"A sharp price move coupled with high volume often prompts speculation about the influence of high frequency trading (HFT), when computer algorithms are used to trade stocks at an extremely rapid pace. HFT has been criticized for affecting the trading of stocks by sending in numerous trade quotes that slow quote activity - without filling the trades when shares fall.
"What that is called is evaporation of liquidity, liquidity that was never there in the first place and it’s a typical maneuver that goes on in the fragmented stock market we have now," said Joseph Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey."
The HFT supporter referenced tries to dismiss that idea.
This sort of thing has happened before where a computer system was allowed to conduct trades independently:
Computers trade without emotional response and they can do trades faster than a human can blink. This sort of thing should have been stopped long ago but it won't be stopped as long as the government bends to the will of the finance industry. They try to justify it by saying it lowers trading costs for everyone:
but they don't go into details about how much it's saving average investors. Plus the trading costs can be set by the same companies doing HFT. They just make too much money from it reliably that they don't want the cash cow taken away from them:
I see no reason to limit or dampen high-freq trading. Sometimes the swings in the market are accentuated due to automatic trades being made once limits are hit, but these risks are part of the game and traders are both aware of the risks and capable of making money whether a stock goes up OR down.
Preventing the flow of trades reduces risk, which also reduces the ability to make a profit. If someone cannot manage their own risk, they have no business being in the market.
I see no reason to limit or dampen high-freq trading
It's anti-competitive. Not everyone is allowed to point computer algorithms at the exchanges. The market is a way of transferring value between investors. When HFT firms report that they are making profits every day for years on end, something is clearly wrong with that system (not for them obviously). The reason they can win more reliably is they can see how everyone else is trading because of the way and speed they can execute their own trades and can adapt faster than any human trader. Not only that, they can manipulate human traders who can't figure out what's happening because they are trying to assess the possible reasoning other humans are trading when it's not human making the trades.
If you had a poker table and just the richest guy at the table was allowed to have a computer that could figure out roughly everyone else's hand based on years worth of market data and how they played and could analyze it in microseconds, would that be a fair game? Of course not, which is why it wouldn't be allowed in poker. But in trading, they're allowed to do it. Trades should be restricted to human-speed processing e.g 1 order per second to allow a human trader to compete on a level playing field with an investment bank.
It's anti-competitive. Not everyone is allowed to point computer algorithms at the exchanges. The market is a way of transferring value between investors. When HFT firms report that they are making profits every day for years on end, something is clearly wrong with that system (not for them obviously). The reason they can win more reliably is they can see how everyone else is trading because of the way and speed they can execute their own trades and can adapt faster than any human trader. Not only that, they can manipulate human traders who can't figure out what's happening because they are trying to assess the possible reasoning other humans are trading when it's not human making the trades.
If you had a poker table and just the richest guy at the table was allowed to have a computer that could figure out roughly everyone else's hand based on years worth of market data and how they played and could analyze it in microseconds, would that be a fair game? Of course not, which is why it wouldn't be allowed in poker. But in trading, they're allowed to do it. Trades should be restricted to human-speed processing e.g 1 order per second to allow a human trader to compete on a level playing field with an investment bank.
Because Apple makes better phones, is THAT anti-competitive? Such an absurd argument, my good man. You are occasionally prone to very strange logical leaps unsupported by evidence.
HFT is a result of competition. Competition is good for everyone (except for the non-competitive).
You certainly can't compete with them as an everyday trader. It would be like allowing one superfast robot in a race and telling all the other whiney human runners to just build their own robot.
When it comes to phones, sure smartphones can happily wipe out dumbphones and not everyone will be able to produce something as complex as that but robot traders can't be allowed to wipe out human traders (or their profitability at least) and they are doing this. 85% of trading volume is done with computers now. We're just supposed to wait until the computer algorithms screw the whole thing up? Then you'll come along and blame the government for not regulating them and suggest they gave them an unfair advantage through their inaction.
These companies are stealing money from investors and their front-running should count as insider trading in all forms when a computer is used to gain the advantage:
Give me a reason why trades shouldn't be limited to a certain time period to make it a level playing field between a human trader and a computer. That's pro-competition. The skill in trading has nothing to do with how fast you can trade, it's making the right choices.
You certainly can't compete with them as an everyday trader. It would be like allowing one superfast robot in a race and telling all the other whiney human runners to just build their own robot.
When it comes to phones, sure smartphones can happily wipe out dumbphones and not everyone will be able to produce something as complex as that but robot traders can't be allowed to wipe out human traders (or their profitability at least) and they are doing this. 85% of trading volume is done with computers now. We're just supposed to wait until the computer algorithms screw the whole thing up? Then you'll come along and blame the government for not regulating them and suggest they gave them an unfair advantage through their inaction.
These companies are stealing money from investors and their front-running should count as insider trading in all forms when a computer is used to gain the advantage:
Give me a reason why trades shouldn't be limited to a certain time period to make it a level playing field between a human trader and a computer. That's pro-competition. The skill in trading has nothing to do with how fast you can trade, it's making the right choices.
They're still free to trade, they just wouldn't be able to execute millions of different trades in microseconds for which there is no justification.
If someone wants to buy $1b of a stock then they can do it. If they want to take that $1b of leverage to make a flurry of microsecond transactions to mess with human traders then they shouldn't be allowed to do it.
The 2nd site points to the Senate hearing where they are looking for ways to regulate this:
"And at that Senate Banking Committee hearing on September 20, you know, the one where a former HFT guy named David Lauer came to testify that the game is rigged in "their" favor, and how he was pissed because he didn't have enough money behind him to buy enough new technology and pay off enough exchanges to get the faster access and cooler algos so he could make the millions he wanted, which is why he got into the business in the first place, yeah, that guy – even he said the game is rigged.
Lauer didn't say it was illegal. Of course, he wouldn't incriminate himself. And the Senators, they all nodded that the game did look rigged, but because it wasn't illegal, they'd have to think about what they heard and see who would now donate what to their campaign finance algorithms."
"Levin wrapping up hearing, saying conflicts and HFT contribute to lack of confidence and leaving investors worse off. “Hopefully, the regulatory agencies will take action,” he said, adding he hopes the SEC doesn’t take as long as they take on some other actions."
^^^ The "justification" Marvin, is that it is done because it is profitable. More types of businesses are better for everyone because expanding markets lead to new products and new customers, which ultimately increases economic activity in general. Arbitrarily telling businesses they cannot make money by exploiting untapped potential in markets is misguided at minimum.
More types of businesses are better for everyone because expanding markets lead to new products and new customers, which ultimately increases economic activity in general.
This isn't like a company that actually produces something like Apple, this is a way of scamming investors out of parts of their investment. It reminds me of this scam:
[VIDEO]
Taking fractions of money because they get rounded by the machines. Take small amounts from lots of people and nobody notices but why should they get away with it? Some of the things they do are like a middle-man taxing every transaction.
Arbitrarily telling businesses they cannot make money by exploiting untapped potential in markets is misguided at minimum.
It's not arbitrary, they allowed them to do the business and it's been established they're causing harm to other people. All that's needed is a regulation that promotes global fair competition, which would be that successive trades can be performed no faster than it takes a light signal to travel around the globe = 40million(metres)/299million(metres/s) = 0.133s (technically halfway round-trip for an acknowledgement and reaction). That's as quickly as anyone could possibly make a competing trade. They can make it a bit longer e.g 1s to allow for network latency but the choice of 0.133s is easier to backup. They can cap the size of each trade too. If someone wants to buy $1b of something, what's the rush? $10m per trade cap and it takes 1.5 minutes to complete the $1b trade.
People can still do algorithmic trading, they can still do fast trades but not significantly faster than a human being can do it on their own.
What's the downside? HFT firms stop trading, so what, they contribute nothing, they are ripping people off for their own gain and destabilising the market purposefully. They'll find some other ways of ripping people off I'm sure. Most likely, they'll try to be the best performer within the time restraints, which moves the competition to the quality of the algorithms than the closeness of the server to the exchange, which opens the competition up to more people and like I say, even to humans.
That's not justification for allowing it, just for doing it. You can justify doing anything by saying it's profitable.
This isn't like a company that actually produces something like Apple, this is a way of scamming investors out of parts of their investment. It reminds me of this scam:
[VIDEO]
Taking fractions of money because they get rounded by the machines. Take small amounts from lots of people and nobody notices but why should they get away with it? Some of the things they do are like a middle-man taxing every transaction.
It's not arbitrary, they allowed them to do the business and it's been established they're causing harm to other people. All that's needed is a regulation that promotes global fair competition, which would be that successive trades can be performed no faster than it takes a light signal to travel around the globe = 40million(metres)/299million(metres/s) = 0.133s (technically halfway round-trip for an acknowledgement and reaction). That's as quickly as anyone could possibly make a competing trade. They can make it a bit longer e.g 1s to allow for network latency but the choice of 0.133s is easier to backup. They can cap the size of each trade too. If someone wants to buy $1b of something, what's the rush? $10m per trade cap and it takes 1.5 minutes to complete the $1b trade.
People can still do algorithmic trading, they can still do fast trades but not significantly faster than a human being can do it on their own.
What's the downside? HFT firms stop trading, so what, they contribute nothing, they are ripping people off for their own gain and destabilising the market purposefully. They'll find some other ways of ripping people off I'm sure. Most likely, they'll try to be the best performer within the time restraints, which moves the competition to the quality of the algorithms than the closeness of the server to the exchange, which opens the competition up to more people and like I say, even to humans.
These are all emotional arguments. Businesses operate based on profits and those that do their particular business best succeed. How they do their business is not your or my concern so long as they aren't committing acts of fraud or theft.
"Athena Capital Research used an algorithm that was code-named Gravy to engage in a practice known as “marking the close” in which stocks are bought or sold near the close of trading to affect the closing price. The massive volumes of Athena’s last-second trades allowed Athena to overwhelm the market’s available liquidity and artificially push the market price – and therefore the closing price – in Athena’s favor. Athena was acutely aware of the price impact of its algorithmic trading, calling it “owning the game” in internal e-mails.
Although Athena was a relatively small firm, it dominated the market in the last few seconds of a trading day for stocks that it otherwise traded only slightly. The manipulative trading described in the SEC’s order occurred from June to December 2009 and made up more than 70 per cent of the total NASDAQ trading volume of the affected stocks in the seconds before the market close.
The firm implemented additional algorithms known as “Collars” to ensure that Athena’s orders received priority over other orders when trading imbalances. These eventually resulted in Athena’s imbalance-on-close orders being at least partially filled more than 98 percent of the time. Athena’s ability to predict that it would get filled on almost every imbalance order allowed the firm to unleash its manipulative Gravy algorithm to trade tens of thousands of stocks right before the close of trading. As a result, these stocks traded at artificial prices that NASDAQ then used to set the closing prices for on-close orders as part of its closing auction. Athena’s high frequency trading scheme enabled its orders to be executed at more favourable prices."
It's good that the regulatory firms can tackle these cases. Hopefully they will regulate it in a way to prevent it happening instead of waiting until the damage is done and then fining them a fraction of their profits.
For a truly competitive system to exist, no successive trades should be allowed to execute faster than it's possible for a competitor to see and react to that trade. A system that allows that is anti-competitive.
"Athena Capital Research used an algorithm that was code-named Gravy to engage in a practice known as “marking the close” in which stocks are bought or sold near the close of trading to affect the closing price. The massive volumes of Athena’s last-second trades allowed Athena to overwhelm the market’s available liquidity and artificially push the market price – and therefore the closing price – in Athena’s favor. Athena was acutely aware of the price impact of its algorithmic trading, calling it “owning the game” in internal e-mails.
Although Athena was a relatively small firm, it dominated the market in the last few seconds of a trading day for stocks that it otherwise traded only slightly. The manipulative trading described in the SEC’s order occurred from June to December 2009 and made up more than 70 per cent of the total NASDAQ trading volume of the affected stocks in the seconds before the market close.
The firm implemented additional algorithms known as “Collars” to ensure that Athena’s orders received priority over other orders when trading imbalances. These eventually resulted in Athena’s imbalance-on-close orders being at least partially filled more than 98 percent of the time. Athena’s ability to predict that it would get filled on almost every imbalance order allowed the firm to unleash its manipulative Gravy algorithm to trade tens of thousands of stocks right before the close of trading. As a result, these stocks traded at artificial prices that NASDAQ then used to set the closing prices for on-close orders as part of its closing auction. Athena’s high frequency trading scheme enabled its orders to be executed at more favourable prices."
It's good that the regulatory firms can tackle these cases. Hopefully they will regulate it in a way to prevent it happening instead of waiting until the damage is done and then fining them a fraction of their profits.
For a truly competitive system to exist, no successive trades should be allowed to execute faster than it's possible for a competitor to see and react to that trade. A system that allows that is anti-competitive.
Are you heavily invested in the market? Help me understand why you personally are concerned, because I'm personally heavily invested in the market and I don't have a problem with less regulations.
Are you heavily invested in the market? Help me understand why you personally are concerned, because I'm personally heavily invested in the market and I don't have a problem with less regulations.
You don't have a problem with less regulation because you adhere to your ideology of less regulation no matter if it conflicts with your own best interests. I think that fair competition should be promoted. Normally you think that too except when government has to step in and then you throw fair competition out.
Do you not think that algorithmic trading at the speeds they are allowed to operate at is anti-competitive?
Comments
Speculators. Maybe people terrified about oil, who knows.
Speculators. Maybe people terrified about oil, who knows.
It was weird because it takes a lot of trading to move AAPL 6%.
85% of trading volume is done by computers:
http://www.reuters.com/article/2014/12/01/us-apple-shares-idUSKCN0JF2M420141201
"A sharp price move coupled with high volume often prompts speculation about the influence of high frequency trading (HFT), when computer algorithms are used to trade stocks at an extremely rapid pace. HFT has been criticized for affecting the trading of stocks by sending in numerous trade quotes that slow quote activity - without filling the trades when shares fall.
"What that is called is evaporation of liquidity, liquidity that was never there in the first place and it’s a typical maneuver that goes on in the fragmented stock market we have now," said Joseph Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey."
The HFT supporter referenced tries to dismiss that idea.
This sort of thing has happened before where a computer system was allowed to conduct trades independently:
http://www.bloomberg.com/news/2012-08-14/knight-440-million-loss-sealed-by-new-rules-on-canceling-trades.html
Computers trade without emotional response and they can do trades faster than a human can blink. This sort of thing should have been stopped long ago but it won't be stopped as long as the government bends to the will of the finance industry. They try to justify it by saying it lowers trading costs for everyone:
http://www.ft.com/intl/cms/s/0/ff8c6486-cb37-11e3-ba95-00144feabdc0.html
but they don't go into details about how much it's saving average investors. Plus the trading costs can be set by the same companies doing HFT. They just make too much money from it reliably that they don't want the cash cow taken away from them:
http://www.bloomberg.com/news/2014-10-30/barclays-says-dark-pool-suit-hurting-investment-bank.html
85% of trading volume is done by computers:
I understand all of this and have read it before... but... 6%... and why now.
There were high volumes in a few other stocks but nothing got out of hand as quickly or as greatly as AAPL.
Basically... what you are saying is that the computer saw something and dumped... others then followed.
That is one theory... but, of course, there are other theories.
Preventing the flow of trades reduces risk, which also reduces the ability to make a profit. If someone cannot manage their own risk, they have no business being in the market.
It's anti-competitive. Not everyone is allowed to point computer algorithms at the exchanges. The market is a way of transferring value between investors. When HFT firms report that they are making profits every day for years on end, something is clearly wrong with that system (not for them obviously). The reason they can win more reliably is they can see how everyone else is trading because of the way and speed they can execute their own trades and can adapt faster than any human trader. Not only that, they can manipulate human traders who can't figure out what's happening because they are trying to assess the possible reasoning other humans are trading when it's not human making the trades.
If you had a poker table and just the richest guy at the table was allowed to have a computer that could figure out roughly everyone else's hand based on years worth of market data and how they played and could analyze it in microseconds, would that be a fair game? Of course not, which is why it wouldn't be allowed in poker. But in trading, they're allowed to do it. Trades should be restricted to human-speed processing e.g 1 order per second to allow a human trader to compete on a level playing field with an investment bank.
It's anti-competitive. Not everyone is allowed to point computer algorithms at the exchanges. The market is a way of transferring value between investors. When HFT firms report that they are making profits every day for years on end, something is clearly wrong with that system (not for them obviously). The reason they can win more reliably is they can see how everyone else is trading because of the way and speed they can execute their own trades and can adapt faster than any human trader. Not only that, they can manipulate human traders who can't figure out what's happening because they are trying to assess the possible reasoning other humans are trading when it's not human making the trades.
If you had a poker table and just the richest guy at the table was allowed to have a computer that could figure out roughly everyone else's hand based on years worth of market data and how they played and could analyze it in microseconds, would that be a fair game? Of course not, which is why it wouldn't be allowed in poker. But in trading, they're allowed to do it. Trades should be restricted to human-speed processing e.g 1 order per second to allow a human trader to compete on a level playing field with an investment bank.
Because Apple makes better phones, is THAT anti-competitive? Such an absurd argument, my good man. You are occasionally prone to very strange logical leaps unsupported by evidence.
HFT is a result of competition. Competition is good for everyone (except for the non-competitive).
Here's the setup process:
http://www.businessinsider.com/heres-how-you-set-up-your-own-high-frequency-trading-operation-2010-6?op=1
You certainly can't compete with them as an everyday trader. It would be like allowing one superfast robot in a race and telling all the other whiney human runners to just build their own robot.
When it comes to phones, sure smartphones can happily wipe out dumbphones and not everyone will be able to produce something as complex as that but robot traders can't be allowed to wipe out human traders (or their profitability at least) and they are doing this. 85% of trading volume is done with computers now. We're just supposed to wait until the computer algorithms screw the whole thing up? Then you'll come along and blame the government for not regulating them and suggest they gave them an unfair advantage through their inaction.
These companies are stealing money from investors and their front-running should count as insider trading in all forms when a computer is used to gain the advantage:
http://www.wikinvest.com/wiki/Front-running
Give me a reason why trades shouldn't be limited to a certain time period to make it a level playing field between a human trader and a computer. That's pro-competition. The skill in trading has nothing to do with how fast you can trade, it's making the right choices.
It's because you're recommending restraint of trade: http://en.m.wikipedia.org/wiki/Restraint_of_trade
They're still free to trade, they just wouldn't be able to execute millions of different trades in microseconds for which there is no justification.
If someone wants to buy $1b of a stock then they can do it. If they want to take that $1b of leverage to make a flurry of microsecond transactions to mess with human traders then they shouldn't be allowed to do it.
http://www.hedgeweek.com/2014/10/17/211615/sec-charges-nyc-high-frequency-trading-firm-fraud
http://moneymorning.com/2012/10/14/high-frequency-trading-is-a-scam-that-is-crippling-the-markets/
The 2nd site points to the Senate hearing where they are looking for ways to regulate this:
"And at that Senate Banking Committee hearing on September 20, you know, the one where a former HFT guy named David Lauer came to testify that the game is rigged in "their" favor, and how he was pissed because he didn't have enough money behind him to buy enough new technology and pay off enough exchanges to get the faster access and cooler algos so he could make the millions he wanted, which is why he got into the business in the first place, yeah, that guy – even he said the game is rigged.
Lauer didn't say it was illegal. Of course, he wouldn't incriminate himself. And the Senators, they all nodded that the game did look rigged, but because it wasn't illegal, they'd have to think about what they heard and see who would now donate what to their campaign finance algorithms."
I don't know if it's this one:
http://blogs.marketwatch.com/capitolreport/2014/06/17/flash-boys-vs-the-exchanges-live-blog-of-high-frequency-trading-hearing-in-senate/
"Levin wrapping up hearing, saying conflicts and HFT contribute to lack of confidence and leaving investors worse off. “Hopefully, the regulatory agencies will take action,” he said, adding he hopes the SEC doesn’t take as long as they take on some other actions."
That's not justification for allowing it, just for doing it. You can justify doing anything by saying it's profitable.
This isn't like a company that actually produces something like Apple, this is a way of scamming investors out of parts of their investment. It reminds me of this scam:
[VIDEO]
Taking fractions of money because they get rounded by the machines. Take small amounts from lots of people and nobody notices but why should they get away with it? Some of the things they do are like a middle-man taxing every transaction.
It's not arbitrary, they allowed them to do the business and it's been established they're causing harm to other people. All that's needed is a regulation that promotes global fair competition, which would be that successive trades can be performed no faster than it takes a light signal to travel around the globe = 40million(metres)/299million(metres/s) = 0.133s (technically halfway round-trip for an acknowledgement and reaction). That's as quickly as anyone could possibly make a competing trade. They can make it a bit longer e.g 1s to allow for network latency but the choice of 0.133s is easier to backup. They can cap the size of each trade too. If someone wants to buy $1b of something, what's the rush? $10m per trade cap and it takes 1.5 minutes to complete the $1b trade.
People can still do algorithmic trading, they can still do fast trades but not significantly faster than a human being can do it on their own.
What's the downside? HFT firms stop trading, so what, they contribute nothing, they are ripping people off for their own gain and destabilising the market purposefully. They'll find some other ways of ripping people off I'm sure. Most likely, they'll try to be the best performer within the time restraints, which moves the competition to the quality of the algorithms than the closeness of the server to the exchange, which opens the competition up to more people and like I say, even to humans.
These are all emotional arguments. Businesses operate based on profits and those that do their particular business best succeed. How they do their business is not your or my concern so long as they aren't committing acts of fraud or theft.
Not sure what's going on, but it's about time to look at buying another big chunk. If it goes below $110, I'll probably buy a very large lot.
Some are but not all of them will get caught:
http://www.hedgeweek.com/2014/10/17/211615/sec-charges-nyc-high-frequency-trading-firm-fraud
"Athena Capital Research used an algorithm that was code-named Gravy to engage in a practice known as “marking the close” in which stocks are bought or sold near the close of trading to affect the closing price. The massive volumes of Athena’s last-second trades allowed Athena to overwhelm the market’s available liquidity and artificially push the market price – and therefore the closing price – in Athena’s favor. Athena was acutely aware of the price impact of its algorithmic trading, calling it “owning the game” in internal e-mails.
Although Athena was a relatively small firm, it dominated the market in the last few seconds of a trading day for stocks that it otherwise traded only slightly. The manipulative trading described in the SEC’s order occurred from June to December 2009 and made up more than 70 per cent of the total NASDAQ trading volume of the affected stocks in the seconds before the market close.
The firm implemented additional algorithms known as “Collars” to ensure that Athena’s orders received priority over other orders when trading imbalances. These eventually resulted in Athena’s imbalance-on-close orders being at least partially filled more than 98 percent of the time. Athena’s ability to predict that it would get filled on almost every imbalance order allowed the firm to unleash its manipulative Gravy algorithm to trade tens of thousands of stocks right before the close of trading. As a result, these stocks traded at artificial prices that NASDAQ then used to set the closing prices for on-close orders as part of its closing auction. Athena’s high frequency trading scheme enabled its orders to be executed at more favourable prices."
It's good that the regulatory firms can tackle these cases. Hopefully they will regulate it in a way to prevent it happening instead of waiting until the damage is done and then fining them a fraction of their profits.
For a truly competitive system to exist, no successive trades should be allowed to execute faster than it's possible for a competitor to see and react to that trade. A system that allows that is anti-competitive.
Are you heavily invested in the market? Help me understand why you personally are concerned, because I'm personally heavily invested in the market and I don't have a problem with less regulations.
You don't have a problem with less regulation because you adhere to your ideology of less regulation no matter if it conflicts with your own best interests. I think that fair competition should be promoted. Normally you think that too except when government has to step in and then you throw fair competition out.
Do you not think that algorithmic trading at the speeds they are allowed to operate at is anti-competitive?