Posted on 05/07/2010 6:02:41 PM PDT by Nachum
Federal investigators probing the “flash crash” that briefly sliced nearly 1,000 points off the Dow Thursday are zeroing in on a series of “unusually high-volume” trades in S&P futures that originated in Chicago, a government official told POLITICO.
Those trades set off a chain reaction of trades that caused the biggest drop within a single day in the Dow Jones Industrial Average’s storied history.
(Excerpt) Read more at politico.com ...
What do you make of this, FRiend?
Thank you for the ping! Adding to research [links in profile.]
“Nasdaq has bragged for years that it is more hi tech than the stodgy ol NYSE who that bald headed stooge Richard Grasso milked for a 140 million payout. Saw that puke on TV today”
LOL....stooge is right. He never knew what happened ;-)
Soros wanted to cover his short?
Stooge or not he is a chrome dome!
Grasso is a bullet headed bas*ard.
A mere test run.
GS took the NYSE away from him, while he was sleeping ;-)
Bookmark
HFT computers........ Do you think they ever defeat competitors HFT computers or are they just scalping the non-HFT players?
War of the Algorithms, constantly adjusted and adapted to changing environment and competition, in part due to Heisenberg effect (Uncertainty Principle). The "scalping the suckers" algorithms are generally the easiest and non-controversial ones that are put in automatically, but this doesn't bring in a lot of profit. Large trading sums and frequency take care of that. Other than that, we shouldn't really care which one "wins" the trade at any given time, as long as there are many "machines" which are programmed to compete against each other and not to conspire together against us.
How come you never hear about the big algorithm traders going out of business? This is a zero sum game when they are battling each other, not scalping the little guys? I'll answer this for you. Various hedge funds and other organizations go up against the biggies with their own algorithms. They lose, they go bankrupt, they disappear. There are always new computer geniuses, algo programmers, coming along who think they "beat the house". When they get funded or work for hedgies they can do battle
Let's put it this way: there is a reason why there are no tic-tac-toe tournaments (the perfect strategy always leads to no one winning), and face-up open cards poker is not nearly as popular (though a viable variant) as face-down closed cards variations.
In other words, we want the big players to provide liquidity if they are assured (or sure) of net winning using their algos and speed. If there is a "perfect" algorithm in a slow, boring market and everyone has nearly identical algos (which the "thieves" or developers spread among most trading shops) and everyone is trying to get the lowest possible price all the time, the bids will keep going lower and/or disappear at some point, along with liquidity they provided... and then we may have a repeat of last Thursday - no bids for "large" (whatever that means at the time) orders taking and "index issue" down and then the indices along with it on the programme trading. It was a good teachable moment at a reasonably good time.
So we get what we need for the market to function well - liquidity - as long as we let them "win some". If we think about it, HFTs are nothing but logical extension of faster, better, cheaper communications and processing / executing technologies finding their way into trading markets as well as our everyday life - from Pony Express to railways to telegraph to telephone to computers to Internet to AI to mobile to colocation / proximity hosting to...
We took a big chunk of their profits from spreads with decimalization. They have to capitalize on technology and algorithms (as scale allows) before it's available to almost anybody for almost nothing... and neophytes (aka "suckers") who let the "market" decide their entry (or exit) price will always lose, HFT or not.
Exchange Heads Called to Washington after Market Plunge - CNBC / Reuters, 2010 May 09
It will also discuss finding ways to possibly rein in market orders and will address stop-loss selling, the source said. Any new rule would need approval from a majority of 5 commissioners. The meeting will include bosses of NYSE Euronext, NASDQ OMX Group, Direct Edge, a private U.S. trading venue operator and BATS Global Markets, the third-largest exchange operator, sources said, but won't include futures or options exchange heads, one source said. ..... ..... The meeting, set for Monday morning at 1000 a.m. eastern standard time, was called by SEC Chairman Mary Schapiro, and is expected to address whether they need to implement a market-wide stock-specific circuit breaker which would halt sudden plunges in individual stocks, a source familiar with an investigation into the events said.
Aftermath: Stock Markets Agree to Create Uniform Rules to Slow Selloffs
I am re-reading you post. Trying to get it :) You are bringing in poker and markets
My bad :) Just a game theory sample. This WSJ article explains what happened, when all HFT algos are essentially similar and are doing the same thing (going in the same direction, i.e., "conspiring" against us, at least for a while until it becomes clearly nonsensical to the machines - humans in this case are faster than HFTs):
Did a Big Bet Help Trigger 'Black Swan' Stock Swoon? - WSJ, 2010 May 11, by Scott Patterson and Tom Lauricella
From the link you sent me (and me only of course) in the comments section about tenth down.
Equity Market exuberance is disproportional and DISCONNECTED from CREDIT market on EURO and also Libor rates for Sovereign debt swaps!!! More pain to come! soon?
Bank Swaps, Libor Show Doubts on Europe Bailout: Credit Markets
May 10 (Bloomberg) — The cost to protect bank bonds from losses and money markets show investors are concerned that the almost $1 trillion rescue package announced by European leaders may not be enough to contain the region’s sovereign debt crisis.....
“Sovereign risk hasn’t gone away in the slightest,” said Jim Reid, head of fundamental strategy in London for Deutsche Bank AG, Germany’s biggest bank. “What this package has done is massively reduced the tail risk in European markets without necessarily changing the medium- to long-term dynamics of financial markets....”
You now have moral hazard at a sovereign level and investors should still be wary of the whole situation,” said Gartmore’s Anderson. “There are record deficits in just about every country in Western Europe and something ultimately needs to be done about them.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=aeY7xsX8bv5s&@#$%&!=2
Financial terrorism or blackmail of some sort.
“The Rise of the Machines” This is a good description of HFT. Wall Street has been using computers for years but at least America was prosperous and Wall Street was just another minor skimmer off American strength and prosperity. Now we are deep in debt and Wall Street’s computerized scams have sunk to........
How do we make money off of debt? Instead of how do we make money off prosperity?
Exactly, HFT is just a logical progression of improved technology which is usually available to anyone who can afford it, i.e., initially to the very rich and later trickles down to regular Joes through pools (funds) and later still, individually if they want it.
... but at least America was prosperous and Wall Street was just another minor skimmer off American strength and prosperity.
Wall Street usually either reflects / indicates the level of prosperity (or misery) or leads / anticipates it (i.e., markets going higher help create the feeling of wealth and raise economic activity), it not only helps create, but it helps democratize wealth. So sometimes it only correlates with periods of prosperity, but sometimes it helps cause it, which is the general nature of free market. Many business cycles are led / anticipated by the capital markets.
Cum hoc ergo propter hoc and Post hoc ergo propter hoc are not always fallacies per se, sometimes they are explanations of reality.
Wall Street is not a problem - it may be a solution to, and at worst, is only a symptom of society's ills or well-being. It's the governments and their insatiable appetite for spending and taking of OPiuM (Other People's Money), their stifling rules, regulations and bureaucracy that is a major skimmer off American strength and prosperity (see Fannie / Freddie / FHA, education system etc...)
If we ever turn into full-fledged "Greece" it won't be as the result of market players shenanigans, it will be the result of decades of socialist / Keynesian government policies, greed and mismanagement. Markets, Wall Street (and Bay Street, the City, Deutsche Börse, Tokyo, Shanghai, Shenzhen...) will only reflect this (and/or anticipate it, and thus may precipitate it) but they are not the cause of it...
How do we make money off of debt? Instead of how do we make money off prosperity?
That's the problem with Keynesian ideology and economic theology, it creates government debt instead of prosperity, and creates it by fiat, not as a matter of (supposedly) generally rational agreements by the parties in a mostly free market, governed by regulated "invisible hand" of self-interest.
Hillary again?
Or was it Obama this time?
/snip from another thread on a Hillary Clinton donor from Chicago who was put on the International Security Advisory Board:
Rajiv K. Fernando’s only known qualification for a seat on the International Security Advisory Board (ISAB) was his technological know-how.
YES, that ping’ed my meter too!
Fernando’s expertise appeared to be in the arena of high-frequency trading — a form of computer-generated stock trading.
He could skim some VERY SERIOUS Cash out of the markets with the insider’s top-secret knowledge
combined with his access to micro-second trading.
It makes Hitlery’s Cattle-Futures trading success look tiny.
46 posted by Future Useless Eater
Followup:
October 14, 2016
Flash crash trader headed to U.S. after losing final appeal
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