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Goodbye High Frequency Trading - Regulators Seek Secret HFT Codes

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Thu, 09/01/2011 - 20:11 | 1624304 speconomist
speconomist's picture

No more Frontrunning Bitchez!

Thu, 09/01/2011 - 20:14 | 1624320 Doña K
Doña K's picture

No frontrunning. But.....

It will be easier for the PPT and Bernanke to manipulate the markets.  

Thu, 09/01/2011 - 21:14 | 1624455 spiral_eyes
spiral_eyes's picture

I really doubt this will be the end for HFT. This technical stuff isn't really my field, but I know that cutting off hands never stopped shoplifters. This will drive the market manipulators underground. But when the manipulators are the Fed's own tentacles — remember, Bernanke is not just a Keynesian but (far more dangerously) an "innovative" post-modern Keynesian who plays Keynesian games in unexpected places — just how underground is underground is the real question.

Fri, 09/02/2011 - 01:51 | 1625285 Fish Gone Bad
Fish Gone Bad's picture

This is how the Obama is planning to win the election.  Throw some bankers in jail after the perp walk, and let the American people know that he has their backs.  After all the screaming, crying, and hand wringing, things will resume their usual course.

Thu, 09/01/2011 - 22:28 | 1624742 Mactheknife
Mactheknife's picture

>It will be easier for the PPT and Bernanke to manipulate the markets.  

So...since they can't raise taxes they'll just have Timmah steal it from the markets...err, frontrun the mkt...no, provide liquidity. That's the ticket.

Thu, 09/01/2011 - 23:28 | 1625017 Cliff Claven Cheers
Cliff Claven Cheers's picture

For as smart as you Tylers are, I can't believe that this is the end of profitable trading.  Since when, name an example has a Federal Regulator ever stopped a bank from doing shit.  The regulators do what they are told, not the other way around.  We all know regulators are just doing favors until they get that cush bank consulting job.

Zero Hedge analysis: Fail.

Thu, 09/01/2011 - 23:52 | 1625097 rocker
rocker's picture

Yipes, are you a holder of special sauce on a turd trade.  Yes they will figure out to how to manipulate trades.

Even if they need to call each other and execute all at once. 

But maybe, just maybe, some of the shit the HFT elitist do will be curtailed.  One tick at a time.

Maybe they should add a $1.00 tax for ever trade made. Even if they are pulled or cancelled.

 

Fri, 09/02/2011 - 00:04 | 1625130 Founders Keeper
Founders Keeper's picture

[Maybe they should add a $1.00 tax for ever trade made. Even if they are pulled or cancelled.]---rocker

Great.  Another tax that will be passed on to the likes of us.

Please stop thinking like that.

 

Fri, 09/02/2011 - 09:14 | 1625951 Arthor Bearing
Arthor Bearing's picture

The thinking we should all try and stop is categorical, inflexible thinking. You get less of what you tax, which is a big reason taxes can do good. It disincentivizes what might otherwise be a profitable but damaging activity. A tax on all trades would incentivize buy-and-hold trading and disincentivize day-trading, which might contribute to stability (for the same reason the HFTs' "liquidity" can create instability). It's certailny worth considering

Fri, 09/02/2011 - 11:17 | 1626611 Founders Keeper
Founders Keeper's picture

Hi Arthor Bearing.  Thank you for your Reply.

I disagree with your premise another tax could be a good thing.  Another tax is not a good thing---categorically speaking.

Taxes, like govt, is a necessary evil.  Should be limited.  Like turning to govt for solutions to problems, taxing should not be our primary go-to solution. 

The incentive one needs is unencumbered freedom, and the confidence that rule of law will prevent the govt and 3rd party risk from stabbing you in the back.

I'm absolutely inflexible about principles.  Unapologetic patriot of our founding principles. 

 

Thu, 09/01/2011 - 23:34 | 1625049 He_Who Carried ...
He_Who Carried The Sun's picture

Bah, its just windowdressing by the SEC. They will let them run down the alley again as soon as nobody's lookin'.

 

Thu, 09/01/2011 - 20:20 | 1624344 JoeStocks
JoeStocks's picture

Why? Because they conflict with the secretive codes that Federal Reserve connected hedge funds use to boost the market at opportune times.

Thu, 09/01/2011 - 21:40 | 1624599 LongBalls
LongBalls's picture

JoeStocks is spot on. The Fed and friends hate competition. If they want to juice the market they are going to juice the market. These pole smokers have no problem eating their own.

 

Thu, 09/01/2011 - 23:00 | 1624903 MachoMan
MachoMan's picture

Exactly, when the capitalist's paradox tells us government intervention is good for nothing but implementing barriers to entry, then why would we expect anything different from this exercise?

The little shops that seek to revolutionize/nail more established players will have no chance when their code is provided to the established players...  An added bonus is that knowing how all the algos interact should make it easier to get more mileage out of PPT shocks.

I realize I'm arguing from induction, but still...

Thu, 09/01/2011 - 23:29 | 1625022 Cliff Claven Cheers
Cliff Claven Cheers's picture

I prefer the term Squirt Stick Suckers versus Pole Smokers.

Thu, 09/01/2011 - 21:48 | 1624616 Pegasus Muse
Pegasus Muse's picture

If HFT robo-trading is impeded or shut down it will be due, in no small measure, to the efforts of ZH and those guys at NANEX.  Good on ya, boyz!

Fri, 09/02/2011 - 05:43 | 1625423 NoClueSneaker
NoClueSneaker's picture

ZHedgers & Nanex sunk HFT battleship before the EU-media even took a notice of the scam.

Congrats and thx ...

( Sink the rest of the Bernank's fleet ).

 

Thu, 09/01/2011 - 21:22 | 1624546 crazyjsmith
crazyjsmith's picture

But why?? Why would they do this?  This move would just make WAY too much sense.  They haven't done ANYTHING along those lines in a very very long time. 

What's next? An audit of the FED?  Possibly a criminal conviction or two?  Cats and Dogs living together????

Darth Lord Blankfein is even getting all lawyered up for something. 

The mercury level is surely dropping in hell right about now if this is really happening. 

 

Thu, 09/01/2011 - 22:42 | 1624803 Milestones
Milestones's picture

My son and I had a conversation along these lines tonite. His thesis: Bammy Mammy realizes he is not going to get the banking $$$ like he needs so he is now seeing his options as the people, whom he despises, (he remembers being poor himself one time) GS has been getting beat up some in the last couple of weeks by Bammy--no accident--its a message. Line up and play ball, and the ball is now in my court. What you stole can get unstoled very quickly.      Milestones

Thu, 09/01/2011 - 23:14 | 1624978 Doña K
Doña K's picture

You're talking SOP Chicago politics.

"See boys, I need to have a billion $ by the 2012 start of elections campaining." 

"Place your bets."

Fri, 09/02/2011 - 02:43 | 1625324 V10
V10's picture

Won't someone please think of the poor unemployed robots?

Fri, 09/02/2011 - 04:16 | 1625392 StychoKiller
StychoKiller's picture

"Please sir, can you spare a cup of booze?" -- Tinny Tim, "Futurama" :>D

Thu, 09/01/2011 - 20:11 | 1624305 I think I need ...
I think I need to buy a gun's picture

new system bitchez

Thu, 09/01/2011 - 20:12 | 1624307 DormRoom
DormRoom's picture

open source the HFT code, so everyone can protect against the flash crash virus.

Thu, 09/01/2011 - 20:13 | 1624309 Corn1945
Corn1945's picture

You are losing it Tyler. Do you really think they are going to crack down on the market levitation machine?

Come on man!

Thu, 09/01/2011 - 20:24 | 1624362 PaperBugsBurn
PaperBugsBurn's picture

there are changes afoot

 

why else would cnbs have a series titled gold rush and have serious discussion of the gold standard?

Thu, 09/01/2011 - 20:29 | 1624380 doomandbloom
doomandbloom's picture

AA+

Thu, 09/01/2011 - 20:43 | 1624432 PaperBugsBurn
PaperBugsBurn's picture

I think we are about to learn what Jennins meant by nailing us on a cross of gold.

Thu, 09/01/2011 - 20:54 | 1624468 SWRichmond
SWRichmond's picture

If you can't beat em, join em (and then beat em).

Thu, 09/01/2011 - 20:26 | 1624370 Tyler Durden
Tyler Durden's picture

Funny: when we said the same thing of prop trading in January 2010, the comment board was full of skeptics: Beginning Of The End For Wall Street's Various Prop Trading Desks

...Now you cant find a Wall Street prop desk to save your life.

Thu, 09/01/2011 - 20:35 | 1624404 Josephus
Josephus's picture

Nice! Love to hear this! 

So instead of all the (now unemployed) MIT grads pinching pennies from the market, they will be welcomed by the NSA write stalking algos!!!

Thu, 09/01/2011 - 21:44 | 1624605 spiral_eyes
spiral_eyes's picture

Prop desks gone underground, Tyler

http://www.institutionalinvestor.com/Article/2712237/Prop-Trading-Goes-U...

I want to be optimistic that the destructo-juggernauts can be regulated out of business/fashion. I really do. But I think Ron Paul is right — not only is the free market the best regulator, it is the only regulator that can be effective in the long term. While the monopolists are still in business (and with big gov't the vampires will always find a way to leech) they can always at some later date climb up out of the muck and rig the system again.

You want proof?

Gramm-Leach-Bliley, bitchez. 

Thu, 09/01/2011 - 22:06 | 1624668 Payable on Death
Payable on Death's picture

Certainly agree in principal. Still, Glass-Steagall was a good reg. A worthy role for government--of the very few--is antitrust. The oligarchy becomes evident when you realize that most Republicans are pro-business, not pro-market.

Thu, 09/01/2011 - 22:34 | 1624765 Stack Trace
Stack Trace's picture

The crux of all our problems. Well said.

Thu, 09/01/2011 - 22:34 | 1624767 Mactheknife
Mactheknife's picture

You can thank Phill Grahm, republican from Texas for the repeal of Glass-Steagall. Exactly where this mess started.

Thu, 09/01/2011 - 22:50 | 1624852 Coldfire
Coldfire's picture

A variant of the John Wayne Gacy childcare fallacy. The holder of the monopoly on force is just the fellow to police business monopolies unsustainable without the connivance of the holder of the monopoly on force. Cf. Schumpeter. Von Mises. Hayek.

Thu, 09/01/2011 - 21:26 | 1624553 disabledvet
disabledvet's picture

Who? And how would the Fed's know if these are the actual programming? By comparing it with their own at the Fed? I understand the need for an "algo dump"--but what the government would do with this information is anyone's guess. My guess would be it's designed to get to the bottom of the recurrent "flash crash" issue but taking the HFT's away could cause more harm than good.

Fri, 09/02/2011 - 04:22 | 1625394 StychoKiller
StychoKiller's picture

Not only that, but source code by itself, is hard to figure out if the code is NOT commented well, and/or contains cryptic variable names and/or spaghetti constructs.  Without test suites, what're ya gonna do?  Watch the code actually execute in the exchanges?  What's to stop some Govt PC-jockey from claiming the code as his/her own and using it at home?

One giant can of worms here, is all I can say!

Thu, 09/01/2011 - 21:27 | 1624554 crazyjsmith
crazyjsmith's picture

Thank You again Tyler!   This site is the much more illuminating than Wikileaks could ever want to be. 

If I were a digital chic, I would be all over your hot ass right now... just sayin...if I were a digital chic...

Thu, 09/01/2011 - 21:29 | 1624562 Melin
Melin's picture

Surely you can imagine our surprise at your exuberance that the regulators were finally "on the job". 

By the way, it's impossible to donate to your site thru your Paypal link and I'm not sending you gold so. . .

Thu, 09/01/2011 - 21:31 | 1624566 Rick64
Rick64's picture

Don't you think the HFT firms will argue that this is proprietary information? Long drawn out arbitration or legal battle?

Thu, 09/01/2011 - 22:31 | 1624752 indygo55
indygo55's picture

Make them fight for it. Make them come out in the open and fight for their proprietary code. When they are in the open we then will know them. They cannot exist in the open and the regulators cannot relent, not in the open. Make them fight.

Thu, 09/01/2011 - 23:05 | 1624934 Milestones
Milestones's picture

There is a proprietary code on DUI breath tests which you are not able to challenge in courts. How about them apples??     Milestones

Fri, 09/02/2011 - 04:24 | 1625395 StychoKiller
StychoKiller's picture

There's proprietary code in Diebold™ voting machines, how about them oranges?

Thu, 09/01/2011 - 23:17 | 1624988 Rick64
Rick64's picture

Sounds good until you see who is in charge of arbitration for FINRA.  President, FINRA Dispute Resolution and Chief Hearing Officer Linda d. Feinberg, who use to work for the law firm Covington&Burling whose clients were

Major companies that have been represented by attorneys of the firm include: Bank of America, Bunge, Deere & Company, Eastman Kodak Company, Eli Lilly, General Electric Company, Giorgio Armani, IBM Corporation, Harley-Davidson, match.com, Microsoft Corporation, Morgan Stanley, NASCAR, National Basketball Association, National Football League, Procter & Gamble, and Verizon.[5]

Controversial clients of the firm include: OCP,[6] Creekstone Farms Quality Beef,[6] Southern Peru Copper Corporation, Philip Morris, Halliburton, and Xe Services.[7]

Thu, 09/01/2011 - 21:35 | 1624587 Cole Younger
Cole Younger's picture

The only problem I see is that they have been asking for the codes for a year now according to the article. HFT hasn't stopped yet..Are they attempting to figure out the legality of HFT? It appears they know who is doing it.

Thu, 09/01/2011 - 21:43 | 1624606 Banjo
Banjo's picture

I guess the point is, prop desk or HFT the clipping shears are out for the "average" investor somewhere.

Look we ended HFT average Joe comes back to market only to get bent over again by "some other" "financial innovation"

Good luck get ready to dive back into the markets with your cash once HFT is gone!

Thu, 09/01/2011 - 21:50 | 1624621 Stoploss
Stoploss's picture

Nice to have the last laugh isn't it.. Good job, don't let up ..

Thu, 09/01/2011 - 21:53 | 1624629 Goldman Hufs
Goldman Hufs's picture

I hate to piss on everyone's parade but the only reason this is happening is because the big boys want it to happen.  With the average person no longer putting anymore money into the rigged casino and old school prop type firms closing down left and right there just isn't enough "free" money to be stolen by all of these HFTs.  Since Goldman and the like realize that that it's no longer them and the private HFT shops fleecing the general public but instead becoming ever more them VS the private HFT firms they simply want to shut it down before they start losing.  The private HFT firms can pay much more and don't have the public eye mulling over there books to criticize the outlandish salaries that these computer geeks are paid.  Because of this difference the top talent will migrate out of the big banks' control which would put them at a disadvantage, and being the true competitors that they are, will shut the entire practice down before they ever had to actually go toe to toe with legitimate competition.  When it does come to end they can go back to their true proprietary technique which most of us here know as insider trading. 

I applaud Zero Hedge for shedding light on this debauchery but the cynic in me does not believe that this has caused the regulators to find their religion.  However, you allow the rest of us to dig through the BS and protect our wealth from these predators.  Please keep up the good work.  This is the only place where a rational person can begin to understand why these markets are so irrational.  Thanks Tylers.

Thu, 09/01/2011 - 22:13 | 1624690 Atomizer
Atomizer's picture

Tyler,

 

Did you see this today? I'm neutral because I follow a lot mentioned.

 

Endgame: When Debt is Fraud, Debt Forgiveness is the Last and Only Remedy

 

The daily twists & turns are becoming harder to manage.  bwahahahahaha.

 

Do NOT follow this link or you will be banned from the site!