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Stock market, HFT exchanges and a detective story.

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04-02-2014, 05:13 PM
  #1
dennilfloss
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Stock market, HFT exchanges and a detective story.

Interesting read and I'm not even an investor (only on provincial disability pension, so not allowed and too poor anyway). The main 'detective' is a Canadian with good old Canadian values of honesty and fairness.

http://www.cbsnews.com/news/is-the-u...market-rigged/

http://www.nytimes.com/2014/04/06/ma...s.html?hp&_r=1


Full debate: http://www.valuewalk.com/2014/04/kat...te-full-video/

Mr. O'Brien's rude and overly emotional demeanour is suggestive of someone who's done something wrong and got caught. He's got the 'cockroach caught in a flashlight beam' look in his eyes.

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04-02-2014, 05:35 PM
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Having lived in Florida for over a decade, I've found that roaches caught in sudden light have more of a scurry to them than any particular look in their eye.

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04-02-2014, 06:33 PM
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KareemTrustfund
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I can think of at least one other thing you should be investing in..

I'll let you figure it out, though.

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04-02-2014, 07:20 PM
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I can think of at least one other thing you should be investing in..

I'll let you figure it out, though.
This guy gets it.

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04-02-2014, 07:27 PM
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Francesa
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Michael Lewis has a good book on this

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04-02-2014, 07:29 PM
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Sharpshooter1
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Quote:
Originally Posted by dennilfloss View Post
Interesting read and I'm not even an investor (only on provincial disability pension, so not allowed and too poor anyway). The main 'detective' is a Canadian with good old Canadian values of honesty and fairness.

http://www.cbsnews.com/news/is-the-u...market-rigged/

http://www.nytimes.com/2014/04/06/ma...s.html?hp&_r=1


Full debate: http://www.valuewalk.com/2014/04/kat...te-full-video/

Mr. O'Brien's rude and overly emotional demeanour is suggestive of someone who's done something wrong and got caught. He's got the 'cockroach caught in a flashlight beam' look in his eyes.


Excellent book by Michael Lewis and story about how that Canadian discovered the con being run by those who use computers to commit high-frequency-trades.

The stock system is beyond rigged, and this book lays it all out.

Good interview with the author on The Daily Show last night too. I recommend people check out the full length version at Comedy Network in Canada or Comedy Central in the US.

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04-02-2014, 07:35 PM
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KareemTrustfund
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I wonder if Michael Lewis knows the cow/bull on his cover has a penis!

I can't even take what he has to say serious. Unless he's investing in beef stocks.Then I'd at least listen.

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04-02-2014, 07:41 PM
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Technology is taking us down a deep and dangerous rode of corruption. The banks can't be trusted. Keep your money at home or in your sock. Don't let the man fool you.

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04-02-2014, 07:46 PM
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I thought 60%+ of trades being HFT was pretty common knowledge?



Anyway, this stuff only applies if you're trying to make your living as a day-trader.

Long/short is not really affected if backed up by solid DD.






Saying the overall stock market is rigged is like saying chess is rigged. It's rigged if you're trying to beat the computer.

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04-02-2014, 07:49 PM
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Anyway, this stuff only applies if you're trying to make your living as a day-trader.
No, it doesn't. When these HFT guys run in front of every trade out there, it's a tax on the rest of us, including institutional traders managing IRAs and 401ks.

Don't defend this, because it's absurd.

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04-02-2014, 07:50 PM
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No, it doesn't. When these HFT guys run in front of every trade out there, it's a tax on the rest of us, including institutional traders managing IRAs and 401ks.

Don't defend this, because it's absurd.
Define "rigged", then.

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04-02-2014, 07:55 PM
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Define "rigged", then.
Structurally unfair is probably a better term than rigged. These guys are trading in a way that no one else can, and we're not talking about scale. They have managed to screw over even the big traders by skimming off the top of every trade out there. In some cases, we're talking about a few millisecond advantage that turns into big $$$.

There's no reason for such a thing to exist. The market doesn't need it, and it's not inherent to computer trading. It's just a total scam, and one that these guys have gotten away with for long enough. We don't allow insider trading, so why is this okay? These boxes execute 'inside' trades at lightning speed in order to accomplish the same thing based on algorithms. It's a joke.

I'm not sold on IEX's approach but it's better than nothing. The idea that computer HFTs can just sit back and profit due to technicalities in the system is absurd. It's also incredibly dangerous, if you consider that these trades can be triggered and it's out of the immediate control of actual humans.

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04-02-2014, 08:00 PM
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Structurally unfair is probably a better term than rigged. These guys are trading in a way that no one else can, and we're not talking about scale. They have managed to screw over even the big traders by skimming off the top of every trade out there. In some cases, we're talking about a few millisecond advantage that turns into big $$$.

There's no reason for such a thing to exist. The market doesn't need it, and it's not inherent to computer trading. It's just a total scam, and one that these guys have gotten away with for long enough. We don't allow insider trading, so why is this okay? These boxes execute 'inside' trades at lightning speed in order to accomplish the same thing based on algorithms. It's a joke.

I'm not sold on IEX's approach but it's better than nothing. The idea that computer HFTs can just sit back and profit due to technicalities in the system is absurd. It's also incredibly dangerous, if you consider that these trades can be triggered and it's out of the immediate control of actual humans.
That sounds fine (your explanation, not the situation).

edit: What I meant above is that a day trader is up against much stiffer competition due to HFT than someone who's taking a long or a short position based on fundamentals or even technicals. The word "rigged" is just too loaded.

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04-02-2014, 08:00 PM
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KareemTrustfund
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Originally Posted by XX View Post
Structurally unfair is probably a better term than rigged. These guys are trading in a way that no one else can, and we're not talking about scale. They have managed to screw over even the big traders by skimming off the top of every trade out there. In some cases, we're talking about a few millisecond advantage that turns into big $$$.

There's no reason for such a thing to exist. The market doesn't need it, and it's not inherent to computer trading. It's just a total scam, and one that these guys have gotten away with for long enough. We don't allow insider trading, so why is this okay? These boxes execute 'inside' trades at lightning speed in order to accomplish the same thing based on algorithms. It's a joke.

I'm not sold on IEX's approach but it's better than nothing. The idea that computer HFTs can just sit back and profit due to technicalities in the system is absurd. It's also incredibly dangerous, if you consider that these trades can be triggered and it's out of the immediate control of actual humans.



It's like iRobot starring Will Smith all over again..

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Old
04-02-2014, 08:05 PM
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That sounds fine (your explanation, not the situation).
Lewis' casino analogy is more appropriate here. It's like every poker table has pros posing as amateurs at it and no one but them is in on it. The casino itself is the exchange. They take a cut of the winnings the pros make, and keep the waters churning by providing new suckers to sit down and play with these pros. They are playing on a completely different, inaccessible level from you. They know all the cards, what's coming next, and are always a step ahead of you. It's in no way fair, and some of these 'suckers' are the largest institutional traders out there.

They are mosquitoes on the system, essentially. HFTs have figured out a novel way to exploit the geographical limitations of electronic trading. That's it. It's like a flat tax on everyone else, with the added novelty that these automatic traders can be triggered in such a way that they cause a mini panic or collapse all on their own.

The regulatory bodies need to step in and guarantee the same time window for everybody. Maybe even establish a nonprofit neutral exchange or something of the sort.

Rigged? No. But the deck is so stacked against you (and even the 'big' guys) that it's comical. It may as well be rigged.

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edit: What I meant above is that a day trader is up against much stiffer competition due to HFT than someone who's taking a long or a short position based on fundamentals or even technicals. The word "rigged" is just too loaded.
Whether you open or close 1 position or 1,000 a day, it affects you the same. Yes, a day trader runs up against HFTs more, but it still affects everyone the same. Would you like an extra 1% on your funds? Because killing these HFTs off is a good way to do that with no downside.

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04-02-2014, 08:26 PM
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Whether you open or close 1 position or 1,000 a day, it affects you the same. Yes, a day trader runs up against HFTs more, but it still affects everyone the same. Would you like an extra 1% on your funds? Because killing these HFTs off is a good way to do that with no downside.
I figured day traders will be caught out by far more often HFT-triggered events than long investors?






So if I purchase x shares at $10.00 and sell them 12 months later for $15.00, why is my selling price higher with no HFTs?

Sorry for the very basic-sounding question. Maybe I'm oversimplifying.

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04-02-2014, 08:39 PM
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So if I purchase x shares at $10.00 and sell them 12 months later for $15.00, why is my selling price higher with no HFTs?

Sorry for the very basic-sounding question. Maybe I'm oversimplifying.
A better way of looking at it would be to say that you were ready to get in at $9.50 but only got filled at $10. Your 'loss' to the HFTs is that fifty cent difference - your HFT tax. Except the amounts we are talking about here are usually a very small percentage. Enough to make it worthwhile, not big enough to be a major disruption.

It's essentially the scam from Office Space. It's hard to quantify how much it hurts, because there's no telling how many trades you lost out on or how much margin you gave up to these HFTs. I'll admit that it doesn't really affect joe blow the home trader who buys ten of something small. But if you have a pension, 401k, index funds etc... these guys are costing you money for no real reason.

We wouldn't tolerate a middleman between us and Amazon.com, for example. Someone who sat there and just took an extra .3% of every sale for no apparent reason other than he can and you can't do anything about it. That's the government's job - to tax - not a small cabal of guys who have programmed boxes to auto trade for them.

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04-02-2014, 09:16 PM
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God dang it, Bobby.

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04-03-2014, 04:30 AM
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Is there a stock market thread?

I can't be the only one on here who invests

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04-03-2014, 06:16 AM
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Is there a stock market thread?

I can't be the only one on here who invests
I don't invest in stock market , I buy precious metals and hoard began buying silver at 9 $ a ounce sold it all at 42$ bought gold at 400 $ a ounce sold it all at 1500 Have not rebought gold but bought a whack more of silver at 19$ a ounce. I find this a lot more safer than the market , I also buy only physical. It does not give a opportunity to break the bank like stocks can do but slow and steady wins the race.

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04-03-2014, 07:58 AM
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Is there a stock market thread?

I can't be the only one on here who invests
political forum

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04-03-2014, 08:21 AM
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