Wash. Post article on high frequency trading

[Markbnj]

Pretty eye-opening the means HFT firms will employ to beat the SIP tape. LOS laser connections between Carteret and Mahwah, for sub-microsecond transmission times?

Makes you wonder whether any ordinary individual sitting at a home computer should ever buy a stock.

http://www.washingtonpost.com/blogs...-explains-how-the-stock-market-became-rigged/

 

[MrChad]

I'm about halfway through Michael Lewis' book Flash Boys. Well worth the read.

 

[Gunbuster]

LOS laser? Easy, hover a quadro copter drone in the middle.

 

[Markbnj]

LOS laser? Easy, hover a quadro copter drone in the middle.

Heh, my first thought was... is there actually LOS from Carteret to Mahwah? I'm sure you get up on the 10th floor or so of some building and there is.

 

[bradly1101]

The game is indeed rigged against us. It's insider trading and should be stopped. The FBI is looking into it.

 

[Rakehellion]

Makes you wonder whether any ordinary individual sitting at a home computer should ever buy a stock.

They shouldn't, because they likely know nothing about finance in the first place. Or Bitcoin, for that matter.

 

[MarkXIX]

As long as whoever is managing my retirement fund has this capability, I'm fine with it.

It's no surprise to me that people with near limitless resources would find a way to make more money and screw over everyone else on the way. That's how greed works.

 

[Gunbuster]

Heh, my first thought was... is there actually LOS from Carteret to Mahwah? I'm sure you get up on the 10th floor or so of some building and there is.

Actually the copter would be to disrupt the laser just for the lolz.

 

[Hacp]

I'm about halfway through Michael Lewis' book Flash Boys. Well worth the read.

I finished it in a day. Audiobook ftw.

 

[Rakehellion]

As long as whoever is managing my retirement fund has this capability, I'm fine with it.

It's no surprise to me that people with near limitless resources would find a way to make more money and screw over everyone else on the way. That's how greed works.

That's how they made the money in the first place.

 

[Markbnj]

Actually the copter would be to disrupt the laser just for the lolz.

You could probably do that with a balloon.

 

[twinrider1]

I'm about halfway through Michael Lewis' book Flash Boys. Well worth the read.

Here is the 60 Minutes piece. Very interesting.
http://www.cbsnews.com/videos/is-the-us-stock-market-rigged

 

[Jodell88]

I saw a documentary on this a while back. Milliseconds count with this kind of thing. If you can get the information just a few milliseconds faster than the next guy then you get the profit.

Also, HFT has been the cause of a few mini crashes as well.

 

[rsutoratosu]

We looked into aoptix for these setup but was denied by our building, im in the citicorp building on east 53. actually, they wanted rent to put these up. rent was too high, and we're moving soon so we'll probably get it in the new office.

http://www.aoptix.com/communications/products

 

[KB]

The ordinary individual investor isn't being affected by HFT. We don't buy enough shares to make it worthwile for the HFT to profit from the resale of the securities. Even in the hypothetical chance that a HFT trader wants to get the jump on me, I won't lose much. If I buy 500 shares of a stock and I am forced to pay one penny more per share thanks to HFT, then its $5.00 I was robbed of. However because of HFT, my trading costs have been shrinking in the last few years down to $7.00 bucks per trade. I saved about $5.00 in trading fees so the two balance out and I lose nothing.

HFT skims off of big investors like mutual funds. Yes I do have a 401K so they are skimming from my future retirement; however I am invested in index funds which don't actively trade. This means they aren't skimming much if any. Second when the fund manager makes trades on behalf of the fund, he/she can set a limit order, an amount they are willing to pay for a security. If their limit order is not filled because a HFT trader has increased the price of the stock they want, all they have to do is wait until the price comes down or find another security to buy. The HFT isn't able to force someone to buy the security at the higher price.

 

[PingviN]

The time frame in which you can buy -> sell stocks should be regulated. Make it half a second or something of the like. Would stop HFT dead in it's parasitic track.

 

[Hacp]

HFT skims off of big investors like mutual funds. Yes I do have a 401K so they are skimming from my future retirement; however I am invested in index funds which don't actively trade. This means they aren't skimming much if any.

Yes and No. The turnover rate for a large index that tracks the SP500 like VFINX is 3.4%. However, a look at VEIEX, which tracks an Emerging Markets index or VISVX, which tracks a Small Cap Value index, and you'll see that the turnover rates are higher (34% and 42%). That's money that you're getting ripped off on.

Second when the fund manager makes trades on behalf of the fund, he/she can set a limit order, an amount they are willing to pay for a security. If their limit order is not filled because a HFT trader has increased the price of the stock they want, all they have to do is wait until the price comes down or find another security to buy.

What you're describing is active trading. That's not the purpose of index funds. A fund manager who oversees an Index Fund should not be buying on limit, they should be buying on market.

 

[CptObvious]

The ordinary individual investor isn't being affected by HFT. We don't buy enough shares to make it worthwile for the HFT to profit from the resale of the securities. Even in the hypothetical chance that a HFT trader wants to get the jump on me, I won't lose much. If I buy 500 shares of a stock and I am forced to pay one penny more per share thanks to HFT, then its $5.00 I was robbed of. However because of HFT, my trading costs have been shrinking in the last few years down to $7.00 bucks per trade. I saved about $5.00 in trading fees so the two balance out and I lose nothing.

HFT skims off of big investors like mutual funds. Yes I do have a 401K so they are skimming from my future retirement; however I am invested in index funds which don't actively trade. This means they aren't skimming much if any. Second when the fund manager makes trades on behalf of the fund, he/she can set a limit order, an amount they are willing to pay for a security. If their limit order is not filled because a HFT trader has increased the price of the stock they want, all they have to do is wait until the price comes down or find another security to buy. The HFT isn't able to force someone to buy the security at the higher price.

You're speaking as though it's impossible to separate the wheat from the chaff. The transactional costs of trading were going to go down anyway due to the efficiencies of computers and automation. The 'front-running' HFT firms are essentially parasites skimming profits risk-free and add little/nothing to the market. Most of the exchanges are doing nothing about it or worse, so it's no wonder overall investor confidence in the market is going down.

 

[Hugo Drax]

Pretty eye-opening the means HFT firms will employ to beat the SIP tape. LOS laser connections between Carteret and Mahwah, for sub-microsecond transmission times?

Makes you wonder whether any ordinary individual sitting at a home computer should ever buy a stock.

http://www.washingtonpost.com/blogs...-explains-how-the-stock-market-became-rigged/

Thats like Asking if someone with a Toyota corolla has a chance at the NASCAR.


If your a buy and hold, diversified (ie passive index buyer) you have nothing to worry about.

Ask your self, if you would have bought 1000 shares of SPY when it was trading at the mid 60s-80s (double digits) during 2008-2009 would you be doing bad?


Retail was more than happy to unload SPY at record lows it seems instead of buying at firesale prices and adding to thier passive index portfolio.

Everyone wants to be the #1 WSOP poker player.

Instead of focusing on a boogeyman, why not focus on the real issues that put our economy at risk. Like all the OTC derivatives that are unregulated and have no clearinghouse that almost sunk us last time.

Unlike Equity options which have been regulated and subject to a central clearinghouse for decades.

 

[Markbnj]

The time frame in which you can buy -> sell stocks should be regulated. Make it half a second or something of the like. Would stop HFT dead in it's parasitic track.

If you read the linked piece, it basically says that if the rules were enforced, nobody could get market data from any exchange faster than the SIP can deliver it, which would be the end of the problem. My expertise in this area is really thin, but the point behind the SIP seems to be to provide one official, fair source of market information, at an affordable rate. When HFT companies can buy in to a faster feed that makes the SIP sort of a joke.

 

[Hugo Drax]

Yes and No. The turnover rate for a large index that tracks the SP500 like VFINX is 3.4%. However, a look at VEIEX, which tracks an Emerging Markets index or VISVX, which tracks a Small Cap Value index, and you'll see that the turnover rates are higher (34% and 42%). That's money that you're getting ripped off on.



What you're describing is active trading. That's not the purpose of index funds. A fund manager who oversees an Index Fund should not be buying on limit, they should be buying on market.

Wrong, they would typically use a VWAP order. (Volume Weighted Average Price) in order to reduce execution risk.

 

[Markbnj]

Thats like Asking if someone with a Toyota corolla has a chance at the NASCAR.


If your a buy and hold, diversified (ie passive index buyer) you have nothing to worry about.

Ask your self, if you would have bought 1000 shares of SPY when it was trading at the mid 60s-80s (double digits) during 2008-2009 would you be doing bad?


Retail was more than happy to unload SPY at record lows it seems instead of buying at firesale prices and adding to thier passive index portfolio.

Everyone wants to be the #1 WSOP poker player.

Instead of focusing on a boogeyman, why not focus on the real issues that put our economy at risk. Like all the OTC derivatives that are unregulated and have no clearinghouse that almost sunk us last time.

Unlike Equity options which have been regulated and subject to a central clearinghouse for decades.

I generally agree, and I don't trade for exactly these reasons. However, I don't think it's a "boogeyman." If you're going to have a regulated market capital should not be able to purchase preferred access to it, period.

 

[gevorg]

This has been known for years, hence why common folk shouldn't daytrade, instead focus on long-term stock goals. Otherwise you're just gambling with the Wall Street mob.

 

[Crusty]

If you read the linked piece, it basically says that if the rules were enforced, nobody could get market data from any exchange faster than the SIP can deliver it, which would be the end of the problem. My expertise in this area is really thin, but the point behind the SIP seems to be to provide one official, fair source of market information, at an affordable rate. When HFT companies can buy in to a faster feed that makes the SIP sort of a joke.

Well by consolidating the data into one feed there is information that is lost along the way. By having access to the data before it gets consolidated a trader is able to make better informed decisions. That's just how things work.

The complaint here is that by having access to those raw data feeds you are in violation of Reg. NMS. I disagree.

http://www.law.uc.edu/sites/default/files/CCL/regNMS/rule610.html is the regulation in question.

The fact is, once the matching engines on the exchange publish data, it's out there for everyone to use. Including the 'SIP' feeds.

 

[Blackjack200]

[

Well by consolidating the data into one feed there is information that is lost along the way. By having access to the data before it gets consolidated a trader is able to make better informed decisions. That's just how things work.

The complaint here is that by having access to those raw data feeds you are in violation of Reg. NMS. I disagree.

http://www.law.uc.edu/sites/default/files/CCL/regNMS/rule610.html is the regulation in question.

The fact is, once the matching engines on the exchange publish data, it's out there for everyone to use. Including the 'SIP' feeds.

According to the article the exchanges are charging huge sums to provide data before it hits the SIP feed, and the high speed traders are trading on that data, that no one else has. That's almost a textbook definition of insider trading.