Posts filed under “Technology”

Rigged? High Frequency Trading Is Legalized Theft

On “60 Minutes” last night, author Michael Lewis made a bland assertion: High-frequency traders, he said, working with U.S. stock exchanges and big banks, have rigged the markets in their own favor. The only surprising thing about Lewis’s assertion was that anyone could be even remotely surprised by it.

The math on trading is simple: It is a zero-sum game. One trader’s gain is another trader’s loss. Only in the case of HFT, the losers are the investors — by way of their pension funds, retirement accounts and institutional funds. The HFT’s take — the “skim” — comes out of these large institution’s trade executions.

Trading on Speed

The technology behind HFT may be complex, but the math is that simple. Once the Securities and Exchange Commission allowed stock exchanges to share with traders all of the unexecuted incoming orders, it was hard not to make money by skimming a few cents or fractions of a cent from each trade. Several years ago, the founder of Tradebot, one of the biggest high-frequency firms, had said that the firm had “not had a losing day of trading in four years.” The firm’s average holding period for stocks is 11 seconds.

Any professional trader can tell you that his job is to manage risks. It is a statistical certainty that a percentage of trades will be losers. You are establishing a position with an unknown outcome. Sometimes they go your way, other times they go against you.

How is it possible that one of the largest high-frequency trading firms executes millions and millions of orders for four years without ever having a down day? The short answer is what they do is not trading — it is skimming. I call it legalized theft. High-frequency trading is a tax on investors, encouraged by the exchanges, allowed by the SEC. It is prima facie proof that something is amiss.

Regardless, to those of us who recognize HFT as a problem, Lewis’s comments are good news. He is out promoting his new book, “Flash Boys: A Wall Street Revolt.” As America’s pre-eminent chronicler of all things financial, his comments will reach a wide audience among the public and among politicos in Washington.

This isn’t the first book on the subject. If you want to dive into HFT, I would suggest reading “Dark Pools: The Rise of the Machine Traders and the Rigging of the U.S. Stock Market,” by Scott Patterson. For a practitioner’s perspective, see “Broken Markets: How High Frequency Trading and Predatory Practices on Wall Street are Destroying Investor Confidence and Your Portfolio,” by Sal L. Arnuk and Joseph C. Saluzzi.

It is interesting to note that the rigging theme is consistent with everyone who looks closely at this subject. My colleague Josh Brown notes that markets haven’t become rigged, they have always been rigged. What is different is the ability of high-frequency traders to see other people’s orders, jump ahead of them, and then sell that exact same stock to them, at a higher price. It is the ultimate market-skimming operation.

The specialist system that pre-dated HFT had its flaws, as we saw in the 1987 stock-market crash. But it also had one crucial redeeming factor: A human being stood ready, willing and able to make a market in a stock when other buyers and sellers disappeared. HFTs, on the other hand, have no such obligation. When things get rough, they unplug their machines. This makes their claims of added liquidity laughable. They are the centerpiece of a flawed system without any socially redeeming qualities.

I am looking forward to reading “Flash Boys.” I hope our members of Congress and the folks at the SEC do so too.

 

Originally published here

Category: Regulation, Technology, Trading

What Makes Candy Crush So Addictive?

It’s a game with more than 500 levels that pulls your emotional triggers. It seduces, provides instant satisfaction, frustrates, amuses and knows how to get you to keep on playing. 32 percent of players say they have ignored family and friends and even left children stranded at school while engaging with those blinking jelly beans. We look at why are so many people are hooked on Candy Crush.

 
A star is born:

Source: Bloomberg, March 26 2014

Category: Technology, Video

High Flying Tech Stocks Come Back to Earth

Fall from recent highs Source: RWM   Some of the most prominent names in technology are getting shellacked today. These companies got way ahead of themselves and now they are, well, to be polite, let’s just call it “retrenching,” as they give up a large percentage of their gains. I don’t think that Twitter Inc.,…Read More

Category: Sentiment, Technology, Trading

How to Be An Innovator

How to be more innovative? Some advice from the experts on how to design your personal innovation roadmap — in three steps. How to Be An Innovator: Your Personal Roadmap from Sidneyeve Matrix Slides from a keynote presentation prepared for Queen’s School of Business Innovation Summit, 2014.

Category: Digital Media, Technology, Venture Capital

Wolfram Language

Stephen Wolfram’s Introduction to the Wolfram Language

Source: YouTube

Category: Technology, Video

Drones over America

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The drone surveillance debate

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Drones in flight, airborne over Austin

Category: Technology, Video

BuzzFeed’s Jon Steinberg (President + COO)

BuzzFeed has become the hottest name in media thanks in large part to the strategic leadership of President and COO Jon Steinberg. On March 12, Steinberg joins the Paley Media Council in New York for a breakfast conversation to share his insights on viral content, native advertising, and his plans for growth in 2014.

Jon Steinberg, President + COO, BuzzFeed from The Paley Center for Media on FORA.tv

Read more at Fora.tv

Category: Technology, Video

Machine Learning and Big Data


Source: Robot Economics


Source: Robot Economics

Category: Data Analysis, Technology, Video

A Dr. Seuss Inspired Guide to Twitter

Category: Technology, Think Tank

Apple + Ferrari = Fast Smart Car

What happens when two of the world’s strongest brands combine? Ferrari’s newlylaunched car has an interface from Apple. Bloomberg’s Tom Gibson examines how these two heavyweights complement each other.


Source: Bloomberg, March 5 2014

Category: Technology, Video