Anybody catch the Michael Lewis segment on 60 Minutes?

[IVplay]

*60 minutes to elons wife* "why did you marry him (after two weeks)"
wife: uhhh hes fuggin loaded

^what she really wanted to say

I loved the typical Canadian attitude the guy had, had me laughing good.

[OldLarry]

http://money.cnn.com/2014/02/11/news...len-testimony/

This seems to link stimuli to unemployment strategy

[BmillsSkier]

*60 minutes to elons wife* "why did you marry him (after two weeks)"
wife: uhhh hes fuggin loaded

^what she really wanted to say

I loved the typical Canadian attitude the guy had, had me laughing good.

You watch a lot of American tv targeted at 50 year olds for a 50 year old American, err, I mean, 14 year old Canadian.

[OldLarry]

A transaction tax is probably the best solution. Investors wouldn't mind a transaction fee if it helps control unnecessary volatility and funded a strong SEC.

Tobin tax was a fucking disaster in Sweden.

http://www.ft.com/intl/cms/s/0/b9b40...#axzz2xa8b39QK

[OldLarry]

http://m.youtube.com/watch?v=a7o_aLbuHjY

http://m.us.wsj.com/articles/SB10001...?mg=reno64-wsj

[4matic]

QE: Asset prices (stocks, bonds, real estate, bitcoins) affect estimates for forward GDP. Stronger GDP estimates might promote business investment which does create real growth.

For this thread the question is: Does HFT affect long term asset prices?

[4matic]

Tobin tax was a fucking disaster in Sweden.

http://www.ft.com/intl/cms/s/0/b9b40...#axzz2xa8b39QK

I was expecting Mott the Hoople or Downbound Train to respond first. Congratulations.

[Hugh Conway]

I was expecting Mott the Hoople or Downbound Train to respond first. Congratulations.

Hey, all the US investors will decamp to......... oh, there aren't that many other good choices right now.

[OldLarry]

A transaction tax is probably the best solution. Investors wouldn't mind a transaction fee if it helps control unnecessary volatility and funded a strong SEC.

HFT dampens volatility if anything. As for long term effect on prices, the argument has been made that it is good for them, but I doubt that very much

Part of the argument is that stock loan and margin requirements make people naturally net long but I don't buy it since you can always out up cash. Will look for white paper.

This IS the case for bitcoin, however, at the moment. As it is difficult to be net short at the exchanges. You need to be net long and trade around the position in order to do any effective exchange arbitrage or market making.

QE: Asset prices (stocks, bonds, real estate, bitcoins) affect estimates for forward GDP. Stronger GDP estimates might promote business investment which does create real growth.

For this thread the question is: Does HFT affect long term asset prices?

[IVplay]

You watch a lot of American tv targeted at 50 year olds for a 50 year old American, err, I mean, 14 year old Canadian.

Stop sidetracking the thread; if you ever poked your head into the ski forum you would see in fact I am from Ontario, and if you still think I'm 50 your even dumber than I thought you you were.

[4matic]

HFT dampens volatility.

Like "Portfolio Insurance?"

[Hugh Conway]

This IS the case for bitcoin, however, at the moment.

An unregulated market filled with moronic bulls waiting to be fleeced?

[BmillsSkier]

if you still I'm 50 your even dumber than I thought you you were.

At least your spelling and grammar is on par with a 14 year olds, gramps.

[Mazderati]

For this thread the question is: Does HFT affect long term asset prices?

Long term pricing isn't really a concern HFT addresses or cares about though? The strategy as a whole is based on trading in the here and now.

HFT dampens volatility if anything.

HFT seems like it would generally decrease the amplitude but increase the frequency of volatility. But then when a big move is made, Marty McFly cranks it to eleven.

[Benny Profane]

http://money.cnn.com/2014/02/11/news...len-testimony/

This seems to link stimuli to unemployment strategy

Iceman probably has better ideas to fix that shit than her. What the fuck can she do to make jobs? You know, that hasn't been done already for years?

[Benny Profane]

http://en.wikipedia.org/wiki/Buttonwood_Agreement

The NYSE was formed by a coalition of brokers to enforce a collective monopoly on trading and to fix commission prices. It has been a government sponsored enterprise in the past, but to imply that it has ever been a non profit organization is disengenuous at best.

Just ask dick grasso:

http://en.wikipedia.org/wiki/Richard_Grasso

Read the last paragraph^

http://www.thereformedbroker.com/201...ket-is-rigged/

[Cono Este]

Front running is nothing new.

When I started in he biz in 1995 I would call three whore houses "on the street" on the phone, all offered at the same price showing a size, and after one traded with me, and before I could call the other two whores, they would would fade for no reason. They ended up admitting to having a buzzer between them, and they settled a huge lawsuit in the late 90's for it. Ironically, One of the few houses that honored their markets was Madoff.

Same thing with the NYSE. I used to make markets in TER options, the specialist in that stock was the biggest pirate ever. He wouldn't honor 500 shares on his mkt, he faded on ever order, every fucking time. Id sell a few thousand deltas of options, send a super dot order directly to him, and 99% of the time he;d fuck me. He put up late prints, I can't remember the rule, but minutes later and you'd see he scooped thousands of shares for himself.

Nothing new here, just whiners who didn't think of it first, or didn't have the brains too but wish they had.

[Bromontana]

The problem is the true takers - corporations - decided to sit on their money and squeeze every ounce of productivity they can from their labor (read: not management) force by wielding the "You don't want to lose your job" stick.

Theese is true. Stock rallies don't imply or equate to wage 'rallies'. The Colorado river basin is a good depiction of how judicial trickle down economics is irl. That goes for regular corps as well as outright oligarchies, with the C-level & equity blowing away gains of sr.mgmt, mgrs, sr consultants, etc. The wealth increase is exponential rather than anything close to linear. It's the s.o.s. that's triggered revolutions in the past and I think a peaceful one is taking shape. But then again, I am two dabs to the wind

... and sorry to cunt it up, will address subject

What sort of studies are out on disparate impact to certain user groups, whether it be institutional investors or retail? I'm not clear on who the victim is, just that these guys are robot alchemists.

[Alpinord]

For another contradictory view of Michael Lewis' book from Tim Worstall, Contributor to Forbes:
Michael Lewis Is Entirely Wrong About High Frequency Trading Hitting The Little Guy

It appears that Michael Lewis has a new book out today, on in which he talks about high frequency trading on the stock market. And he makes the claim that this practice in some way takes money from the little guy to give to the capitalist profiteers running those HFT systems. No, I’m sorry but this will not do. The effect on the small investor is entirely the other way around. Small investors benefit from the existence of HFT. So do large investors in fact. It could be that HFT has other risks and problems. Perhaps it makes the markets more fragile at times of stress, there’s a possibility, as with the Flash Crash that people can misprogram their algos and thus make the market horribly volatile for a short time. There’s even been a case of someone bankrupting their firm by the misuse of the training part of the software package (Knight that was).

But Lewis’ contention is that in the average operation of the HFT market it is somehow taking money from the small investor and handing it over to those plutocrats: and this is something that just isn’t true. Here’s a report of what hen said on 60 Minutes yesterday:

Robots aren’t just taking your jobs, they’re stealing your profits on stock trades, too.
The stock market has been rigged by a group of tech-savvy insiders who are using super-computers to game trades at the expense of normal investors, journalist Michael Lewis charges in his new book, “Flash Boys.”

OK, so how do they do this?

The robots’ high-speed networks allow them to buy the stocks milliseconds in advance — enough time to push up the price for the investor that had made the original order.
“They’re able to identify your desire to, to buy shares in Microsoft MSFT +1.76% and buy them in front of you and sell them back to you at a higher price,” Lewis said. “The speed advantage that the faster traders have is milliseconds … fractions of milliseconds.”

The villains are a “combination of these stock exchanges, the big Wall Street banks and high-frequency traders” who are bagging billions every year with the practice, Lewis said in an interview Sunday with “60 Minutes.”

The victims, Lewis adds, are “everybody who has an investment in the stock market.”

My word, how dastardly.
However, reality is a little different. Yes, there most certainly are people playing around with HFT, they do use high speed fibre optics, locate their servers right next to the exchange so that they can move faster than anyone else and so on. But the effect on all of the other traders in the market is entirely the opposite to the one that Lewis identifies.
Apologies, but a little bit of the economics of a stock market for a moment. So, it’s a market where people buy and sell things: clearly and obviously. And there’s also always a difference between the price at which the market makers (those who promise to both buy and sell in a particular stock) are willing, at any one moment, to buy or sell the specific stock under discussion. This is called the spread. It’s possible for there to be a wide spread in a particular stock (or bond, currency, whatever). One percent can happen in certain very small markets. The price at which you can sell to the market maker is 1% below the price at which you can buy, at the same time, that same item from that same person. It is, if you like,, a tax upon your activity, 0.5% either side on every buy or sell order. It’s also, from the market maker’s side, his fee for being ready to buy and or sell that item at any time that the market is open.
We can also have markets where the spread is 1 basis point, or 0.01% of the total value. Truly large markets (say, the US dollar to euro exchange rate) work at about these sorts of spreads. Thus the fee, or the tax, for trading in this is 0.005% either side of a buy or sell order. You can see that the buyer or seller is getting a better deal in this second sort of market, with the low spread, than they are in the first, with the high spread.
We also know what it is that determines whether a market has a high or low spread: the liquidity in that market. This is just the jargon method of saying that the more people buying and selling whatever it is in larger and larger quantities then the smaller that gap between the buying and selling price will be. The $ to € market is one of the largest markets on the entire planet, possibly as large as $1 trillion a day. This is hugely larger than the market in any individual stock (yes, even that of Apple AAPL -0.02% or Google GOOG -0.5% etc).

So what is it that the HFT guys are providing to the market? They’re providing liquidity. As Lewis has noted in the New York stock markets they’re just over 50% of all trading right now. So they’re obviously 50% of all the liquidity. Which means that they’re also 50% of what reduces the spread on those markets. And that, in turn, means that everybody buying and or selling stocks has had the tax, that spread, that they must pay reduced by their activity. And while I’ve not got the detailed numbers to prove it I’d be willing to bet a very large sum indeed that the reduction in the spread is greater than whatever amount the HFT guys might be able to make by front running a purchase order from anyone except the very largest of investors trying to move a truly monumental amount of any one stock.
So I’m afraid that Lewis has got this the wrong way around. The HFT guys are making money, yes indeed they are. But they’re making money in much smaller sums than the general investors in aggregate are saving through the collapse in spreads as a result of the extra liqudity. HFT, at least in normal market conditions, benefits the small investor most certainly, not costs her.

[OldLarry]

http://tabbforum.com/opinions/no-mic...-is-not-rigged

Different Larry-

[Tippster]

I loved the typical Canadian attitude the guy had, had me laughing good.

You talking about Elon Musk? He's not Canadian.

[hev]

I love Michael Lewis and his books and found this piece fascinating but it hardly seemed like news. As others have pointed out front running has been around for quite a while and it seems like a logical evolution of the markets not a scam. "The markets are rigged" seems like a highly sensationalized headline. I do think that exchanges that implement gated trade frequency will eventually become the higher volume exchanges and enjoyed that half of the story a bit more although I feel it could have been more explicit why it is a better deal to place your money on an exchange like IEX than a more established one.

A while back wired ran an article about flash crash and "the markets are out of our control" seems like a less sensationalized and equally scary headline that still hasn't been answered addressed.

[philth]

Same thing with the NYSE. I used to make markets in TER options, the specialist in that stock was the biggest pirate ever. He wouldn't honor 500 shares on his mkt, he faded on ever order, every fucking time. Id sell a few thousand deltas of options, send a super dot order directly to him, and 99% of the time he;d fuck me. He put up late prints, I can't remember the rule, but minutes later and you'd see he scooped thousands of shares for himself.

Any options market maker that did not use a floor broker on the NYSE was trading in complete darkness. The biggest misconception about SuperDot was that it was an instant execution button to hit the bid or take the offer. It was not. It was an electronic access to the auction market at the point of sale on the NYSE. Your order was then represented in the trading crowd just like everybody else's. A floor broker working the bidside, most likely, was the party that took stock ahead of your Dot order. Many times, representing a scummer options trader who was shopped your trade before you saw it. Stopped stock, Sold sales, Rules 127 and and 72B, there were many reasons why a print went on the tape that were legit that outsiders would perceive as being fucked by the dealer. The NYSE was the one place bitd where fucking with the tape was watched real time. The prints going up off the floor were fucking hilarious….the wild west. Now that all being said I knew some specialists that were truly scum of the earth….fucking thieves. FYI I was and options market maker, and options specialist and an NYSE floor broker so I saw all sides. I would bitch about specialist just as you did when trying hedge thru Dot. Once on the NYSE floor I got some clarity on how it actually worked. I still bitched about specialists but for reasons that would take three pages to explain here. Ahhhh the old days…

Also…I knew that TER specialists well. Guy was fucking one of a kind. Out of his mind but not the worst guy down there by far.

[Benny Profane]

Well, you just gotta love it all. Sounds like an oh so efficient market everyone is describing, with most of the capital making it to American industry and services so that they can lead us all into the 21st century.

[Cono Este]

It;s quite incredible that people complain about this. It goes to show, no matter how much you improve service to people, they will still complain. Thats why my old trading mentors moto still stands.

"If a customer comes back a second time, you didn't do your job right the first time".