alexey Posted April 1, 2014 Share Posted April 1, 2014 Lots of interesting stuff in the article. Apparently they were also on 60 minutes, with other media appearances sure to follow. I quoted the part where high speed traders get caught with their hand in the jar. Please lets do something about this!! http://www.reuters.com/article/2014/03/31/us-markets-hft-flashboys-idUSBREA2U03D20140331 ... But Brad Katsuyama, former head trader in New York for the Royal Bank of Canada and a major figure in Lewis's book, said he was finding that when he would send a large stock order to the market, it would only be partially filled, and then he would have to pay a higher price for the rest of the order. With the help of new hire Ronan Ryan, Katsuyama realized that his orders traveled along fiber optic lines and hit the closest exchange first, where high frequency traders would get a glimpse, and then use their speed advantage to beat him to the other 12 U.S. public exchanges and 45 private trading venues. HFT algorithms could then buy the shares Katsuyama wanted, and then sell them to him at a slightly higher price. Katsuyama and Ryan created a system in which RBC would send its orders first to the exchange that was the furthest away, and last to the exchange that was closest, with the goal of arriving at all places nearly simultaneously, cutting out HFT. "Essentially, our fill rates went to 100 percent. We couldn't believe it when we actually figured it out," Katsuyama told "60 Minutes." ... Link to comment Share on other sites More sharing options...
s0crates Posted April 1, 2014 Share Posted April 1, 2014 Shocking that Wall Street is crooked. Link to comment Share on other sites More sharing options...
Renegade7 Posted April 1, 2014 Share Posted April 1, 2014 This caught my eye last night so I actually sat down and watched the piece on 60 minutes last night. Makes me wonder if our government agencies in charge of oversight are simply overwhelmed, underfunded, or simply incompentent. Likely a combination of all three, really sad, man. Link to comment Share on other sites More sharing options...
s0crates Posted April 1, 2014 Share Posted April 1, 2014 This caught my eye last night so I actually sat down and watched the piece on 60 minutes last night. Makes me wonder if our government agencies in charge of oversight are simply overwhelmed, underfunded, or simply incompentent. Likely a combination of all three, really sad, man.Better that they be incompetent than malicious. I don't know which it is. Link to comment Share on other sites More sharing options...
chipwhich Posted April 1, 2014 Share Posted April 1, 2014 Cost of doing business? Hey most Americans are turning over large portions of their investment in hidden and known management fees. Even your company 401K plan management fees could be outrageous. It's an out of sight out of mind thing for most. Link to comment Share on other sites More sharing options...
Bang Posted April 1, 2014 Share Posted April 1, 2014 This caught my eye last night so I actually sat down and watched the piece on 60 minutes last night. Makes me wonder if our government agencies in charge of oversight are simply overwhelmed, underfunded, or simply incompentent. Likely a combination of all three, really sad, man. ...or in league with the miscreants. ~Bang Link to comment Share on other sites More sharing options...
Predicto Posted April 1, 2014 Share Posted April 1, 2014 This caught my eye last night so I actually sat down and watched the piece on 60 minutes last night. Makes me wonder if our government agencies in charge of oversight are simply overwhelmed, underfunded, or simply incompentent. Likely a combination of all three, really sad, man. In this case it appears to be a matter of technology advancing more quickly than regulation. I guess that is "overwhelmed," of the three choices you suggest. Link to comment Share on other sites More sharing options...
alexey Posted April 1, 2014 Author Share Posted April 1, 2014 I think it is overwhelmed on purpose. There seems to be so much fatalism about this stuff... Link to comment Share on other sites More sharing options...
Stadium-Armory Posted April 1, 2014 Share Posted April 1, 2014 Great piece of journalism. Link to comment Share on other sites More sharing options...
PeterMP Posted April 1, 2014 Share Posted April 1, 2014 Did people not realize this? And a partial solution is easy. Increase the tax on each stock transaction as a function of the size of the transaction (e.g. make the tax a percentage of the transaction). People looking to make lot's of trades will get hit hard by the tax and it will become less profitable, which means there will be less of it. There is already a very small tax. We just need to increase it. Link to comment Share on other sites More sharing options...
chipwhich Posted April 1, 2014 Share Posted April 1, 2014 Did people not realize this? And a partial solution is easy. Increase the tax on each stock transaction as a function of the size of the transaction (e.g. make the tax a percentage of the transaction). People looking to make lot's of trades will get hit hard by the tax and it will become less profitable, which means there will be less of it. There is already a very small tax. We just need to increase it. It would have a negative effect on share prices of some stocks. It would also have a negative effect on pockets of congressman. A bigger tax isn't happening. Link to comment Share on other sites More sharing options...
Corcaigh Posted April 1, 2014 Share Posted April 1, 2014 What I was surprised about is that the firms are openly engaged in 'front running' and it is currently legal in this situation, but illegal in every other. There is no reason to allow this and it should be stopped today. Link to comment Share on other sites More sharing options...
PeterMP Posted April 1, 2014 Share Posted April 1, 2014 It would have a negative effect on share prices of some stocks. It would also have a negative effect on pockets of congressman. A bigger tax isn't happening. Other than the companies making money off of it, i don't think there is evidence that it is true. Link to comment Share on other sites More sharing options...
chipwhich Posted April 1, 2014 Share Posted April 1, 2014 Other than the companies making money off of it, i don't think there is evidence that it is true. The evidence stares you right in the face. It drives up the price of the trade on highly traded companies. If I can buy a stock for $20 a share without it or $21 a share with it, how can you say there is no evidence? Link to comment Share on other sites More sharing options...
PeterMP Posted April 1, 2014 Share Posted April 1, 2014 The evidence stares you right in the face. It drives up the price of the trade on highly traded companies. If I can buy a stock for $20 a share without it or $21 a share with it, how can you say there is no evidence? Because highly traded companies are also highly sold companies, and they are doing the same thing the other way with the sale. Link to comment Share on other sites More sharing options...
alexey Posted April 1, 2014 Author Share Posted April 1, 2014 Yes we all know there are problems, etc. Yes this is not surprising. Yet I think there is value in still getting outraged about it. Let's get emotional, let's tell other people, let's try to raise awareness and do something. Elections are coming up. Can we make this an issue? Link to comment Share on other sites More sharing options...
chipwhich Posted April 1, 2014 Share Posted April 1, 2014 Because highly traded companies are also highly sold companies, and they are doing the same thing the other way with the sale. They are causing the end buyer to pay more for a stock. I am not sure why that is difficult to understand. They don't make money by giving the end buyer a deal. They prop up the stock price to make more than a stock would normally trade for. Link to comment Share on other sites More sharing options...
Destino Posted April 1, 2014 Share Posted April 1, 2014 The entire financial services sector should be torn down and rebuilt from the ground up. It's hard wired to rob, cheat, and ruin and no legislative solution can make much difference when their lobbyists get to essentially write it. Link to comment Share on other sites More sharing options...
Mursilis Posted April 1, 2014 Share Posted April 1, 2014 Please lets do something about this!! Such as? And why do you think anyone would care? I read the other day that Ryan Braun, the PED user who lied about his use and got suspended by MLB, got a standing ovation at his first at-bat following his suspension. The only problem most of us seem to have with cheaters is not getting in on the action. Link to comment Share on other sites More sharing options...
JMS Posted April 1, 2014 Share Posted April 1, 2014 The evidence stares you right in the face. It drives up the price of the trade on highly traded companies. If I can buy a stock for $20 a share without it or $21 a share with it, how can you say there is no evidence? The problem is we live in a cleptocracy. Average people's money is stolen, wealthy peoples money is automatically compounded on the backs of average people at no risk to the wealthy. The cost of that once it is fully undestood will have such a negative effect on the markets that it will suppress all investment in the money markets... And to differ with those who think this is merely an example of technology moving so fast it's eclipsed regularory's ability to check new opprotunities for graft... nothing could be further from the truth. The facts are high frequency trading has been a property of the US money markets since the 70's. Ever since computers first eclipsed ticker tape. The current "scandal" is the tip of the iceberg. Wait till they start talking about how IPO's work. That's the biggest corruption in the history of civilization. Where hundreds of billions of graft is created in an afternnoon and all goes into the pockets of elite's with connections at the expense of both the investors and the companies trying to raise money. The net effects are we are all weaker, and poorer; systemic corruption on a scale which was unimaginable just a few decades earlier... Again none of this is new, it's tought in business schools for decades... It's the way our markets work.... Link to comment Share on other sites More sharing options...
PeterMP Posted April 1, 2014 Share Posted April 1, 2014 There have been various efforts to curb the practice. Harkin has introduced a bill multiple times and as recent as 2013. http://www.pbs.org/newshour/making-sense/a-new-tax-to-raise-money-for-t/ Fixing this will require people to act. How many of people in this thread have contacted their elected officials over the matter? Link to comment Share on other sites More sharing options...
JMS Posted April 1, 2014 Share Posted April 1, 2014 Such as? And why do you think anyone would care? I read the other day that Ryan Braun, the PED user who lied about his use and got suspended by MLB, got a standing ovation at his first at-bat following his suspension. The only problem most of us seem to have with cheaters is not getting in on the action. Because it costs our industry and investors billions, maybe trillions. Because it's not a victimless crime. Because it's hurts the economy. What could you do about it... You could mandate an even playing field for all investors across the board. You could make illegal or at least transparent what is occuring. You could toss a few keasters in prison... It's like insider trading only on steroids... You could certainly make it illegal. There have been various efforts to curb the practice. Harkin has introduced a bill multiple times and as recent as 2013. http://www.pbs.org/newshour/making-sense/a-new-tax-to-raise-money-for-t/ Fixing this will require people to act. How many of people in this thread have contacted their elected officials over the matter? You do realize senators and congressmen are people who legislatively aren't subject to insider tading laws... There is no mystery in how to fix this type of activity.... It's like fixing shoplifting... Technologically it's well understood. You just make the imposed delays illegal, and you increase the latency of the demand metrics so they aren't useful to these types of high freequency traders.... Give them the same latency that everybody else has... That would fix it overnight. Balance the playing field.... and make transparent to the investors thos companies which don't have the track record of transparency... make their profits transparent to their investors too. Link to comment Share on other sites More sharing options...
Larry Posted April 1, 2014 Share Posted April 1, 2014 Oh, I wouldn't mind something vastly more spectacular. Say, a tax of 1% or more, on any stock held less than a day. Heck, I wouldn't mind a tax on "investments" held less than a month. Maybe even a year. Make it more about investing, less about speculating. Link to comment Share on other sites More sharing options...
Corcaigh Posted April 1, 2014 Share Posted April 1, 2014 Whether speculating or high frequency trading should be discouraged is something that can be debated, but what was referred to in the 60 minutes piece was 'front running'. This is illegal for a human as a form of insider trading, but thanks to very fast networks and computers it allows a third party to intercept the trade you are trying to make and get in front of it thanks to their access to a faster fiber optic network so that you pay a higher price. This should be illegal. Link to comment Share on other sites More sharing options...
mcsluggo Posted April 1, 2014 Share Posted April 1, 2014 Did people not realize this? And a partial solution is easy. Increase the tax on each stock transaction as a function of the size of the transaction (e.g. make the tax a percentage of the transaction). People looking to make lot's of trades will get hit hard by the tax and it will become less profitable, which means there will be less of it. There is already a very small tax. We just need to increase it. that addresses a need... but not THIS need. I actually chanced on the 60-minutes segment sunday night (i haven't seen 60 minutes in years...). In this case the problem isn't the high frequency, high turnover traders... it is more malicious than that. if you are placing a buy order, it gets spread over several different locations where it can be filled-- all within a small fraction of a second. What these people did was capture the buy order in the first location (before it could be filled) and then beat that buy order to the locations where it COULD be filled, and pre-purchased the buy, and and then fill the order... pushing up the price a tiny bit. It is pure sleaze. Front running is already against teh law... the code against it apparently just didn't capture this particular (advanced, and relatively recent) form of front-running ---- at least according to 60 minutes THIS ^^^^^^ form of front running isn't currently against the law. They are causing the end buyer to pay more for a stock. I am not sure why that is difficult to understand. They don't make money by giving the end buyer a deal. They prop up the stock price to make more than a stock would normally trade for. the "tobin tax" that Peter is talking about is a very very low level tax, (and in some forms is only applied if the stock isn't held for a fixed, not very long, term). It only "bites" when many many transactions are piled on together. Link to comment Share on other sites More sharing options...
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