High Frequency Trading
One allegation about price manipulation was made by the German regulator BaFin. That proves it, right? Not so fast.
When obnoxiously wealthy pricks with the ability to bribe stock exchanges to place their trading computers on the floor of the exchange and financially induce the Wall Street banks to funnel trades through their dark pools in order to know what is happening a nanosecond before everyone else, and use this information to front run unknowing investors to generate risk free profits, it’s wrong. It really is black and white. I don’t care that it is supposedly “legal”. By complying with Regulation NMS the smart order routers of institutional investor firms like Vanguard, Fidelity and Schwab simply funneled naïve investors into various snares laid for them by the unscrupulous high frequency traders. The bad guys always win and the good guys always lose on Wall Street. And no one does anything because they are all on the take. Lewis puts it in terms the average person can understand.
Capture, corruption, irreparable harm--and little hope for change.
[J. Bradley Bennett]...compared high frequency trading to buying a first-class ticket on an airline...“Is there anything unfair about that? Doesn’t sound like it to me.”
On the subject of High Frequency Trading, our respondents are thus far unimpressed with the argument that HFT helps U.S. equity market participants. Fully half answered that it is “Harmful” or “Very Harmful”. Only 19% said it was “Helpful” or “Very Helpful” to participants. ... In short, the survey seems to tell a very clear story. Most professional investors and institutional brokers do not feel that markets treat all participants fairly. They worry about how fragile markets might become during periods of abnormally high volume. At the same time, they are cautiously picking their way through the minefield in which they find themselves and are unsure what role regulators should play. How the landscape will change as a result of their unease is still unclear. What is certain is that change is coming.
Ultimately, I think the problem for HFT liquidity providers is not that they are skinning investors, but that they are outsiders. They're doing what the keepers of the market infrastructure keys have always done - skin investors, retail and institutional alike, to the outer limits of what technology and the law allows. But while their outward behavior and appearance may be familiar, they are clearly an alien species on the inside, without so much as a microgram of Wall Street DNA. They are Rakshasa's. HFT liquidity providers are technology companies disguised as financial intermediaries. They hijacked the market infrastructure in the aftermath of the Great Recession, stealing it away from under the noses of the big financial firms who had come to see control over market structure as their birthright, and they had a good run. But now the big boys want their market infrastructure back, and they're going to get it.
“Bail-in” means that the bank’s owners - the shareholders, and creditors - the bondholders and now even depositors, will be line to absorb losses banks will incur, before outside sources of finance may be called upon. Deposit confiscation cometh ...
Ukraine is quickly turning into a Vietnam moment for the US political scene. When will parties in the USA (including Obama camp “progressives”) stop cheerleading for a showdown over this hapless doormat of a faraway nation whose destiny is not entwined with the people of Ohio, Nebraska, Rhode Island, or any of the other fifty states? We have enough to do in our own country to adjust to the new realities of the unraveling turbo-industrial global economy — and, by the way, we are not doing a damn thing to address any of it. Our domestic political conversation at all levels is juvenile and idiotic.
Ever since Goldman's anti-HFT Op-Ed less than a month ago, and since the even more recent full-hearted support by Goldman of Michael Lewis' most recent entry into the anti-HFT crusade (one promoting the Goldman-supported IEX exchange), one thing has been clear: the days of market structure in its current format are numbered. This was further confirmed after Goldman exited both its legacy Spear Leeds & Kellogg designated market making post at the NYSE, and is said to be winding down its market-dominating dark pool, Sigma X. Sure enough, Post reports that just three weeks after the Gary Cohn Op-Ed, the SEC is "preparing to remove some high-frequency trading firms."
The market is facing an increasingly negative environment. Historically speaking April and May have not been big months for crises, but the number of negatives the market is facing today is rather unique.
The real truth the bankers wish to conceal from the public is that they use HFT programs to suppress gold and silver prices.
The Father Of High Speed Trading Speaks: "The Market We Created Is A Casino; A Complete Mess; A Rigged Game"Submitted by Tyler Durden on 04/07/2014 18:42 -0400
"I must confess to you that I was an ardent proponent of bringing technology to trading and brokerage. Unfortunately, I only saw the good sides. I saw how electronic trading and record-keeping could be used to force people to be more honest, to make the process more efficient, to lower transaction costs and to bring liquidity to the markets. I did not see the forces of fragmentation and the opportunity for people to use technology to keep to the letter but avoid the spirit of the rules -- creating the current crisis.... Technology, market structure, and new products have evolved more quickly than our capacity to understand or control them. ... To the public the financial markets may increasingly seem like a casino, except that the casino is more transparent and simpler to understand.... The result has been a series of crises over the past few years that have caused many investors to lose confidence or to think that the whole system is a rigged game."
The blog posts and defenses of high frequency trading in the past week have come with dizzying high frequency. 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.
In the aftermath of Michael Lewis' book "Flash Boys" there has been a renewed surge in interest in High Frequency Trading. Alas, much of it is conflicted, biased, overly technical or simply wrong. And since we can't assume that all those interested have been followed our 5 year of coverage of a topic that finally has earned its day in the public spotlight, below is a simple summary for everyone.
The whole situation is very reminiscent of the computer trading, which led to the 1987 Crash.