Free Republic

Tiny gap between private trade confirmations and public data feed can be exploited to detect market moves, critics say Five years ago, the world’s largest exchange operator vowed to fix a flaw in its systems that allowed high-speed traders to infer the direction of the futures market a fraction of a second before everyone else. Now, the defect is back at CME Group Inc.,traders say. And some allege it is yielding rich profits for ultrafast firms at the expense of ordinary investors. The problem arises from the two ways that CME distributes information about a trade. One is the private...

His only qualification was giving lots of money to the Clinton Foundation A few weeks ago, ABC broke the story of Raj Fernando, a big-money donor to the Clinton Foundation - as well as past campaigns of both Obama and Hillary - and how he managed to land a spot on the prestigious International Security Advisory Board. That’s a board generally populated by former generals, governors and top diplomats, who advise the Secretary of State on international security matters. Lots of eyebrows were raised when a securities trader with no background in any of this was introduced as a new...

ABC Breaking News Newly released State Department emails help reveal how a major Clinton Foundation donor was placed on a sensitive government intelligence advisory board even though he had no obvious experience in the field, a decision that appeared to baffle the department’s professional staff. The emails further reveal how, after inquiries from ABC News, the Clinton staff sought to “protect the name” of the Secretary, “stall” the ABC News reporter and ultimately accept the resignation of the donor just two days later. Copies of dozens of internal emails were provided to ABC News by the conservative political group Citizens...

Newly released State Department emails help reveal how a major Clinton Foundation donor was placed on a sensitive government intelligence advisory board even though he had no obvious experience in the field, a decision that appeared to baffle the department’s professional staff. The emails further reveal how, after inquiries from ABC News, the Clinton staff sought to “protect the name” of the Secretary, “stall” the ABC News reporter and ultimately accept the resignation of the donor just two days later. Copies of dozens of internal emails were provided to ABC News by the conservative political group Citizens United, which obtained...

Sergey Aleynikov has conviction dismissed out of hand by appeal judges after serving a year for copying trading software A former Goldman Sachs computer programmer has been freed from prison after a surprise ruling from a federal appeals court quashed his conviction for stealing computer code. "Justice occasionally works," said Russian-born Sergey Aleynikov, who walked free after serving one year out of a sentence of eight years or more. Aleynikov, a naturalised US citizen who emigrated from Russia in 1990, was first arrested in July 2009 as he returned from a trip to Chicago to the offices of his new...

Donor promised to make Clinton ‘look good’ if appointed to board Rajiv Fernando lobbied top Clinton aide for a seat on sensitive intelligence board He had little experience in the field and resigned after appointment was scrutinized The Chicago businessman donated to Clinton, Obama and the Clinton Foundation WASHINGTON A major Democratic donor personally lobbied then-Secretary of State Hillary Clinton’s office for a seat on a sensitive government intelligence board, telling one of her closest aides that if appointed he would make Clinton “look good.” Rajiv Fernando acknowledged that he may not have the experience to sit on a board...

Forget Hillary's personal email server: this is what true cronyism and criminal corruption looks like, and this is the biggest threat from a Hillary presidency. It has been widely speculated, if not proven, that donors to the Clinton Foundation who over the years have transferred hundreds of millions of dollars to the "charitable organization", bought political favors with the Clintons in exchange for their generosity. That has now been confirmed thanks to a stunning ABC report which reveals how a major foundation donor - one who previously had practically no experience on intellgience matters - mysteriously ended up as a...

Last week, the big story was how bankers use HFT (High Frequency Trading) algorithmic software not only to rig markets but also to commit theft on a daily basis (Frontrunning, like Quantitative Easing, is just fancy Wall Street lingo to disguise its true meaning of theft). Though many in the public blogosphere expressed shock that stock markets are rigged and that regulators like the Securities Exchange Commission willingly allow this theft to occur, the only thing shocking about this story was how long it took this story to reach the mainstream and that people were crediting Michael Lewis with uncovering...

Everyone's talking about Michael Lewis' latest book Flash Boys and HFT (high-frequency trading) and whether the markets are rigged. What they're not talking about is how the markets have been set up for institutionalized rigging. I'm not kidding. The markets are rigged. You're going to have to get over it and deal with it. The rigging is in the system and that's just the way it is... As to HFT, I'll get to that... But you can't pass judgment on HFT until you understand how cascading technology and unintended consequences landed us in the deep end of the dark pool...

Government shouldn’t rush to judgment on Wall Street’s high-speed traders. Granted, this whole business probably looks dodgy to Main Street’s 401(k) owners and stock pickers. Financial brainiacs are employing sophisticated computer programs called algorithmic robots to quickly scan financial data streams for subtle stock-market patterns. Trading, and lots of it, happens in a flash. The algobots see what big institutional investors are doing while they’re doing it. Every millisecond counts, which is why traders pay hundreds of millions of dollars a year to rent space for their computers in stock-exchange data centers. Half of daily U.S. trading volume is now...

Two CEOs of exchanges got in a nasty brawl on CNBC's "Power Lunch" over high-frequency trading.  William "Bill" O'Brien, the CEO of BATS, slammed Brad Katsuyama, the CEO and president of IEX, and author Michael Lewis.Katsuyama is the hero in Michael Lewis' new book, "Flash Boys." His firm, IEX, is an alternative exchange. "I've been shaking my head a lot quite frankly the last 36 hours ... Michael and Brad, shame on both of you," he said, adding that they've possibly scared "millions of investors in an effort to promote a business model."CNBC correspondent Bob Pisani asked Katsuyama if he thought the...

The secret of life is honesty and fair dealing. If you can fake that, you've got it made –Groucho Marx I suspect the SEC, FINRA, and CFTC are big fans of Groucho Marx, or at least his observations on fair dealing. How else could they justify turning a blind eye to a global media powerhouse such as Reuters selling early access to market-moving information? How could these authorities not condemn a practice like high-frequency trading (HFT), which causes significant market disruptions on a daily basis and destroys investor confidence? Why would agencies that are charged with oversight of the most...

Tuesday’s brief and shocking market crash, which roiled stock and other financial markets, was triggered by language-reading software that got tripped up by such words as “explosion,” “Obama” and “White House.”

Before leaving Goldman Sachs to earn a millionaire’s salary with Chicago High Frequency Trading (HFT) startup Teza Technologies, Sergey Aleynikov made one last transaction. At 5:20pm on his last day, just before his going-away party, Aleynikov uploaded 500,000 lines of encrypted source code from the Wall Street firm’s proprietary HFT system to a server located in Germany. Following the clandestine upload, Aleynikov deleted the encryption program, wiped his command history, and headed to the party. Although Aleynikov later managed to download the source code to his home computer in New Jersy before flying to Chicago, he was apprehended by the...

Eric Burroughs Warning signs on market liquidity risks May 15, 2011 07:28 EDT If the great commodity selloff of 2011 shows nothing else, it is that markets are undergoing serious structural changes that need to be followed closely. Our commodities analyst John Kemp has compared the oil plunge with the May 2010 flash crash in U.S. shares, and rightfully so. Four standard deviation moves in oil futures are not normal, even if Gaussian distributions underestimate the chance of such a move. The rise of high-speed electronic trading appears to be creating imbalances between buyers and sellers in nanoseconds that lead...

Anand Iyer, after reading the article I wrote in Wired with Jon Stokes, emails with a couple of questions: The age of analysing a company’s stats, looking at its balance sheets, researching the market the company operates in, and looking at the people running the company seems to be gone. It’s all bots (highly sophisticated ones) who operate the financial world. What I wanted to ask was would it make sense for a single person to be doing investing the good old fashioned way in this scenario (I do and I guess I will even if your answer tends to...

Side-channel attack on high-frequency trading networks could net a hacker millions of dollars in seconds -- and leave everyone else much poorer High-frequency trading networks, which complete stock market transactions in microseconds, are vulnerable to manipulation by hackers who can inject tiny amounts of latency into them. By doing so, they can subtly change the course of trading and pocket profits of millions of dollars in just a few seconds, says Rony Kay, a former IBM research fellow and founder of cPacket Networks, a Silicon Valley firm that develops chips and technologies for network monitoring and traffic analysis. Kay, an...

Wired magazine and the New York Times both recently published detailed stories on "flash trading" - the increasing use of high speed artificial intelligence algorithms in the financial markets. Both asked the same question: Will flash trading help the markets by improving efficiency - or will it destroy them? But while both stories covered the same basic facts, they took strikingly different approaches. Wired discussed the technology in a generally balanced fashion, whereas the New York Times adopted a more alarmist attitude, including emphasizing the problems the technology would create for government regulators. However, the concerns raised by the Times...

No, The Average Stock Holding Period Is Not 11 Seconds Barry Ritholtz, The Big Picture Oct. 28, 2010, 2:26 PM Barry Ritholtz is author of the blog The Big Picture. There’s been this meme circulating that 70% of all trading volume on the exchanges is HFT, and that the average holding period for stocks is 11 seconds. Punch into Google “Average Stock Holding Period: 11 Seconds” and you get 850,000 results. The problem is, none of these data points are backed up with real data. I set about tracking down where this meme came from. I first read this number...

WASHINGTON — As a doctoral candidate in physics at Princeton two decades ago, Gregg E. Berman spent a year and a half in a laboratory searching through subatomic data for an elusive particle called the heavy neutrino. Now, from his small office at the Securities and Exchange Commission here, the former physicist is busy completing a similarly painstaking task, supervising a team of more than 20 investigators who have spent the last five months scrutinizing reams of stock-trading data and hundreds of interview transcripts in an effort to figure out why stock prices went into free fall for 20 terrifying...