Stock Traders Find Speed Pays, in Milliseconds

[kpete]

Source: New York Times

Stock Traders Find Speed Pays, in Milliseconds

By CHARLES DUHIGG
Published: July 23, 2009

It is the hot new thing on Wall Street, a way for a handful of traders to master the stock market, peek at investors’ orders and, critics say, even subtly manipulate share prices.

It is called high-frequency trading — and it is suddenly one of the most talked-about and mysterious forces in the markets.

Powerful computers, some housed right next to the machines that drive marketplaces like the New York Stock Exchange, enable high-frequency traders to transmit millions of orders at lightning speed and, their detractors contend, reap billions at everyone else’s expense.

These systems are so fast they can outsmart or outrun other investors, humans and computers alike. And after growing in the shadows for years, they are generating lots of talk.

Read more: http://www.nytimes.com/2009/07/24/business/24trading.html?_r=1&hp=&adxnnl=1&adxnnlx=1248440431-piRj8gUXNtgUHfE8g7vd7A

[RUMMYisFROSTED]

1. Scammers scamming.

Who'da thunk?

[high density]

2. This is ridiculous

How do these idiot firms think this is going to be sustainable? From one scam to another, and the rest of us are all unwillingly along for the ride. I hope any future regulators out there are taking notes.

[clixtox]

3. The equity markets are like your local card room or casino it turns out!

A smidgen is subtracted on every play and from every player, adding up to billions of dollars quickly, with none of the downside risks burdening an actual investor.

When GS is referred to as Goldman Sacks it is the literal truth.

GS has been pillaging, raping and sacking markets and investors for decades, perhaps.

Including widows and orphans, like these thieves give a hoot.

As if...

[kojak]

5. Except the casino and bookie doesn't rig the game

and come asking for a bailout when their rigging backfires. Your local bookies also have more honor than Wall Street scum.

[bemildred]

4. Why run "the market" like a business when you can run it like a casino? nt

[OwnedByFerrets]

6. If idiots like me didnt give them their money to play with....

they would have to take their toys and go home. Makes me disgusted with myself that I enable these evil motherfuckers.

[JDPriestly]

7. It used to be called cheating, and used to end in bar-room fights with six-guns,

but now it's called "trading" by Wall Street's bullies.

It's the mentality on Wall Street that does this kind of trading that is impoverishing America's so-called middle class. Gambling addicts, please understand, casinos do not play "fair." They fix the odds so that they win. Wall Street is no different.

High-frequency traders often confound other investors by issuing and then canceling orders almost simultaneously. Loopholes in market rules give high-speed investors an early glance at how others are trading. And their computers can essentially bully slower investors into giving up profits — and then disappear before anyone even knows they were there.

High-frequency traders also benefit from competition among the various exchanges, which pay small fees that are often collected by the biggest and most active traders — typically a quarter of a cent per share to whoever arrives first. Those small payments, spread over millions of shares, help high-speed investors profit simply by trading enormous numbers of shares, even if they buy or sell at a modest loss.
. . . .
The slower traders began issuing buy orders. But rather than being shown to all potential sellers at the same time, some of those orders were most likely routed to a collection of high-frequency traders for just 30 milliseconds — 0.03 seconds — in what are known as flash orders. While markets are supposed to ensure transparency by showing orders to everyone simultaneously, a loophole in regulations allows marketplaces like Nasdaq to show traders some orders ahead of everyone else in exchange for a fee.
. . . .
“You want to encourage innovation, and you want to reward companies that have invested in technology and ideas that make the markets more efficient,” said Andrew M. Brooks, head of United States equity trading at T. Rowe Price, a mutual fund and investment company that often competes with and uses high-frequency techniques. “But we’re moving toward a two-tiered marketplace of the high-frequency arbitrage guys, and everyone else. People want to know they have a legitimate shot at getting a fair deal. Otherwise, the markets lose their integrity.”

http://www.nytimes.com/2009/07/24/business/24trading.html?_r=2&hp=&adxnnl=1&adxnnlx=1248440431-piRj8gUXNtgUHfE8g7vd7A

Thank God, we did not allow Bush to privatize Social Security.

[conspirator]

8. So basically the stock exchange casino, which was already rigged

Now it's technologically super rigged.
The only shares I have were given to me as share options in the places I have worked.
Otherwise I am not spending 1 cent in that casino.

[TheWatcher]

9. But haven't you heard? According to the Economic Cheerleader Contingent at DU

It's the leading indicator that the Economy is improving and that The Recession is almost over.

Yes, because the Dow is above 9000 now, through Artificial Manipulation and Program Trading, The Jobs will start magically coming back and the Recovery will be complete by next year!

CNBC Said So!

And Warren Buffet, one of the Big Whales of the Casino said today that you should be investing at Dow 9000!

Go All In, I say!

Praise Marty Moose!

[No Elephants]

10. Soooo, will our gubbamint do anything about this? If so, how soon? Anyone interested in a pool?

[clixtox]

11. Dey be de gubbamint, bubba... & Dey print de dough 2!

Really the feds should calculate the profits derived through this skim and confiscate it all, plus fines and damages, for systematic criminal racketeering.

If this isn't a RICO (Racketeer Influenced and Corrupt Organizations Act ) violation then no criminal conspiracy ever has been.

This multi-billion dollar swindle makes the Hells Angels and Mafia look like choir boys.

Well, not quite, but if these miscreants were indicted under the RICO statute then these gangsters should be prosecuted as well.

[depakid]

12. Just imagine how much money could be raised by a small financial transactions tax

Maybe enough to pay for their bailouts- while discouraging market manipulation. But do the Dems have the good sense or the guts to pull off a win/win like this?

Or was Nader right again- just another instance of "not a dimes' worth of difference."

[hunter]

14. Forget the money raised, make the tax high enough to force long term planning...

Maybe 1% per trade or higher.

People would only buy shares with the expectation of staying with them.

It would drive the market down at first, but it would eliminate a lot of of the bloodsuckers who contribute nothing to the economic prosperity of the United States.

[Liberal_in_LA]

13. unreal

[Occulus]

15. Tax all trades a few pennies and see what happens

A few pennies in taxes- billions of times a day. That adds up.