Posts Tagged ‘flash trading’

More Observations On HFT’s Tyranny Of Stock Markets

More Observations On HFT’s Tyranny Of Stock Markets

Courtesy of Tyler Durden of Zero Hedge

Anywhere one turns these days, bashing HFT is the new market normal. Having written 150 articles on the topic, beginning in April 2009, we are happy to have brought the world’s attention to this most dangerous of market aberrations. Yet until the SEC finally bans the practices of micro churning, quote stuffing, positive feedback loop chasing, flash trading, subpennying, DMA accessing, and all other aspects conceived merely to provide some market participants with an unfair advantage over everyone else, the fight against HFT must continue.

Which is why we draw your attention to two items: the first is a paper by Bluemont Capital "The Marginalizing of the Individual Investor" in which the authors question if HFT has distorted true market valuation (yes) and to what degree. Some relevant soundbites: "Unfortunately, high-frequency trader interaction with computerized algorithms of large-cap financial institutions is providing opportunities for high-speed, virtually undetectable market manipulation", "At a minimum, computerized high-frequency and algorithmic trading are undermining traditional value investing strategies. Short-term liquidity and data movements are distorting information on real business performance", "Essentially, high-frequency trading platforms function as positive feedback loops. Engineers treat positive feedback loops as inherently unstable, as each positive response generates stepped-up repetition of the same actions. Positive feedback loops result in an ever- expanding balloon, but like all balloons, the risk of bursting increases with the balloon’s size." It concludes that the "continuing advances in computerized trading pose challenges for regulators throughout the world—and leave individual investors marginalized… Regulators should not only seek to assure that markets are able to continue to function under stress, but they also need to devise remedial actions that protect individual investors who have fundamentally different objectives from the high-turnover objectives of high frequency traders and computerized algorithms."

The other notable item is the appearance of our friends at Nanex on ABC radio over in Australia, where firm founder Eric Hunsader discusses the previously highlighted concepts of latency arbitrage as a potential progenitor to the May 6 crash, as well as possible ways that the NBBO arbitrage could have provided for unfair and illegal mispricing opportunities for a select few.

Bluemont Capital "On the Marginalizing of the Individual Investor":

 

Full August 29 interview with Eric Hunsader on Latency Arbitrage
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The Day The Market Almost Died (Courtesy Of High Frequency Trading)

The Day The Market Almost Died (Courtesy Of High Frequency Trading)

Courtesy of Tyler Durden

Swan breathing fire

A year ago, before anyone aside from a hundred or so people had ever heard the words High Frequency Trading, Flash orders, Predatory algorithms, Sigma X, Sonar, Market topology, Liquidity providers, Supplementary Liquidity Providers, and many variations on these, Zero Hedge embarked upon a path to warn and hopefully prevent a full-blown market meltdown. On April 10, 2009, in a piece titled "The Incredibly Shrinking Market Liquidity, Or The Black Swan Of Black Swans" we cautioned "what happens in a world where the very core of the capital markets system is gradually deleveraging to a point where maintaining a liquid and orderly market becomes impossible: large swings on low volume, massive bid-offer spreads, huge trading costs, inability to clear and numerous failed trades. When the quant deleveraging finally catches up with the market, the consequences will likely be unprecedented, with dramatic dislocations leading the market both higher and lower on record volatility."

Today, after over a year of seemingly ceaseless heckling and jeering by numerous self-proclaimed experts and industry lobbyists, we are vindicated. We enjoy being heckled – we got a lot of it when we started discussing Goldman Sachs in early 2009. Look where that ended. Today, we have reached an apex in our quest to prevent the HFT "Black Monday" juggernaut, as absent the last minute intervention of still unknown powers, the market, for all intents and purposes, broke. Liquidity disappeared. What happened today was no fat finger, it was no panic selling by one major account: it was simply the impact of everyone in the HFT community going from port to starboard on the boat, at precisely the same time. And in doing so, these very actors, who in over a year have been complaining they are unfairly targeted because all they do is "provide liquidity", did anything but what they claim is their sworn duty. In fact, as Dennis Dick shows (see below) they were aggressive takers of liquidity at the peak of the meltdown, exacerbating the Dow drop as it slid 1000 points intraday.

It is time for the SEC to do its job and not only ban flash trading as it said it would almost a year ago, but get rid of all the predatory aspects of high frequency trading, which are…
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Phil's Favorites

Omicron and market sell-off: don’t be surprised if there’s more turbulence to come

 

Omicron and market sell-off: don’t be surprised if there’s more turbulence to come

shutterstock.

Courtesy of Arturo Bris, International Institute for Management Development (IMD)

Until the Omicron variant hit the headlines, the signs were that 2021 was going to close with a stellar stock-market performance. Most markets have been on the rise since the beginning of the year, with the S&P500 up about 25% and the FTSE All Share index up by about 10%.

There had ...



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Biotech/COVID-19

Omicron and market sell-off: don’t be surprised if there’s more turbulence to come

 

Omicron and market sell-off: don’t be surprised if there’s more turbulence to come

shutterstock.

Courtesy of Arturo Bris, International Institute for Management Development (IMD)

Until the Omicron variant hit the headlines, the signs were that 2021 was going to close with a stellar stock-market performance. Most markets have been on the rise since the beginning of the year, with the S&P500 up about 25% and the FTSE All Share index up by about 10%.

There had ...



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Zero Hedge

Goldman Partners With Amazon To Launch New Cloud Computing Platform

Courtesy of ZeroHedge View original post here.

Goldman Sachs and Amazon are launching their most ambitious collaboration yet:  a new cloud computing service geared toward Wall Street firms to help them with high-frequency trading and other practices.

And all these firms need to do is agree to entrust their entire back-end IT setup to the Vampire Squid to access what Amazon is touting as one of the fastest and most useful back-end systems available to Wall Street firms looking to transition on to the cloud.

...



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Politics

The first Thanksgiving is a key chapter in America's origin story - but what happened in Virginia four months later mattered much more

 

The first Thanksgiving is a key chapter in America’s origin story – but what happened in Virginia four months later mattered much more

In the 19th century, there was a campaign to link the Thanksgiving holiday to the Pilgrims. Bettman/Getty Images

Courtesy of Peter C. Mancall, USC Dornsife College of Letters, Arts and Sciences

This year marks the 400th anniversary of the first Thanksgiving in New England. Remembered and retold as an allegory for perseverance and cooper...



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Chart School

Gold and Silver still working higher

Courtesy of Read the Ticker

Using Gann Angles from zero we can time the next run up, and it is near.

The last two days gold and silver are down on the back of central bankers talking the US Dollar higher in a attempt to off set inflation. A rising dollar is a form of tightening. Also the talk of a faster 'taper' has sent interest rates higher. But Luke Gromen knows this cant not last.

@LukeGromen Externally-financed twin deficit nations with insufficient external financing (ie the US, not Japan) cannot abide rising real rates for long.


RTT Comments: What this means a higher US Dollar makes it harder for those outside the US to buy the vast quantity of US Treasuries. 


U...

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Digital Currencies

Stablecoins: these cryptocurrencies threaten the financial system, but no one is getting to grips with them

 

Stablecoins: these cryptocurrencies threaten the financial system, but no one is getting to grips with them

Safe as houses? iQoncept

Courtesy of Jean-Philippe Serbera, Sheffield Hallam University

Cryptocurrencies have had an exceptional year, reaching a combined value of more than US$3 trillion (£2.2 trillion) for the first time in November. The market seems to have benefited from the public having tim...



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Promotions

Phil's Interview on Options Trading with TD Bank

TD Bank's host Bryan Rogers interviewed Phil on June 10 as part of TD's Options Education Month. If you missed the program, be sure to watch the video below. It should be required viewing for anyone trading or thinking about trading using options. 

Watch here:

TD's webinar with Phil (link) or right here at PSW

Screenshots of TD's slides illustrating Phil's examples:

 

 

&n...



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Kimble Charting Solutions

Crude Oil Cleared For Blast Off On This Dual Breakout?

Courtesy of Chris Kimble

Is Crude Oil about to blast off and hit much higher prices? It might be worth being aware of what could be taking place this month in this important commodity!

Crude Oil has created lower highs over the past 13-years, since peaking back in 2008, along line (1).

It created a “Double Top at (2), then it proceeded to decline more than 60% in four months.

The countertrend rally in Crude Oil has it attempting to break above its 13-year falling resistance as well as its double top at (3).

A successful breakout at (3) would suggest Crude Oil is about to mo...



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ValueWalk

Managing Investments As A Charity Or Nonprofit

By Anna Peel. Originally published at ValueWalk.

Maintaining financial viability is a constant challenge for charities and nonprofit organizations.

Q4 2020 hedge fund letters, conferences and more

The past year has underscored that challenge. The pandemic has not just affected investment returns – it’s also had serious implications for charitable activities and the ability to fundraise. For some organizations, it’s even raised doubts about whether they can continue to operate.

Finding ways to generate long-term, sustainable returns for ...



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Mapping The Market

Suez Canal: Critical Waterway Comes to a Halt

 

Suez Canal: Critical Waterway Comes to a Halt

Courtesy of Marcus Lu, Visual Capitalist

The Suez Canal: A Critical Waterway Comes to a Halt

On March 23, 2021, a massive ship named Ever Given became lodged in the Suez Canal, completely blocking traffic in both directions. According to the Suez Canal Authority, the 1,312 foot long (400 m) container ship ran aground during a sandstorm that caused low visibility, impacting the ship’s navigation. The vessel is owned by Taiwanese shipping firm, Evergreen Marine.

With over 2...



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The Technical Traders

Adaptive Fibonacci Price Modeling System Suggests Market Peak May Be Near

Courtesy of Technical Traders

Our Adaptive Fibonacci Price Modeling system is suggesting a moderate price peak may be already setting up in the NASDAQ while the Dow Jones, S&P500, and Transportation Index continue to rally beyond the projected Fibonacci Price Expansion Levels.  This indicates that capital may be shifting away from the already lofty Technology sector and into Basic Materials, Financials, Energy, Consumer Staples, Utilities, as well as other sectors.

This type of a structural market shift indicates a move away from speculation and towards Blue Chip returns. It suggests traders and investors are expecting the US consumer to come back strong (or at least hold up the market at...



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Lee's Free Thinking

Texas, Florida, Arizona, Georgia - The Branch COVIDIANS Are Still Burning Down the House

 

Texas, Florida, Arizona, Georgia – The Branch COVIDIANS Are Still Burning Down the House

Courtesy of Lee Adler, WallStreetExaminer 

The numbers of new cases in some of the hardest hit COVID19 states have started to plateau, or even decline, over the past few days. A few pundits have noted it and concluded that it was a hopeful sign. 

Is it real or is something else going on? Like a restriction in the numbers of tests, or simply the inability to test enough, or are some people simply giving up on getting tested? Because as we all know from our dear leader, the less testing, the less...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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