We have written extensively on the HFT Algoritmic Machines trading the Markets. The pale argument of the machines providing liquidity is as stupid as ever. Yes, HFT machines trade a lot, and make up an increasing part of daily trading volume, but it is not increasing liquidity and it is not promoting protecting the average Joe's orders etc.
During last week's trading, Nasdaq almost hit the maximum amount of data it can process, before the system shuts down. This is due to the fact the HFT machine's different predatory strategies such as quote stuffing etc slow up the system and give them an advantage over the average Joe. The trader has argued, for the HFT ultimately being the single most important factor in the markets ultimate collapse, as they will drive the liquidity to low levels while all trying to execute similar strategies. Below some HFT update from Bloomberg;
The stock market’s fastest electronic firms boosted trading threefold during the rout that erased $2.2 trillion from U.S. equity values, stepping up strategies that profit from volatility, according to one of their biggest brokers.
The increase from Aug. 1 to Aug. 10 over their 2011 average surpassed the 80 percent rise in U.S. equity volume, showing that high-frequency traders made up more of the market during the plunge, Gary Wedbush, executive vice president and head of capital markets at Wedbush Securities, said in a telephone interview. Wedbush is the largest broker supplying bids and offers on the Nasdaq Stock Market, according to exchange data.
“We’re seeing a tremendous amount of high-frequency trading,” said Wedbush, whose company is one of the biggest execution and clearing brokers catering to high-speed firms. “Their business is a trading business, and volatility creates far more opportunities. Some of their algorithms and automated systems are trading two, three or five times as many shares as they would have in a more normalized volatility environment.”
and the fallacy of providing liquidity;
“The bulk of high frequency traders are adding liquidity to the marketplace,” Wedbush said. “Automated traders employ a myriad of strategies that seek to profit from a stock’s short- term volatility, but the mass of HFT is adding liquidity by being on both sides of the market or doing creation/redemption arbitrage for ETFs.”
Our view is that the HFT Algo machines will cause the ultimate collapse of the Markets. The system has been feeding of a lack of regulation, and therefore we see many of the HFT machines simply conducting a regulations arbitrage. Due to lack of understanding and a huge lobby organization, the regulators and exchanges are simply not in the position to implement the relevant regulations. Arguments of providing liquidity etc are never challenged and become the truth, without further questioning. The ones providing the arguments are depending on the HFT firms paying the bills. Welcome to free markets.
Full HFT Update from Bloomberg.
BOE provided an interesting piece earlier this year;
The Flash Crash left market participants, regulators and academics agog. More than one year on, they remain agog. There has been no shortage of potential explanations. These are as varied as they are many: from fat fingers to fat tails; from block trades to blocked lines; from high-speed traders to low-level abuse. From this mixed bag, only one clear explanation emerges: that there is no clear explanation. To a first approximation, we remain unsure quite what caused the Flash Crash or whether it could recur.1
That conclusion sits uneasily on the shoulders. Asset markets rely on accurate pricing of risk. And financial regulation relies on an accurate reading of markets. Whether trading assets or regulating exchanges, ignorance is rarely bliss. It is this uncertainty, rather than the Flash Crash itself, which makes this an issue of potential systemic importance.
For some insight by at least one of the regulators that seem to address the problem, click here.
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on Sun, 08/14/2011 - 13:33
#1559113
From the Freakonomics blog:
http://www.freakonomics.com/2011/08/12/the-markets-are-mad-is-high-frequ...
on Sun, 08/14/2011 - 10:31
#1558679
What about the billions they are sucking out of the markets? Why doesn't that make the markets fall in price? Or is it made up by government quantitative easing?
Now that QE has ended wonder how much of the drop in the S&P is due to the wealth sucked out of the system by these leeches.
on Sun, 08/14/2011 - 10:12
#1558650
Tick Rate Hits New Highs, Indicating HFT Activity
Traders Magazine Online News, August 12, 2011
James Armstrong
Bloomberg is reporting an unprecedented number of quotes in recent days, rising to new highs on Wednesday even as overall volume was down slightly, an indication of unfilled orders and the likely presence of active high frequency traders.
“The tick volume is up dramatically, when the actual volume of shares traded isn’t at the highest levels that we’ve seen,” Nagrath said. “Every time an order goes out, even though it’s canceled, for us it counts as another tick, another quote.”
Wednesday set an all-time high of 43.7 billion ticks. That was about one and a half times the number of ticks recorded during last year’s flash crash. Yesterday, data showed about 38 billion ticks, according to Bloomberg.
Click for chart <------------ Great PDF Chart of Ticks 2008 Fincial Crash / Flash Crash in 2009 / Japan Tsunami as well in this chart for comparison.
http://www.tradersmagazine.com/news/ticks-hfts-trading-volumes-108026-1.html?ET=tradersmagazine:e979:55405a:&st=email&utm_source=editorial&utm_medium=email&utm_campaign=tm_weekly_081211
on Sun, 08/14/2011 - 10:08
#1558645
Unfortunately Bankster owned DC and Corp Media are there to disinform.
Nationalize the Fed. Sieze assets of JP Morgue, Goldman Sucks et al. Clawback! Clawback! Clawback!
Make worthless ALL CDOs. Actually ALL derivatives that have absolutley 0 value. These are just bets on bets on controlled captive markets. These Rothchild families are now considered BROKE. No Oligarchs yippieee!
TAX ALL WALL ST transactions. If one exists.
Start a national jobs program with HIGH WAGES
Repeal NAFTA & GAT. TAX All IMPORTS from China BYE BYE Walmart, Apple. The small Mom & Pops ARE BACK Baby! THE REAL JOB CREATORS
Limit individual Assets to 1 Billion. No more ultra wealthy fucking with soveriegn countries. Bye BYE Cock Brothers!
Any Thoughts free market A holes?
on Sun, 08/14/2011 - 10:59
#1558741
Two thoughts-
1) We havent had a free market in so long few remember what it looks like, so returning to it might be a good idea. The crony capitalism we have had for decades is no more free market then the centrally directed lunacy you advocate.
2) You seem to be a bit of an authoritarian idiot. Its unfortunate that your survival strategy is that of a two legged flea, maybe if you start looking at life in terms of finding a way to get by on your own instead of waiting for centralized power to rescue you you wouldnt be such a twerp. Trying to limit what people can have is nothing but the envy of a typical type B leftist idiot.
on Sun, 08/14/2011 - 10:06
#1558643
http://www.youtube.com/watch?v=Xoglm_HcPzs
The S.E.Cs 3.87 trillion dollar lawsuit
and for the Falsh Crash??
EVERYONE KNOWS WHY IT HAPPENED!
Washington DC was pushing for regulation in the Derivatives Market..
after the Flash Crash.. NOT A FUCKING WORD!
Look at the time lines and figure it out!
Congress and the Senate did! LOL!!
on Sun, 08/14/2011 - 10:11
#1558648
http://agoracom.com/ir/CMKM/forums/discussion/topics/207582-cmkm-diamonds-q-a-update/messages/796561
http://cmkm.189025.free-press-release.com/
http://www.ripoffreport.com/investment-brokers/cmkm-diamonds/cmkm-diamonds-u-s-securities-67587.htm
on Sun, 08/14/2011 - 06:23
#1558510
This is the ultimate betrayal of 'price discovery'. Its all false flags and mirrors from those who have a front seat in WS, those TBTF shills. Anybody who says that the FED's ZIRP policy that feeds the kleptocracy, the speculative beast, the USD carry trade, the HFT trade, like it does the OTC derivatives on a mega scale, is also helping the world capitalist system needs a lobotomy. The market is now getting lobotomised so the road to foggy bottom is now charted. TY US of A and your ponzi 'free, invisible handed market'.
The world has to walk away from it through ultra regulation, boycotting these shills, changing the reserve currency and letting the ponzi burn when push comes to shove in market place; when the last chairs in the musical chairs game disappear.
Lets hope the world wil have the courage to walk away. All those who are not party to this race to bottom.
on Sun, 08/14/2011 - 10:42
#1558703
By definition u cannot have your reserve currency become a funding currency. Move along.
on Sun, 08/14/2011 - 06:57
#1558521
yo falak ,
lucid thoughts for the end of the weekend...
on Sun, 08/14/2011 - 10:14
#1558654
our boy is on fire! love all of his stuff that I have read!
charlie dont surf!