Comments on: So Much For High Frequency Trading

By: Steve Place

Steve Place — Thu, 24 Sep 2009 14:03:39 +0000

Peter Gibbons Explains Flash Trading

Peter: Alright, so when the trading algorithm sees a trade com across, right, it puts an order in front of the trade and we make money on the spread. And we drop the spread into an account at Goldman.

Joanna: So, you’re stealing.

Peter: Uh, no. No, you don’t understand. It’s uh– it’s very complicated. It’s uh– it’s aggregate, so I’m talking about fractions of a penny here. And, uh, over time they add up to a lot.

Joanna: Oh, okay. So, you’re gonna make a lot of money, right?

Peter: Yeah.

Joanna: Right? That’s not yours?

Peter: Uh, well, it becomes ours.

Joanna: How is that not stealing?

Peter: I don’t think, uh– I don’t think that I’m explaining this very well.

Joanna: Okay.

Peter: Um, the 7-Eleven, right?

Joanna: Mm-hmm.

Peter: You’d take a penny from the tray.

Joanna: From the crippled children?

Peter: No, that’s the jar. I’m talking about the tray. The– You know, the pennies f-for everybody.”

Joanna: Oh, for everybod– Okay.

Peter: Yeah, well, those are whole pennies.

Joanna: Right.

Peter: Alright? I’m just talking about fractions of a penny here. Okay? But we do it from a much bigger tray and we do it a couple of million times a day.

Peter: So what’s wrong with that?

Joanna: I don’t know. It just seams wrong.

Peter: It’s not wrong. We’re making markets. We’re providing liquidity. Alright? The Fed is wrong. Doesn’t it bother you that you have to get up in the morning and you have to put on a bunch of pieces of flair?

Joanna: Yeah, but I’m not about to go in and start taking money from the register.

A little known fact: Ben Bernanke wears 23 pieces of flair.

By: KidDynamite

KidDynamite — Mon, 21 Sep 2009 01:47:57 +0000

damn – what a shame – i was out of town and am just catching up to this… Iman, Transor, don’t worry, i’m alive and well. It makes me so sad when i read someone as smart as Barry write a rant like this that’s so far off the mark. without getting off topic: Flash trading is a non-issue. If it’s banned, you will see no chance in anything, and if it exists, no one is getting robbed. Clearly, even Barry doesn’t understand what flash trading is: the order executor is the one who decides if he wants his order flashed. that’s fact 1 and is the most important fact that assailants of flash trading gloss over. NO ONE if giving sneak peaks of your orders to their buddies unless you want them to. secondly, the REASON people want their orders flashed is because it SAVES THEM MONEY – they don’t have to pay an extra fee to route the order outside the target market center. Now, there IS the possibility that some recipients of flash order information could abuse such information, and instead of stepping up to provide liquidity against the flashed order, COULD go the same way as the flashed order and front run it. THIS IS POSSIBLE. Guess what – YOU DON”T HAVE TO HAVE YOUR ORDERS FLASHED! if your orders are getting front run, you will/would stop flashing them.

it’s not a big deal… it’s become a political point for guys like Schumer to hang a hat on under the guise of helping the little guy – when in reality all it’s doing is HURTING the little guy who wants to keep his execution costs low.

By: Mark E Hoffer

Mark E Hoffer — Sat, 19 Sep 2009 16:14:30 +0000

“One last comment on this thread…..Does anybody think we would even know what Flash Trading, Dark Pools or HFT is IF the guy from Goldman-Sachs hadn’t (supposedly) stolen that software?”

http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=Dark+Pools+TheDeal

http://www.thedeal.com/dealscape/2009/07/the_issues_underlying_high_fre.php

BG,

LSS: Robert Teitelman, the editor in chief of The Deal, and The Deal magazine, itself, among, few, others, have been tracking, and telling, about these phenomena..

By: alfred e

alfred e — Sat, 19 Sep 2009 14:28:16 +0000

Ooops Good job. Not goof job. Thanks wordpress.

By: alfred e

alfred e — Sat, 19 Sep 2009 14:27:22 +0000

@RW: perspicuity

Haven’t seen that word in years.

Goof job. Nice to know there are still some literate peeps.

By: Becky Burke Mundt » Blog Archive » Proof There is Sanity In the Modern Economic World

Sat, 19 Sep 2009 06:14:22 +0000

[...] So Much For High Frequency Trading [...]

By: Christopher

Christopher — Sat, 19 Sep 2009 04:01:32 +0000

I only drink when I’m alone or with someone.

By: Time For Another Stock Market Crash? | MAS o Menos

Time For Another Stock Market Crash? | MAS o Menos — Sat, 19 Sep 2009 01:35:56 +0000

[...] of fraud to drive this rally at breakneck speed. Looks like that advantage is about to end. From So Much For High Frequency Trading by Barry Ritholtz: Flash trading is more like having access to private info from the sellers, [...]

By: RW

RW — Sat, 19 Sep 2009 01:20:35 +0000

Oh for an edit-after-post function …I meant to write that “I understand there are” technical barriers to NYSE/Euronext offering ‘flash trading’ … and add a hat tip to ‘twofish’ commenting at Brad DeLong’s blog. Sigh …this commenting business is getting complicated.

By: RW

RW — Sat, 19 Sep 2009 01:14:55 +0000

PS: Meant to add that while this may overtly be a fight between NYSE/Euronext and NASDAQ — (there are technical barriers to NYSE/Euronext offering ‘flash trading’ so NASDAQ gains more share implementing the facility) — the larger issue of asymmetric information, unequal status, economic rent seeking and systemic parasitism (no improvement in market efficiency, just more blood tapping) needs to be addressed: The credit crisis was more than a crisis in confidence but a crisis of confidence does remain.