. Treasury bonds. All of a sudden the structure of the U.S. stock market, which had been aped by other markets, seemed to implicate more than just the market for U.S. stocks. In the past 11 months, the U.S. stock market has been as chaotic as a Cambodian construction site. At times the noise has sounded like preparations for the demolition of a hazardous building. At other times it has sounded like a desperate bid by a slumlord to gussy the place up to distract inspectors. In any case, the slumlords seem to realize that doing nothing is no longer an option: too many people are too upset. Brad Katsuyama explained to the world what he and his team had learned about the inner workings of the stock market. The nation of investors was appalled—a poll of institutional investors in late April 2014, conducted by the brokerage firm ConvergEx, discovered that 70 percent of them thought that the U.S. stock market was unfair and 51 percent considered high-frequency trading “harmful” or “very harmful.” And the complaining investors were the big guys, the mutual funds and pension funds and hedge funds you might think could defend themselves in the market. One can only imagine how the little guy felt. The authorities evidently saw the need to leap into action, or to appear to. The narrow slice of the financial sector that makes money off the situation that Flash Boys describes felt the need to shape the public perception of it. It took them a while to figure out how to do this well. On the book’s publication day, for instance, an analyst inside a big bank circulated an idiotic memo to clients that claimed I had “an undisclosed stake in IEX.” (I’ve never had a stake in IEX.) Then came an unfortunate episode on CNBC, during which Brad Katsuyama was verbally assaulted by the president of the BATS exchange, who wanted the audience to believe that Katsuyama had dug up dirt on the other stock exchanges simply to promote his own, and that he should feel ashamed. He hollered and ranted and waved and in general made such an unusual public display of his inner life that half of Wall Street came to a halt, transfixed. I was told by a CNBC producer that it was the most watched segment in the channel’s history, and while I have no idea if that’s true, or how anyone would even know, it might as well be. A boss on the Goldman Sachs trading floor told me the place stopped dead to watch it. An older guy next to him pointed to the TV screen and asked, “So the angry guy, is it true we own a piece of his exchange?” (Goldman Sachs indeed owned a piece of the BATS exchange.) “And the little guy, we don’t own a piece of his exchange?” (Goldman Sachs does not own a piece of IEX.) The old guy thought about it a minute, then said, “We’re fucked.” That feeling was eventually shared by the BATS president. His defining moment came when Katsuyama asked him a simple question: Did BATS sell a faster picture of the stock market to high-frequency traders while using a slower picture to price the trades of investors? That is, did it allow high-frequency traders, who knew current market prices, to trade unfairly against investors at old prices? The BATS president said it didn’t, which surprised me. On the other hand, he didn’t look happy to have been asked. Two days later it was clear why: it wasn’t true. The New York attorney general had called the BATS exchange to let them know it was a problem when its president went on TV and got it wrong about this very important aspect of its business. BATS issued a correction and, four months later, parted ways with its president. From that moment, no one who makes his living off the dysfunction in the U.S. stock market has wanted any part of a public discussion with Brad Katsuyama. Invited in June 2014 to testify at a U.S. Senate hearing on high-frequency trading, Katsuyama was surprised to find a complete absence of high-frequency traders. (CNBC’s Eamon Javers reported that the Senate subcommittee had invited a number of them to testify, and all had declined.) Instead they held their own roundtable discussion in Washington, led by a New Jersey congressman, Scott Garrett, to which Brad Katsuyama was not invited. For the past 11 months, that’s been the pattern: the industry has spent time and money creating a smoke machine about the contents of Flash Boys but is unwilling to take on directly the people who supplied those contents. On the other hand, it took only a few weeks for a consortium of high-frequency traders to marshal an army of lobbyists and publicists to make their case for them. These condottieri set about erecting lines of defense for their patrons. Here was the first: the only people who suffer from high-frequency traders are even richer hedge-fund managers, when their large stock-market orders are detected and front-run. It has nothing to do with ordinary Americans. Which is such a weird thing to say that you have to wonder what is going through the mind of anyone who says it. It’s true that among the early financial backers of Katsuyama’s IEX were three of the world’s most famous hedge-fund managers—Bill Ackman, David Einhorn, and Daniel Loeb—who understood that their stock-market orders were being detected and front-run by high-frequency traders. But rich hedge-fund managers aren’t the only investors who submit large orders to the stock market that can be detected and front-run by high-frequency traders. Mutual funds and pension funds and university endowments also submit large stock-market orders, and these, too, can be detected and front-run by high-frequency traders. The vast majority of American middle-class savings are managed by such institutions. The effect of the existing system on these savings is not trivial. In early 2015, one of America’s largest fund managers sought to quantify the benefits to investors of trading on IEX instead of one of the other U.S. markets. It detected a very clear pattern: on IEX, stocks tended to trade at the “arrival price”—that is, the price at which the stock was quoted when their order arrived in the market. If they wanted to buy 20,000 shares of Microsoft, and Microsoft was offered at $40 a share, they bought at $40 a share. When they sent the same orders to other markets, the price of Microsoft moved against them. This so-called slippage amounted to nearly a third of 1 percent. In 2014, this giant money manager bought and sold roughly $80 billion in U.S. stocks. The teachers and firefighters and other middle-class investors whose pensions it managed were collectively paying a tax of roughly $240 million a year for the benefit of interacting with high-frequency traders in unfair markets. Anyone who still doubts the existence of the Invisible Scalp might avail himself of the excellent research of the market-data company Nanex and its founder, Eric Hunsader. In a paper published in July 2014, Hunsader was able to show what exactly happens when an ordinary professional investor submits an order to buy an ordinary common stock. All the investor saw was that he bought just a fraction of the stock on offer before its price rose. Hunsader was able to show that high-frequency traders pulled their offer of some shares and jumped in front of the investor to buy others and thus caused the share price to rise. The rigging of the stock market cannot be dismissed as a dispute between rich hedge-fund guys and clever techies. It’s not even the case that the little guy trading in underpants in his basement is immune to its costs. In January 2015 the S.E.C. fined UBS for creating order types inside its dark pool that enabled high-frequency traders to exploit ordinary investors, without bothering to inform any of the non-high-frequency traders whose orders came to the dark pool. The UBS dark pool happens to be, famously, a place to which the stock-market orders of lots of small investors get routed. The stock-market orders placed through Charles Schwab, for instance. When I place an order to buy or sell shares through Schwab, that order is sold by Schwab to UBS. Inside the UBS dark pool, my order can be traded against, legally, at the “official” best price in the market. A high-frequency trader with access to the UBS dark pool will know when the official best price differs from the actual market price, as it often does. Put another way: the S.E.C.’s action revealed that the UBS dark pool had gone to unusual lengths to enable high-frequency traders to buy or sell stock from me at something other than the current market price. This clearly does not work to my advantage. Like every other small investor, I would prefer not to be handing some other trader a right to trade against me at a price worse than the current market price. But my misfortune explains why UBS is willing to pay Charles Schwab to allow UBS to trade against my order. As time passed, the defenses erected by the high-frequency-trading lobby improved. The next was: the author of Flash Boys fails to understand that investors have never had it better, thanks to computers and the high-frequency traders who know how to use them. This line has been picked up and repeated by stock-exchange executives, paid high-frequency-trading spokespeople, and even journalists. It’s not even half true, but perhaps half of it is half true. The cost of trading stocks has fallen a great deal in the last 20 years. These savings were fully realized by 2005 and were enabled less by high-frequency market-making than by the Internet, the subsequent competition among online brokers, the decimalization of stock prices, and the removal of expensive human intermediaries from the stock market. The story Flash Boys tells really doesn’t open until 2007. And since late 2007, as a study published in early 2014 by the investment-research broker ITG has neatly shown, the cost to investors of trading in the U.S. stock market has, if anything, risen—possibly by a lot. Finally there came a more nuanced line of defense. For obvious reasons, it was expressed more often privately than publicly. It went something like this: O.K., we admit some of this bad stuff goes on, but not every high-frequency trader does it. And the author fails to distinguish between “good” H.F.T. and “bad” H.F.T. He further misidentifies H.F.T. as the villain, when the real villains are the banks and the exchanges that enable—nay, encourage—H.F.T. to prey on investors. There’s some actual truth in this, though the charges seem to me directed less at the book I wrote than at the public response to it. The public response surprised me: the attention became focused almost entirely on high-frequency trading, when—as I thought I had made clear—the problem wasn’t just high-frequency trading. The problem was the entire system. Some high-frequency traders were guilty of not caring a great deal about the social consequences of their trading—but perhaps it’s too much to expect Wall Street traders to worry about the social consequences of their actions. From his seat onstage beside Warren Buffett at the 2014 Berkshire Hathaway investors’ conference, vice-chairman Charlie Munger said that high-frequency trading was “the functional equivalent of letting a lot of rats into a granary” and that it did “the rest of the civilization no good at all.” I honestly don’t feel that strongly about high-frequency trading. The big banks and the exchanges have a clear responsibility to protect investors—to handle investor stock-market orders in the best possible way, and to create a fair marketplace. Instead, they’ve been paid to compromise investors’ interests while pretending to guard those interests. I was surprised more people weren’t angry with them. If I didn’t do more to distinguish “good” H.F.T. from “bad” H.F.T., it was because I saw, early on, that there was no practical way for me or anyone else without subpoena power to do it. In order for someone to be able to evaluate the strategies of individual high-frequency traders, the firms need to reveal the contents of their algorithms. They don’t do this. They cannot be charmed or cajoled into doing this. Indeed, they sue, and seek to jail, their own former employees who dare to take lines of computer code with them on their way out the door. In the months after the publication of Moneyball, I got used to reading quotes from baseball insiders saying that the author of the book couldn’t possibly know what he was talking about, as he was not a “baseball expert.” In the 11 months since the publication of Flash Boys, I’ve read lots of quotes from people associated with the H.F.T. lobby saying the author is not a “market-structure expert.” Guilty as charged! Back in 2012, I stumbled upon Katsuyama and his team of people, who knew more about how the stock market actually worked than anyone then being paid to serve as a public expert on market structure. Most of what I know I learned from them. Of course I checked their understanding of the market. I spoke with high-frequency traders and people inside big banks, and I toured the public exchanges. I spoke to people who had sold retail-order flow and people who had bought it. And in the end it was clear that Brad Katsuyama and his band of brothers were reliable sources—that they had learned a lot of things about the inner workings of the stock market that were unknown to the wider public. The controversy that followed the book’s publication hasn’t been pleasant for them, but it’s been fun for me to see them behave as bravely under fire as they did before the start of the war. It’s been an honor to tell their story. The controversy has come with a price: it has swallowed up the delight an innocent reader might have taken in this little episode in financial history. If this story has a soul, it is in the decisions made by its principal characters to resist the temptation of easy money and to pay special attention to the spirit in which they live their working lives. I didn’t write about them because they were controversial. I wrote about them because they were admirable. That some minority on Wall Street is getting rich by exploiting a screwed-up financial system is no longer news. That is the story of the last financial crisis, and probably the next one, too. What comes as news is that there is now a minority on Wall Street trying to fix the system. Their new stock market is flourishing; their company is profitable; Goldman Sachs remains their biggest single source of volume; they still seem to be on their way to changing the world. All they need is a little help from the silent majority. Read more: Subscribe now for access. The full issue is available March 11 in the digital editions and March 17 on national newsstands.Thinking, Fast and Slow
The Best of Times, the Worst of Times
Rookie Season
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There's a reason Mike writes and doesn't trade anymore...
the one remaining justification for capitalism:
https://www.youtube.com/watch?v=vvuYr4am2N0&t=28m40s
How much can a rigged casino steal from me if I don't gamble?
the true rate of inflation
Good point. I agree. The only way to win the game is by not playing.
I'll never get the 4 minutes back which was wasted on this video. Those guys need to pay for my time.
Its really the people IN CHARGE OF RUNNING the entire system that is the problem... like the bankers and politicians....rotting to the core selfish greedy bastards. Money brings the evil out of men.
Well, it does say in the bible that money is the root of all kinds of evil (note it doesn't say money is the root of all evil, as is commonly said). History pretty much backs that up.
Still too narrow, it's not just the equity or other financial markets, they are just a byproduct of a flawed monetary system. This is the best most simple overview I've seen. Starts slow but well worth the read:
http://debtcrash.report
Actually, I think the bible says it is the "love" of money that is the root of all evil, not money itself?
correct...but still "all kinds of", not "all"
It says love of money is the root of all evil, or all kinds of evil if you prefer. Money itself is innocent of evil.
You are correct, it is the LOVE of money.
Automation in trading would be a welcome change - removal of emotional bias and elimination of unnecessary risk, if the right people were in charge. Instead it's like ordering autopilot systems for passenger jets from ISIS.
Meaning what exactly...that he's a great writer?
After being fired from my old job 8 months ago, i've had luck to learn about this great company online that was a lifesaver for me... They offer online home-based work. My last month payment after working with them for 4 months was 16ooo bucks... Great thing about it was that only requirement for the job is basic typing and reliable internet...If you think this could be for you then find out more here...
www.globe-report.com
So GENEROUS of you to share!!!
How wonderful that you've found a source of riches that will not diminish if everyone else does it too!
Thank you, thank you, thank you!
Sorry, that was sarcasm. Fuck off and die.
There's a reason Mike writes and doesn't trade anymore...
yes, he knows the entire system is complete bullshit and should be shuttered for the farce it is
The markets were corrupted so many ways from Sunday since well before Jesse Livermore set up his bucket shop down the street from the NYSE. This article means well but reeks of bullshit. It implies the markets once were honest and above board.
Strictly enforced rules for investors and a separate covert set of rules for brokers that investors aren't privy to
brokers allowed to recommend stocks and earn commissions from investor trades, then take the opposite position for the benefit of the same interested parties through a subsidiary veil.
Brokers trading against investors, and at greatly reduced or redeemed exchange fees and no commisions
Brokers allowed to use or borrow against funds held in escrow from short sales
Brokers allowed to short stocks investors are only allowed to hold long
No criminal statutory enforcement, corporations are people too
Brokers allowed to shortsell more stocks than exist in the float for eight days, investors three days
Investor services not held criminally liable for issuing false accounting data
Financial news services allowed to discount consistently poor results by saying their raison de etre is for entertainment only
Corporations allowed to buy back stock under the guise of raising the pps only to reissue as exec and BOD bonuses by BOD vote
Yeah, fix this HFT thing. After that, WTF could possibly go wrong?
@GMacTrader - nice glib throw-away line. Did your HFT masters cut you a nice check for that one?
What a fucking knob - no wonder this place is going to shit.
Yeah the moment the system don't show up, the whole place goes to hell, been there, done that.
Stunning prediction: just like last time, nobody will care and nothing will change.
some big bank/firm will pay a small percent fine, nothing will be mentioned in the media except for a blurb on a financial back page, and the company will go about doing the same thing until the get caught again, and again pay a pittance of a fine.
A credited Eye - Actually it is starting to change. Mainstream media is reporting much of the corruption and we're seeing more Mexican stand-offs. Now that the little guy has been plundered the oligarchs go after each other. People onky tow the line when there is something to gain.
When growth stalls at the top as is occuring now that is when things change.
absolute corruption corrupts absolutely
this systemic indemic corruption is obviously not going to fix itself
absolute corruption corrupts absolutely
this systemic indemic corruption from the very top to the very bottom is obviously not going to fix itself
WOW! That was a quick response. I missed the other 4998. You should stop using the flash system to post.
if you can't imprison Corzine forget about the rest. We are on a giant ponzi ride of central banks forking money to the most corrupt. Thanks for the quadrillion of zero interest money I am going to find some STUPID country that pays interest and put it there. A GIANT SWIRLING TOILET BOWL of stupidity. These zero rate interest are stuff of great depressions
Once you understand the system of 'laws'...it is just another control strategy in the matrix. There is no real justice, unless you lie and cheat like the rest...and in the end, those of us who know and understand the truth know that lying and cheating will only result in eternal pain.
So, the righteous people of this earth will always be taken advantage of by the evil doers....until it all ends. That is just the way it will be.
Here's the main web page for the IEX exchange. I like how it's got nothing but a box with spool of fiber-optic cable as the main graphic. Also charts their progress, volumes, etc. since incep.
http://www.iextrading.com/
Any mention of Goldman Sachs reminds me of the famous saying
"What is good for Goldman Sachs is bad for America!"
What's notable is the even Goldman has switched allegiances from BATS to IDX.
i don't know who will win the ultimate bot v. bot competition but i do know who will lose.
Yes. The entire system means including the spinless scumbag politicians.
Is this really news to anyone who has been paying attention - computers allow for mass manipulation - period
The mass of lame stream media deception must be countered any and all ways possible, slowly, incrementally, over time.
mass manipulation is actually like a free market. Selective manipulation is fraud.
At best this will get shut down but nobody will go to jail and no (serious amounts) money will get returned. Just the usual "stop this form of theft" so they will move on and look for another way to steal.
"The authorities evidently saw the need to leap into action, or to appear to."
wow, it's a tough call but if I were a betting man I'd have to take the under on that one...
The solution is so fucking simple it's insulting at this point:
auctions every second or so using orders from all conduits (honoring reg NMS), orders prioritized by price and (randomized) time stamp within each auction cycle and/or auction reports delayed by several seconds to prevent quote fishing, minimum fees to post quotes, no rebates and a massive reduction/simplification of order types.
In a nutshell, regulators need to acknowledge that the speed of light is a restraint to market access that cannot be eliminated and should not be allowed to be the basis for manipulating market structure for individual advantage.
Recall that the entire purpose of a market is to provide a venue for buyers and sellers to intereact on more or less equal (structural) footing for the purpose of maximizing price discovery and liquidity.
If the criminal activity that was exposed by Michael Lewis was not shutdown, it can only mean that the government (or a "quasi-government" entity) uses the activity and perhaps even enabled it.
enough said.
Does anybody on this blog actually trade. I do and get price improvement 20-30% of the time. Spreads have never been this narrow. One thing I only use limit orders, and have no clue why anyone uses market orders (or stops for that matter)
can get price improvementws after a trade-through. actually, the price would have been even better if your bid/offer wasn't there in the frist place. My experience remains that even with the big caps fills are horrible. FOKing the offer generally gets you about 60% of the fill you actually want. Problem is not only the frontrunning of orders but the special order types that most non-HFT traders have. You may be first in line, but that's basically irrelevant these days. Sure you'll get the great fill when th level breaks.
Avoiding US markets almost completely the past 12-odd months. Looking more towards the Brasil market (higher costs) but with a 'first-come-first-serve" order policy.
How are we going to export our way out of this crisis?
Goods? If you buy US products, you get NSA backdoors.
Services? If you buy on US stock exchanges, you get skimmed.
We're making a tough sell harder.
Great Book - Thanks for exposing the bad behavior and how it is done. I think middle america is more concerned about what the latest Bionce tune is though. Ignorance is bliss
Also have a look for "Broken Markets" link: http://www.amazon.com/Broken-Markets-Frequency-Destroying-Confidence/dp/... (and no, I do not get paid for that link). A more academic review of the issues.
the kardashians, bro. not "B"
So “good” HFT and “bad” HFT like in “good” Terror and “bad” Terror where subjectively you maybe can make this distinction but it still is terror, objectively speaking. So then you say the terror is not the problem but the ones making the decision against who this terror is directed is the problem. Still that doesn't change anything. It still is terror. The only thing you can do to stop terror is just not doing the terror.
So cut the HF out of HFT and call it ET (Electronic Trading) or something in which you read the ping (server latency), like is done in online gaming matches and balance it out so that everyone can play an honest game without somebody having the advantage of a faster ping connection. On top of that you need a punkbuster variant like used in gaming to catch the cheaters who always will be there to try to get an dishonest advantage.
Why HFT was introduced in the first place is beyond me because it's like playing an online game knowing you always will lose that game while the other guys are playing, sitting next to the computer server. It just doesn't make any sense. It's cheating no matter if I know it or not. Of course with the difference that if I know it I won't play the game which will result in the game not being played at all.
In a sense one could see it as double cheating in don't getting the information about my ping and as a result losing the game. And that's exactly what is happening with HFT today.
Steve Hughes on 'The war on Terror', 'Good Terror, 'Bad Terror' and 'Terror Light' ;) https://youtu.be/ohogzxiqqkM?t=41m51s
Stocks have always been manipulated always will. Jesse Livermore maybe greatest trader ever even resorted to manipulation in his later days (though he tried to deny it). There are rules already in place to stop the spoofing but no one enforces it. this whole thing is mostly an enforcement problem
The problem is pension funds.
If those piles of money weren’t there, there would be no fraud.
Like cheese to rats.
Exactly like cheese to rats!
No shit Sherlock... it's all a scam.
Keep that information flow coming. Good stuff.
De-paperize yourself and hang on.
Lewis is an Obama sycophant...screw you Lewis...YOUR people built this bitch...
ad hominum much?
P < P + I
As a relatively excellent article published on Zero Hedge, the one above out-does the typical patterns:
Grossly understating the problems:
"—the problem wasn’t just high-frequency trading. The problem was the entire system."
Grossly overstating the solutions:
"What comes as news is that there is now a minority on Wall Street trying to fix the system. Their new stock market is flourishing; their company is profitable; Goldman Sachs remains their biggest single source of volume; they still seem to be on their way to changing the world. All they need is a little help from the silent majority."
Since the entire system is based on ENFORCED FRAUDS, those are deliberately misunderstood to the maximum possible degree, as demonstrated by the ways that people take for granted the natural languages and philosophy of science that they use to perceive and discuss the rapidly developing social situations where what electronics did was enable the increasing AUTOMATION OF ENFORCED FRAUDS. It is practically impossible to overstate the ways that a civilization controlled by backing up lies with violence develops the most backward possible ways of thinking and talking about everything. Therefore, it is also practically impossible to understate the degree of dangerous difficulties that exist with respect to resolving those situations!
There is NO doubt that:
"The problem was the entire system."
However, that ENTIRE SYSTEM includes the basic ways that the dominant natural languages and philosophy of science worked through the biggest bullies' bullshit world view, which is BACKWARDS as it can possibly be! In that context, looking at Goldman Sachs as providing some kind of "solutions," when Goldman Sachs is the leading example of corporations successfully corrupting governments, is so tragically absurd that it is amusing to a macabre sense of humour.
Given that the FOUNDATION IS ENFORCED FRAUDS, every possible advance in science and technology ends up primarily being employed to ENFORCE FRAUDS. Without a deeper understanding of how and why the FOUNDATIONS ARE ENFORCING FRAUDS, then there could not be any genuine resolutions of those problems. Any possible reforms of systems with utterly rotten foundations are ridiculous.
While human beings operate as entropic pumps of energy flows, that is deliberately misunderstood in the maximum possible ways, as demonstrated by operating through a fundamentally fraudulent financial accounting system, where "money" can be created out of nothing as debts, and disappear back to nothing when those debts disappear, is flagrantly FRAUDULENT, because it violates the most basic law of nature to make something out of nothing, or to make something disappear back to nothing. The existing systems are ACTUALLY organized lies operating robberies, where frauds are symbolic robbery.
Those who were the most socially successful doing that have been able to present their abilities to ENFORCE FRAUDS as being good things ... which they were for them personally, over the short-term. However, the society as a whole within which ENFORCING FRAUDS is presented as a good thing, and therefore, that it is better to do that even more so and faster (i.e., AUTOMATED FRAUDULENCE, as High Frequency Trading) is a runaway, psychotically insane society, which is based on deliberately misunderstanding everything to the maximum possible degree that it can!
HFT demonstrates the growing Grand Canyon Chasm between progress it physical sciences, without any matching progress in political science. Thereby, technologies which are trillions of times more capable are employed to amplify the ability to ENFORCE FRAUDS by many orders of magnitude. In order to make political science more consistent with physical sciences, it would be necessary to regard human beings and human civilization as a general energy system. While that is theoretically possible, doing so would take a series of intellectual scientific revolutions, not the least of which would be to reverse the way that we think about entropy, because we are currently taking for granted the dominant philosophy of science that already inverted entropy, in order to make that consistent with the biggest bullies' bullshit world view.
The banksters' social successes are based on the degree to which the biggest bullies' bullshit world view dominates our natural languages and philosophy of science. ENFORCING FRAUDS is presented as a positive thing. Those who are the most socially successful through taking advantage of that fundamentally fraudulent financial account system then can use their profits from those frauds to reinvest in more frauds. (Some superficial examples of that were the ways the HFT companies developed their public relations, as described in the article above.)
However, that is all trivial compared to the overall ways that being able to back up lies with violence is presented as doing relatively positive things, rather than relatively negative things, within the context of the biggest bullies' bullshit world view, that commands the dominant natural languages and philosophy of science that the vast majority of people take for granted, when they perceive the political problems and pretend to discuss those problems with some illusions of being "rational," when they actually could not be more irrational if they tried!
Progress in physical sciences has enabled the development of electronics, which has been applied to AUTOMATE ENFORCED FRAUDS. Human beings ARE operating as entropic pump energy systems, and they MUST necessarily do so. However, the ways that human beings are currently understanding how they are doing that are the most deliberately backward misunderstandings possible. The results of running fundamentally fraudulent accounting systems, that get away with deliberately ignoring the most basic laws of nature, such as the conservation of energy, because those systems are socially successful through ACTUALLY being integrated systems of legalized lies, backed by legalized violence, are resulting in runaway social polarization and destruction of the natural world.
It is NOT possible to stop human beings and civilizations from operating as entropic pumps of energy flows. However, it IS possible to change the ways that we perceive that. There could be a series of profound paradigm shifts in the ways that we perceive politics. Given that there have already been a series of profound paradigm shifts in physical sciences, which have enabled the development of globalized systems of electronic monkey money frauds, backed by the threat of force from apes with atomic bombs, it is theoretically imperative for enough human beings to change the ways that they understand political science.
Nothing less is in the same order of magnitude, or ball park of the problems presented by the ability of HFT to have AUTOMATED ENFORCED FRAUDS. However, obviously, at the present time, we are still stuck inside the situation where the foxes are guarding the hen house, and therefore, the article above could, apparently with a straight face, recommend that a "solution" backed by Goldman Sachs was a good one, that other people should support. That alone is another demonstration of the degree to which we are living in a psychotically insane society.
At the present time, it appears that our society is terminally sick and insane, because of the degree to which those engaged in ENFORCED FRAUDS are continuing to be able to do that even more, despite the overall consequences being collective criminal insanities, headed towards committing suicide, due to the degree to which the social successes of the ENFORCED FRAUDS depends upon people deliberately ignoring the laws of nature as much as possible, in order to be able to maintain their beliefs in bullshit.
Progress in science and technology ends up being channeled through social pyramid systems based on backing up lies with violence, to result in BIGGER AND BETTER WAYS TO ENFORCE FRAUDS. Meanwhile, in that context, there are "solutions" to those problems promoted with are ridiculously putting bandages on the some of the tips of icebergs of those problems. There continues to be a basic unexamined belief by the vast majority of people that they can continue to deliberately ignore how and why there was progress in physical sciences, and merely apply the resulting technologies, without doing anything comparable to change the paradigms regarding how to perceive political science.
Given that is that standing situation, which is actually getting worse, faster, the most probable predictions for the future are that more progress in physical sciences will continue to drive civilization to behave in even more criminally insane ways. Technologies which can use information trillions of times faster than was previously possible are being pumped into systems of ENFORCED FRAUDS. That basic problem is NOT being faced nor discussed. Instead, there are trivial debates about how to reform the established systems, while nothing less than a series of intellectual scientific revolutions could be sufficient to cope with the real magnitude of those problems ...