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How HFT Destroys Markets: 50 Pages Of Evidence
How HFT Destroys Markets: 50 Pages Of Evidence
Back in 2009, when aside from a few insiders, nobody had heard of HFT, Zero Hedge launched its crusade to expose the algorithmic scourge that has since then caused an equity, treasury and now US Dollar flash crash, and has been the subject of a Michael Lewis bestseller and resulted in countless market halts and failures.
More importantly, there is now roughly 50 pages of just bibliography citing the evidence-based, academic research that has shown just how pervasively, maliciously and premeditatedly HFTs manipulate, destabilize, impair and otherwise destroy every single market in which they participate, and what’s worse: result in incremental costs to investors, debunking the biggest lie HFTs spread about themselves – that they, being the gregarious humanist vacuum tubes they are, make trading cheaper and more accessible for the small investor.
And the biggest paradox: despite all this proof – which we urge every readers to sent to their favorite SEC regulator – America’s corrupt enforcers of securities laws continue to turn a blind eye to all the crime that takes place every single day. Why? Because they collect a portion of the proceeds, of course, and because they need a scapegoat to blame once the market crashes.
We are grateful to “R. T. Leuchtkafer” who put it all together.
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Troy Will Burn – the Big Deal about Big Data
Troy Will Burn – the Big Deal about Big Data
I know, I know … I’m a broken record and a Cassandra, with 2 successive notes on Big Data. But I don’t care. This is a much larger structural risk for markets and investors than HFT and the whole Flash Boys brouhaha, it’s just totally under the radar and hasn’t surfaced yet. And unfortunately, just as I think Jeb Bush speaks for most Americans – Democrat and Republican alike – when he says that he doesn’t get what all the fuss is about when it comes to metadata collection and Big Data technologies, so do I think that most investors – institutional and individual alike – are blithely unaware of how their market identities can be stolen and their market behaviors influenced, all in plain sight.
Jeb Bush should know better. I think he probably does. Investors may not know better yet, but they will soon, one way or another. As you read this note, a small group of hedge fund managers are doing to you exactly what the NSA is doing to “terrorists”.
Today a handful of governments use Big Data to identify individual behavioral patterns so that certain individuals can be killed. Today a handful of hedge funds use Big Data to identify investor behavioral patterns so that certain investors can be crushed. Today Big Data is primarily an instrument of social information gathering, with a powerful but punctuated impact on those individuals on the receiving end of a drone strike or a targeted trade.
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Michael Lewis Reflects on His Book Flash Boys, a Year After It Shook Wall Street to Its Core
Michael Lewis Reflects on His Book Flash Boys, a Year After It Shook Wall Street to Its Core
When I sat down to write Flash Boys, in 2013, I didn’t intend to see just how angry I could make the richest people on Wall Street. I was far more interested in the characters and the situation in which they found themselves. Led by an obscure 35-year-old trader at the Royal Bank of Canada named Brad Katsuyama, they were all well-regarded professionals in the U.S. stock market. The situation was that they no longer understood that market. And their ignorance was forgivable. It would have been difficult to find anyone, circa 2009, able to give you an honest account of the inner workings of the American stock market—by then fully automated, spectacularly fragmented, and complicated beyond belief by possibly well-intentioned regulators and less well-intentioned insiders. That the American stock market had become a mystery struck me as interesting. How does that happen? And who benefits?
By the time I met my characters they’d already spent several years trying to answer those questions. In the end they figured out that the complexity, though it may have arisen innocently enough, served the interest of financial intermediaries rather than the investors and corporations the market is meant to serve. It had enabled a massive amount of predatory trading and had institutionalized a systemic and totally unnecessary unfairness in the market and, in the bargain, rendered it less stable and more prone to flash crashes and outages and other unhappy events. Having understood the problems, Katsuyama and his colleagues had set out not to exploit them but to repair them. That, too, I thought was interesting: some people on Wall Street wanted to fix something, even if it meant less money for Wall Street, and for them personally.
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