Alonjar: True story: a relative of mine works for the SEC. The agency spent a lot of time and money building a new super computer to track and monitor market manipulation by HFT machines. The SEC budget is completely controlled by washington... and they killed the budget for the HFT tracking specifically. The kicker? The SEC is self funded... they bring in more revenue than they cost through fines and fees.It was entirely a move by someone powerful in washington who wanted to shut down the program so their cronie buddues could continue siphoning money from the markets. My relatives boss resigned over the matter because he was so pissed.
Alonjar: drdonks: In David Cay Johnston's book Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense and Stick You With The Bil he talks about a company that was based in Omaha or some other Midwestern city that wound up moving to New York because they were losing out on trades because their high powered computers couldn't keep pace with the east coast traders...who were conducting trades hundredths of a second faster than they could because of the distance. As the author puts it (paraphrased) "the speed of light wasn't fast enough for them to maximize profits."Its more complicated than that... and more messed up. There are different tiers of pipes going into the markets... for people who are willing to pay the price, you can buy a higher priority tier and have your servers sitting next to the markets systems. The difference in speed isnt just speed of execution... if you are on the top tier, your computers can actually see new orders coming down the pipe... and you can alter your orders after you see theirs, but before they are processed. So machines blatantly walk up the price etc.. you place a sell order for $1.00 per share.. then as a buy order comes in for the $1.00 price, you alter your order to $1.01. The buyer then alters his order to match at $1.01 price, but again, you see it coming and alter your order to $1.02. You do this process automatically until you find the buyers price ceiling.Do this over and over hundreds of times a second all over the market... doing the inverse for your own buys, and you end up with a price spread that you can profit off all day long.
dj_spanmaster: But the complaint now will be that you'll not just destroy a few businesses but a whole industry. They already have a lot of money and will fight it, probably successfully.
Gaseous Anomaly: FTA: "The motive of the algorithm is still unclear."
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