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Under the headline, "The Wolf Hunters of Wall Street", The New York Times Magazine is running this review of a new book. It tells a long story that ends in the creation of IEX (Investors Exchange), a new stock exchange with the intent of bypassing the unfair advantages that co-located high-speed traders currently have. After a few weeks of operation near the end of 2013, their volume was larger than AMEX(!!)
Here's a quote from near the end of the book review:
IEX had made its point: That to function properly, a financial market didn't need to be rigged in someone's favor. It didn't need payment for order flow and co-location and all sorts of unfair advantages possessed by a small handful of traders. All it needed was for investors to take responsibility for understanding it, and then to seize its controls.
"The backbone of the market," Brad Katsuyama (President & Chief Executive Officer, IEX) says, "is investors coming together to trade." While the article is long, I enjoyed the story. I have no connection to this company, but here's their website.
(Score: 1) by No.Limit on Wednesday April 02 2014, @01:23AM
This submission was certainly much more interesting than many others with more comments. At least for me.
(Score: 2) by carguy on Wednesday April 02 2014, @09:54AM
From submitter -- thanks for the compliments. However, the lack of comments brings to mind the phrase, "it was a critical success", which is usually used for books and shows that flop financially....
(Score: 2) by TheLink on Wednesday April 02 2014, @10:38AM
(Score: 2) by Hairyfeet on Wednesday April 02 2014, @11:17AM
Well I'm afraid if you want a lot of comments on an article like this it really needs to be in a financial publication because frankly one has to have some really in depth knowledge of the subject to see why this is important or why HFT is a problem.
Take myself as an example, i didn't post because there really isn't anything to add other than HFT gives the top 86 individuals that now control over 70% of the wealth on this planet a way to siphon even more riches, but anybody who knows anything about HFT already knows that it allows the top 1% an easy way to grow their wealth as 1.- You need a LOT of money to even get into the game, and 2.- because you already know what the price is and are trading on the milliseconds it takes for the price to hit the screen? you can't lose. Those that know nothing about HFT will either not believe you or think its something political, so you are either wasting your time or preaching to the choir...what is the point in that?
Lets face it, most of the guys that came over here at day 1 are old school tech heads NOT day traders, so its doubtful many will have the level of expertise to speak about this in any kind of depth.
(Score: 1) by NeoNormal on Wednesday April 02 2014, @11:24AM
Excellent post! That is the way I feel about quite a few topics. I know enough to understand the thrust of the discussion, but not enough to advance it... so I read and moderate.
And, to be clear, I still enjoy reading these topics as I feel they advance my knowledge.
(Score: 1) by No.Limit on Wednesday April 02 2014, @02:54PM
Same here. Only reason why I didn't moderate and commented instead was because I didn't have mod points just then.
It's often really interesting to read posts of people who are simply much better informed.
(Score: 2) by Phoenix666 on Wednesday April 02 2014, @01:22PM
There is the question of fairness, which has already been mentioned. Front-running a trade you know is going to happen is an unfair advantage. It is the purest and most insidious form of insider trading. There is the question of legality, which has been covered. Front-running a trade is illegal. Insider trading is illegal. Both happen all the time and even when the rare, rare person or firm is caught for it, the penalties are either waived or are so paltry that the cost-benefit ratio of the behavior is so wildly inadequate that it guarantees recidivism. There is the question of harm, which many have touched on. Who does it really harm if somebody steals a few pennies off your final price? It mostly affects big traders, so who cares if they get stuck for a few extra millions? They can spare it, can't they? Can the average person even understand or care about the basic math you have to be able to do to really appreciate the scale of what this means?
If those are the only things you are looking at, then, yeah, so what?
The real importance of this story is the externalities, which are vast, deep, huge. First, you have the unearned wealth skimming off the top to further enrich an elite group of complete sociopaths. If all they did with that money was to buy another lambo or another house in the Caymans, so what. But they don't. They totally corrupt our democracy to the point where laws are passed that depriving most of us of liveable wages, medical care, housing, food, the ability to get our roads fixed, or to do something about the massive carbon bloom in our atmosphere. That is an existential threat to the very lives of the vast majority of us in the world. Second, you have the critical loss of confidence in the financial system, which has taken many body blows in the last 20 years. The little people who always get the shortest end of the stick lost that confidence a very long time ago, but when the other large players in the game lose that confidence too then the whole raison-d-etre descends into chaos. Consider that. The Snowden revelations have destroyed the credibility of the entire federal government, with the result that elements of the federal government are starting to turn on each other (see DiFi's attack on the CIA) and the NSA is turning on its own workers (presumably to stop future leakers). Now here with the financial system you have the pension funds, which are the really, really big money in the system, turning on the traders and the banks. Throw in the good times going on around the world like Russia and China and the Arab Spring. Throw in climate change and we have four very large trends converging on a very, very large systemic shift that's right around the corner.
Me, I'm teaching my 5- and 3-yr olds how to forage for food, hunt, fish, and flint-knap because after this collapse they could well be the skills they'll need to survive.
(Score: 1) by No.Limit on Wednesday April 02 2014, @02:56PM
I think this is one of the main problems with corporations or governments abusing laws.
I think you can go as far as saying that it's an insult to a rational mind not to commit these crimes, because the risk and profit clearly tell you that it's absolutely worth it.