vlogolution network » high-frequency trading

$IBKR Interactive Brokers CEO having second thoughts about HFTs

Alexander P Morris — Thu, 20 Oct 2011 19:13:55 +0000

(WSJ) While a number of Wall Street traders would agree, this argument may seem surprising coming from the 67-year-old Mr. Petterfy: He is widely considered the father of computer trading, a position that has made him a billionaire several times over. High-frequency traders are “fair-weather market makers,” he said in an interview. “When the markets came under serious stress , we felt like we were standing on the precipice by ourselves, staring into the abyss.” Mr. Peterffy has a solution: Require exchanges to hold orders for one-tenth of a second, while allowing registered market makers, such as Interactive, to trade at will. The requirement could put a dent in many high-frequency strategies, which rely on the ability to get in and out of positions as speeds measured in microseconds, or one-millionth of a second…

Full Story: A Call to Pull Reins on Rapid-Fire Trade (WSJ)

The Perfect Storm: Lessons Learned from the DOW’s 1000 Point Flash Crash

Alexander P Morris — Wed, 19 May 2010 22:02:53 +0000

Was the May 6^th, 2010 intraday crash and recovery just another one of those once-in-a-lifetime rare anomalies -– a rare confluence of events coming together to form the “Perfect Storm”? And if a “Perfect Storm” generally occurs so infrequently, why does it seem that we are presented with a newsworthy “Perfect Storm” in the markets on an almost regular basis? With all the misinformation and outrageous reasons the media and its “pundits” offer, perhaps it’s time to revisit exactly how markets work, and what (or who) may be to blame. It’s a lot easier to blame a “fat finger” or some naughty short-sellers for a huge market-selloff, than to accept that markets do not always have a buyer for every seller. Very simply, when a large number of market participants decide they all must sell (or buy) at the exact same time, an “air pocket” of price action will form. Anyone who has traded a market knows that this type of single-sided liquidity “crisis” occurs every day in the markets to various extents, especially after significant news events are released. While these relatively smaller moves may not be nearly as significant as a 1000 point intraday drop and overall market selloff, the dynamics are more or less the same. The setup develops with a large number of market participants all thinking the same way (ie. very strong bullish or bearish sentiment), generally due to a strong extended trend in a market. When the market finally turns, the large group of participants on the wrong side of the trade all decide to reverse course at the same time, at similar stop levels, just to save their leveraged hides. Does the trading term “slippage” ring a bell?

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Only Goldman Sachs can get away with Illegal Insider Trading

Alexander P Morris — Thu, 20 Aug 2009 22:33:04 +0000

It’s kind of ironic how Martha Stewart became the poster child for cracking down on insider trading activity, even though it was never even proven or substantiated. For those of you that remember the movie Airplane with Leslie Nielsen, it reminds me of the scene where the police officers detain the little old lady while allowing a dozen terrorists to walk right through the security gate armed with bazookas. Now with Goldman Sachs, we’re faced with likely the greatest inside information and market manipulation scheme of all time — way larger than the usual trading on inside information that seems to go on every day in the markets. And once again, I doubt a single one of the people responsible will end up in jail over it (let alone receive anything much more than a slap on the wrist, if that). More likely, it’ll be brushed under the rug with the rest of the manure and never heard of again. But should we really expect anything different from our government, which at this point exists as little more than a taxpayer-subsidized wholly-owned subsidiary of Goldman Sachs?! Shhhh, thou shalt not use the lordGoldman’s name in vain!

It was also quite telling that Goldman was able to have the FBI detain their programmer Sergey Aleynikov within a day’s notice on charges that the theft of their code was an issue of national security as it could enable others to manipulate the markets. Of course, I’m sure that’s not what Goldman would be using it for (uh huh)… But I suppose that the Plunge Protection Team a.k.a. Goldman Sachs does require “special access” to the markets to do its job and assure it stays in the black (and then sooooome).

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