Meet Optiver, High Frequency Trading Friend in Oil
by ilene - September 4th, 2009 4:54 pm
Meet Optiver, High Frequency Trading Friend in Oil
Courtesy of Trader Mark at Fund My Mutual Fund
I’d like to introduce you to a friend in the oil market, named Optiver. This is one of countless HAL9000 high frequency firms who simply make a market and "provide liquidity". The New York Times has a nice piece on this little firm, with the cute name.
- Traders in the Chicago office of Optiver openly talked among themselves of “whacking” and “bullying up” the price of oil. But when called to account by officials of the New York Mercantile Exchange, they described their actions as just “providing liquidity.”
Errr…. Remember, if you ask any questions about the market nowadays, you have an avalanche of people from inside the game telling you all they do is provide liquidity. Without them, we’d be unable to have a functioning market. Countless posts I (and others) put up on sites like Seeking Alpha that even dare to ask about any potential loopholes that some firms in the HAL9000 league could exploit are met with an army of "they just provide liquidity" comments. Almost as if those retorts are organized. Or maybe it’s just the dogma that pervades so much of group think nowadays.
Now of course some of these firms are truly only providing a market making business – skimming off the top and in return "providing liquidity" (in good times at least) [Meet Getco, High Frequency Trading King]. But if one firm like Optiver can manipulate the oil market (allegedly) just imagine what some of the powerful financial elite could do with all the money they have (much of it now backstopped by the Federal Reserve) in all the other markets. Not that they’d ever take advantage of it to post a 97% winning percentage. [Aug 5, 2009: Goldman Sachs Q2 Winning Percentage: 97%] Or more likely (ahem) Optiver was the only bad apple in the bunch…
Wait a second, Larry Summers once worked for a HAL9000 firm DE Shaw learning the tricks of the trade [Apr 6, 2009: Larry Summers – No Conflict of Interest;…