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(BusinessWeek)   There's a bomb in the market. Once the price reaches 55, the bomb is armed. Once the price drops below 55, it explodes. Now what do you do. WHAT DO YOU DO?   (businessweek.com) divider line 45
    More: Interesting, high-frequency trading, retail investor, arbitrages, retreats, waste of time, Securities and Exchange Commission  
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5108 clicks; posted to Business » on 04 Jun 2012 at 1:54 PM (2 years ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2012-06-04 01:13:50 PM
I sure the fark ain't getting Keanu to fix it...
 
2012-06-04 01:50:10 PM
All high speed arbitrage based trading should be banned. Exploiting a lack of transparency is how markets get farked up in the first place, it is the moral equivalent of insider trading. Markets only work properly when everyone has the same accurate information and equal access to the market. Anything else is basically scamming.
 
2012-06-04 01:52:51 PM
Go for lunch?
 
2012-06-04 01:54:37 PM

NowhereMon: All high speed arbitrage based trading should be banned. Exploiting a lack of transparency is how markets get farked up in the first place, it is the moral equivalent of insider trading. Markets only work properly when everyone has the same accurate information and equal access to the market. Anything else is basically scamming.


100% agreed. not to mention the clusterf*cks that can be created by the automatic trading involved.
 
2012-06-04 02:03:15 PM
Shoot the trader.
 
2012-06-04 02:05:02 PM
Sure would be a shame if something were to happen to that connection they've got there.
 
2012-06-04 02:06:54 PM
Find some hot girl and explode all over her!!!
 
2012-06-04 02:11:07 PM
Per-transaction tax would fix that right up. Screws and/or brings in mad revenue from gamblers day-traders and HFTs, leaves actual investors alone.
 
2012-06-04 02:12:52 PM

imontheinternet: Shoot the trader investor.


wouldn't it be the investor who is the hostage?
 
2012-06-04 02:24:38 PM
I think it was called "The Bus that Couldn't Slow Down."
 
2012-06-04 02:30:52 PM
I'm calling Karl...

dyingbraincells.files.wordpress.com
 
2012-06-04 02:32:29 PM
Pricing at 1 cent? What happens when the penny goes away? Will they have to trade by the nickle?

/prefers to trade rods and cords by the bushel
 
2012-06-04 02:32:50 PM

thomps: NowhereMon: All high speed arbitrage based trading should be banned. Exploiting a lack of transparency is how markets get farked up in the first place, it is the moral equivalent of insider trading. Markets only work properly when everyone has the same accurate information and equal access to the market. Anything else is basically scamming.

100% agreed. not to mention the clusterf*cks that can be created by the automatic trading involved.


But does not the exploitation of inefficiencies serve to highlight them and in the long run, eliminate them...thus making the market more efficient?

Or should we return to the good old days where specialists could fark everyone but their friends over with 12.5 cent spreads?
 
2012-06-04 02:50:43 PM

Opiate of the Lasses: Per-transaction tax would fix that right up. Screws and/or brings in mad revenue from gamblers day-traders and HFTs, leaves actual investors alone.


I agree completely with the authors view, but there is a big misconception that traders do nothing other than cause harm to global markets. there are bad apples with traders just like there are in any profession, but to promote the banning of all traders shows a big misunderstanding of just what exactly it is that traders provide.
Next time you purchase a coffee or loaf of bread or even make a foreign currency transaction you can thank traders for providing the one thing they do create - liquidity.
 
2012-06-04 02:58:59 PM

Opiate of the Lasses: Per-transaction tax would fix that right up. Screws and/or brings in mad revenue from gamblers day-traders and HFTs, leaves actual investors alone.


I got a little ahead of myself there - sorry. I know you didn't call for the banning of traders, but any transaction tax like the ny times has been pushing would effectively eliminate all traders.
 
2012-06-04 03:00:20 PM
Trade by the second. Every order in that second is treated as being in the same second, and the order they're filled is randomized within the second.

Kills HFTs dead. Without transaction taxes.
 
2012-06-04 03:00:21 PM

H31N0US: thomps: NowhereMon: All high speed arbitrage based trading should be banned. Exploiting a lack of transparency is how markets get farked up in the first place, it is the moral equivalent of insider trading. Markets only work properly when everyone has the same accurate information and equal access to the market. Anything else is basically scamming.

100% agreed. not to mention the clusterf*cks that can be created by the automatic trading involved.

But does not the exploitation of inefficiencies serve to highlight them and in the long run, eliminate them...thus making the market more efficient?

Or should we return to the good old days where specialists could fark everyone but their friends over with 12.5 cent spreads?


those are two completely independent options, so the "or" clause isn't really applicable.
 
2012-06-04 03:02:42 PM

thomps: NowhereMon: All high speed arbitrage based trading should be banned. Exploiting a lack of transparency is how markets get farked up in the first place, it is the moral equivalent of insider trading. Markets only work properly when everyone has the same accurate information and equal access to the market. Anything else is basically scamming.

100% agreed. not to mention the clusterf*cks that can be created by the automatic trading involved.


A question that's always bugged me about HFTs and high-speed trading:

High volume gets to "jump the line", but what does that mean in losses for the "little guys" that are trying to buy or sell during that window? Example: I hit "sell" on 50 shares of ConHugeCo at $50/share at 14:26:53 - I should get a check for $2,500 (less fees, taxes and commissions), only some asshole algorithm decided that 14:26:53.2 was THE PERFECT time to execute a sale of 1,000 shares of ConHugeCo. Assuming sale of stock = change in price (though, is any change linear and immediate? Sale by a stockholder = of $x in stock or Y% of shares = rise/drop in price?), do I just have to live with having "lost" $.05/share because the big boys must see every penny they expected to, and their volume of trades is better than my volume of trades?

Do I have this totally wrong?
 
2012-06-04 03:18:07 PM

thomps: H31N0US: thomps: NowhereMon: All high speed arbitrage based trading should be banned. Exploiting a lack of transparency is how markets get farked up in the first place, it is the moral equivalent of insider trading. Markets only work properly when everyone has the same accurate information and equal access to the market. Anything else is basically scamming.

100% agreed. not to mention the clusterf*cks that can be created by the automatic trading involved.

But does not the exploitation of inefficiencies serve to highlight them and in the long run, eliminate them...thus making the market more efficient?

Or should we return to the good old days where specialists could fark everyone but their friends over with 12.5 cent spreads?

those are two completely independent options, so the "or" clause isn't really applicable.


They're not completely independent with respect to market efficiency, and I was being hyperbolic.
 
2012-06-04 03:24:08 PM

H31N0US: thomps: H31N0US: thomps: NowhereMon: All high speed arbitrage based trading should be banned. Exploiting a lack of transparency is how markets get farked up in the first place, it is the moral equivalent of insider trading. Markets only work properly when everyone has the same accurate information and equal access to the market. Anything else is basically scamming.

100% agreed. not to mention the clusterf*cks that can be created by the automatic trading involved.

But does not the exploitation of inefficiencies serve to highlight them and in the long run, eliminate them...thus making the market more efficient?

Or should we return to the good old days where specialists could fark everyone but their friends over with 12.5 cent spreads?

those are two completely independent options, so the "or" clause isn't really applicable.

They're not completely independent with respect to market efficiency, and I was being hyperbolic.


NowhereMan's point was that it's not an example of efficiency, it's an example of exploiting an artificial barrier to effectively insider-trade.
 
2012-06-04 03:25:28 PM

H31N0US: thomps: H31N0US: thomps: NowhereMon: All high speed arbitrage based trading should be banned. Exploiting a lack of transparency is how markets get farked up in the first place, it is the moral equivalent of insider trading. Markets only work properly when everyone has the same accurate information and equal access to the market. Anything else is basically scamming.

100% agreed. not to mention the clusterf*cks that can be created by the automatic trading involved.

But does not the exploitation of inefficiencies serve to highlight them and in the long run, eliminate them...thus making the market more efficient?

Or should we return to the good old days where specialists could fark everyone but their friends over with 12.5 cent spreads?

those are two completely independent options, so the "or" clause isn't really applicable.

They're not completely independent with respect to market efficiency, and I was being hyperbolic.


also, i can't think of a way in which it reduces spreads for the common investor, as you seem to be implying.
 
2012-06-04 03:26:39 PM

reverend maynard: I agree completely with the authors view, but there is a big misconception that traders do nothing other than cause harm to global markets. there are bad apples with traders just like there are in any profession, but to promote the banning of all traders shows a big misunderstanding of just what exactly it is that traders provide.


The problem is that the downside is so dangerous AND likely (global economic meltdown and it's happened three times since the mid-80s) that this is a case where you really want to throw out the baby with the bathwater. Will it slow down the economy? Sure. . . Well, maybe. I really don't need the ability to transfer $X of my funds to buy shares of some widget factory in Peru in 5 minutes. Frankly, that's precisely the problem. That's the point. For a dubious chance of slight decline in short-term standard of living I'll gladly take the drastic increase in stability. Egads, Wall Street is so full of itself. No one goes there to make the world a better place!

To put it another way, raw sewage is 99% water. It'd be perfectly potable. . . except for the fact that the 1% of it that's crap makes the whole thing raw sewage. Still wanna drink?
 
2012-06-04 03:27:22 PM
This could all collapse and these people might have to produce something of value for a living,

1.bp.blogspot.com
 
2012-06-04 03:40:32 PM

Petey4335: imontheinternet: Shoot the trader investor.

wouldn't it be the investor who is the hostage?


Yes, shoot the hostage.
 
2012-06-04 03:45:18 PM

Lawnchair: Trade by the second. Every order in that second is treated as being in the same second, and the order they're filled is randomized within the second.

Kills HFTs dead. Without transaction taxes.


That's far too sensible and effective.

Wall Street won't allow a solution that actually works, and the government won't allow a solution that doesn't further complicate the regulatory scheme.
 
2012-06-04 03:57:16 PM

NowhereMon: All high speed arbitrage based trading should be banned. Exploiting a lack of transparency is how markets get farked up in the first place, it is the moral equivalent of insider trading. Markets only work properly when everyone has the same accurate information and equal access to the market. Anything else is basically scamming.


It's cute that youngsters believe in a fair / free market.
 
2012-06-04 04:11:53 PM
That would result in Total Chaos as the computing platforms scramble to re-tool their data structures. Share prices that are limited to 1ct increments allow you to do fun stuff like store the price as an integer that is 100x the actual amount. Since integers are faster and take up less space in memory, databases, etc. this strategy can result in faster processing. It sounds silly, but if they allow fractions of a cent, all those programs that use the decimal-as-integer "cheat" will no longer work.
 
2012-06-04 04:36:22 PM

Petey4335: imontheinternet: Shoot the trader investor.

wouldn't it be the investor who is the hostage?


Actual investors (as opposed to traders/gamblers) probably don't give a shiat about high frequency traders, at all.

That is, somebody who buys and holds and rarely sells.
 
2012-06-04 04:53:47 PM

tillerman35: That would result in Total Chaos as the computing platforms scramble to re-tool their data structures. Share prices that are limited to 1ct increments allow you to do fun stuff like store the price as an integer that is 100x the actual amount. Since integers are faster and take up less space in memory, databases, etc. this strategy can result in faster processing. It sounds silly, but if they allow fractions of a cent, all those programs that use the decimal-as-integer "cheat" will no longer work.


Like Superman 2?
/It's not some mundane detail, Michael
 
2012-06-04 04:53:55 PM

dragonchild: reverend maynard: I agree completely with the authors view, but there is a big misconception that traders do nothing other than cause harm to global markets. there are bad apples with traders just like there are in any profession, but to promote the banning of all traders shows a big misunderstanding of just what exactly it is that traders provide.

The problem is that the downside is so dangerous AND likely (global economic meltdown and it's happened three times since the mid-80s) that this is a case where you really want to throw out the baby with the bathwater. Will it slow down the economy? Sure. . . Well, maybe. I really don't need the ability to transfer $X of my funds to buy shares of some widget factory in Peru in 5 minutes. Frankly, that's precisely the problem. That's the point. For a dubious chance of slight decline in short-term standard of living I'll gladly take the drastic increase in stability. Egads, Wall Street is so full of itself. No one goes there to make the world a better place!

To put it another way, raw sewage is 99% water. It'd be perfectly potable. . . except for the fact that the 1% of it that's crap makes the whole thing raw sewage. Still wanna drink?


Show me anything in the world that isn't tainted by 1% You still need to drink. Humans are flawed in all walks of life.
Again I don't know how many people in here posting have actually read the article, but we need to make a distinction between HFT and all traders. We certainly don't need to waste billions to rape the planet building more infrastructure to shave a nano second. But traders as a whole do not create volatility in fact that help stabilize the market.
 
2012-06-04 05:52:07 PM

tillerman35: That would result in Total Chaos as the computing platforms scramble to re-tool their data structures. Share prices that are limited to 1ct increments allow you to do fun stuff like store the price as an integer that is 100x the actual amount. Since integers are faster and take up less space in memory, databases, etc. this strategy can result in faster processing. It sounds silly, but if they allow fractions of a cent, all those programs that use the decimal-as-integer "cheat" will no longer work.


True, but not quite for that reason.

The decimal-as-integer cheat works for any reasonable number of decimal places (at least on modern hardware with modern math libraries). If you allow .001-cent increments, then you just store the price as an integer that's 100000x the amount. Still lots faster than using the floating-point processor, and with no risk of rounding errors.

But any change to the pricing structure would indeed require lots and lots of code rework. All your code that operates on prices now has to be revised to use the 100000x factor instead of the 100x factor, and all of the data stored on disk has to be converted (or the code has to be able to tell the difference between the old 100x data and the new 100000x data, and correctly deal with both).

It's a pain. But the same sort of pain happened with decimalization (when we moved from "37 3/8" to prices in cents), and the industry dealt with it.
 
2012-06-04 05:55:15 PM
www.ritholtz.com
 
2012-06-04 06:59:07 PM

dethmagnetic: [www.ritholtz.com image 640x421]


So, basically, limit trading to 5 second intervals to prevent runs?
 
2012-06-04 07:18:36 PM

reverend maynard: Show me anything in the world that isn't tainted by 1%


False equivalence fallacy. Your toast can get a little dusty and still be fine. The market moves as a collective, so I think comparing it to raw sewage is apt. No matter how thirsty you are, if you don't completely separate the crap from the water you can't make the case that it's "99% useful". The stuff, unfiltered, is dangerous.

Our current trading system is a moral hazard whose risks and downsides FAR outweigh the benefits. You can't separate the risks from the rest in its current state. In principle, you could, but not realistically. The infestation is too severe and I'm rather sick of ideologues and their puritan fantasies that never were, aren't and never will be.

reverend maynard: I don't know how many people in here posting have actually read the article, but we need to make a distinction between HFT and all traders.


You do realize that Bills of Attainder are specifically banned by the U.S. Constitution, right? The law cannot make a distinction; ergo, I don't make a distinction. When drafting policy, you HAVE to assume ALL traders are crooked (or rather, that's best practice). Policy has to assume worst-case possibilities -- not necessarily zero tolerance, but zero faith in human nature. For example, we make murder explicitly illegal because you'd have to be wacko to think it can be "self-regulated". The only distinction to be made is who breaks the law (wherein we legally establish that murder = bad) and who doesn't. We arrest those who kill and leave alone those who don't. I'm rather sick of Wall Street insisting they be given the benefit of the doubt. No businessperson likes regulation but the market has repeatedly shown a complete inability to self-regulate so the only solution is an epic crackdown.

Now, there is an argument to be made about only banning certain kinds of trading, leaving the "healthy" parts intact. Hypothetically. But banks are so relentlessly aggressive at exploiting loopholes and using unelected agencies to undermine regulation that I'm willing to do away with the whole thing. You can take whatever gratitude you think traders are owed and shove it up your ass. Are they useful? Yes, but so is a paper clip, and if I had to get rid of one or the other, I think I'd miss paper clips more.
 
2012-06-04 08:31:33 PM

tillerman35: . Share prices that are limited to 1ct increments allow you to do fun stuff like store the price as an integer that is 100x the actual amount. Since integers are faster and take up less space in memory, databases, etc. this strategy can result in faster processing. It sounds silly, but if they allow fractions of a cent, all those programs that use the decimal-as-integer "cheat" will no longer work.


It would still work just fine. They'd just have to multiply everything by 1000 instead of by 100.
 
2012-06-04 08:41:29 PM

Jodeo: I'm calling Karl...


Last time I tried to buy American Express traveler's checks, they told me I couldn't bill them to my American Express card. WTF?

Turns out more places take American Express cards than their traveler's checks anyway.
 
2012-06-04 09:02:58 PM

Thoguh: tillerman35: . Share prices that are limited to 1ct increments allow you to do fun stuff like store the price as an integer that is 100x the actual amount. Since integers are faster and take up less space in memory, databases, etc. this strategy can result in faster processing. It sounds silly, but if they allow fractions of a cent, all those programs that use the decimal-as-integer "cheat" will no longer work.

It would still work just fine. They'd just have to multiply everything by 1000 instead of by 100.


... until you break it because the whole thing assumed multiples of 100 or you run out of address space, or anything. In theory an easy change, in practice is another story.

This whole high speed trading is gaming the system.
 
2012-06-04 09:14:31 PM
dragonchild

You know you can take your poor attitude and shove it up your ass. How did I become the posterboy for all things wall street here?
Guess what? I deplore wall street culture too. I think there needs to be more regulation and oversight too. But if you want to tear down the whole system well good luck with that because the fact is we have a highly integrated global economy and although the traders do the majority of the volume the institutions holding 'investors' funds hold the majority of the funds. And when they are competing with each other for the exit you get what we got in the fall of 08.
You enjoy your paper clips. Ignorance is bliss.
 
2012-06-04 11:22:36 PM
The floor of the NYSE is the quietest place in Manhattan.
 
2012-06-05 04:17:38 AM

reverend maynard: Opiate of the Lasses: Per-transaction tax would fix that right up. Screws and/or brings in mad revenue from gamblers day-traders and HFTs, leaves actual investors alone.

I agree completely with the authors view, but there is a big misconception that traders do nothing other than cause harm to global markets. there are bad apples with traders just like there are in any profession, but to promote the banning of all traders shows a big misunderstanding of just what exactly it is that traders provide.
Next time you purchase a coffee or loaf of bread or even make a foreign currency transaction you can thank traders for providing the one thing they do create - liquidity.


3.bp.blogspot.com

/ob
 
2012-06-05 08:04:43 AM

reverend maynard: dragonchild

You know you can take your poor attitude and shove it up your ass. How did I become the posterboy for all things wall street here?
Guess what? I deplore wall street culture too. I think there needs to be more regulation and oversight too. But if you want to tear down the whole system well good luck with that because the fact is we have a highly integrated global economy and although the traders do the majority of the volume the institutions holding 'investors' funds hold the majority of the funds. And when they are competing with each other for the exit you get what we got in the fall of 08.
You enjoy your paper clips. Ignorance is bliss.


There's a reason the idiot is kept on ignore by seemingly quite a few people.
 
2012-06-05 09:10:45 AM

reverend maynard: How did I become the posterboy for all things wall street here?


Here:

reverend maynard: there is a big misconception that traders do nothing other than cause harm to global markets. there are bad apples with traders just like there are in any profession, but to promote the banning of all traders shows a big misunderstanding of just what exactly it is that traders provide.
Next time you purchase a coffee or loaf of bread or even make a foreign currency transaction you can thank traders for providing the one thing they do create - liquidity.


Here's a social engineering issue few Farkers consider: How many altruists are in Wall Street? None. Zero. NO ONE goes to Wall Street to make the world a better place, even as a secondary goal. That's not what it's there for. Many of them even fit the profile of a psychopath, as the ego creates this worldview where their actions do good by fiat. This strongly challenges the notion that there are any "bad apples" to distinguish from the rest.

They hardly have a monopoly on liquidity, anyway. Companies can also grow through debt; the advantage to public trading is that a company can raise capital without taking on loan payments by selling shares of ownership. This is useful -- I never disputed that -- but its benefit to society is way, way, WAY overrated. When you consider the massive downsides it's a no-brainer that we're better off without them. They're not growing food or anything.

reverend maynard: But if you want to tear down the whole system well good luck with that because the fact is we have a highly integrated global economy


Oh, we've gone from justifying their existence to hiding behind their clout.
 
2012-06-05 03:04:10 PM
dragonchild

What is this some sort of advocacy course from 2nd year law? You're trying to counter arguments I never even made.

I got good laugh from your profile Not everyone on Fark is a troll. Some just take themselves too seriously. Guys, almost no threads last beyond 48 hours. It's OK to disagree, but grow a skin. Yelling doesn't convince anyone, and all the conversations you destroy don't make you any more important. Your describing yourself. You take yourself way to damn seriously. You like to hear yourself talk. You take any issues you don't like and percolate in that brain of yours and think to yourself how can I make myself sound knowledgeable and important and get further and further away from the topic.

The only point I've tried to make: HFT spending billions to shave nano seconds is stupid and needless, but traders are still needed to play a role.
The point you've taken: TRAdERS ARE God's Gift to earth we should lavish them with praise and thank them endlessly eveery morning and everynight for allowing us mere mortals to be in their presence.

I think I'll take UnspokenVoice advice. Save your social engineering and bills of attainder for your blog.

Seriously you don't know what you're talking about. Enjoy your ignorance.
 
2012-06-06 05:49:55 AM

reverend maynard: Enjoy your ignorance.


It is bliss they say. ;)

I don't mind disagreement. I'm abjectly opposed to idiocy. I am, and I will be, capable of being wrong. That's good, it means I still have stuff to learn and I don't mind being taught new things - even tough things, like changing my opinions on subject that don't have facts to fully support one side or the other. I am not attempting to place myself on a pedestal, I'm explaining why they're not worth my time. It /is/ however worth my time to point out to others that they're wasting their time.

Strangely? I'm reminded of a time when some guy quit at a place where I was the supervisor. He asked me, "How do you like me now?" I responded with, "Who ever said I liked you to begin with?" You can cure stupidity with education. Willful ignorance isn't fixable.
 
2012-06-06 08:21:05 PM

mcmnky: reverend maynard: Opiate of the Lasses: Per-transaction tax would fix that right up. Screws and/or brings in mad revenue from gamblers day-traders and HFTs, leaves actual investors alone.

I agree completely with the authors view, but there is a big misconception that traders do nothing other than cause harm to global markets. there are bad apples with traders just like there are in any profession, but to promote the banning of all traders shows a big misunderstanding of just what exactly it is that traders provide.
Next time you purchase a coffee or loaf of bread or even make a foreign currency transaction you can thank traders for providing the one thing they do create - liquidity.

[3.bp.blogspot.com image 285x206]

/ob


Was going to say: "Sell, Mortimer!"
 
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