High Frequency Trading

[offshore44]

OK, I'll bite...

On another thread it was mentioned that the DOW is not really going anywhere but up for the foreseeable future, because the big financial firms are "gaming the system" using High Frequency Trading algorithms to trade in the stock market. There has been quit a lot about that particular issue in the non-mainstream / non-traditional press lately.

To the point: I have seen statements to the effect that High Frequency Trading (HFT) is about 70% of the activity in the stock markets today. Trading volume is low. It is painfully obvious to the most casual of observers that the DOW does not reflect current economic conditions.

So, how does a non-professional determine how much of the current market volume is HFT trades? The follow on question is where is the money used for HFT coming from? Another is: Is this legal?

I have this ugly suspicion that the big financial houses are using taxpayer money borrowed at ridiculously low rates to game the stock market by skimming fractions of a cent from each trade over millions of trades; putting a "sanitized" profit into several someone's private pockets. How can you document that?

[Skilter]

I wonder the same. But, if you look hard at all the trends... something ain't right. How do stocks, bonds, AND PM's all go up with all the outflows in personal accounts? I would imagine that if you were in a position to do so with hard cold facts and were about to disclose such facts, you would all of a sudden have a "accident".

Other PTB have to be in on it too... Other foreign banks, the Swiss, House of Saud, The Chinese. I can't see how this is not global.

But, I am afraid it is now WAY beyond a "Perp. Walk" for the criminals and that it is institutionalized as moving to a NWO.

Now I don't wear a tin foil hat, but something ain't "natural" in capitalism right now and as an average daily investor I don't like it.

My opinion only...

[offshore44]

Originally posted by Skilter
I wonder the same. But, if you look hard at all the trends... something ain't right. How do stocks, bonds, AND PM's all go up with all the outflows in personal accounts? I would imagine that if you were in a position to do so with hard cold facts and were about to disclose such facts, you would all of a sudden have a "accident".

Other PTB have to be in on it too... Other foreign banks, the Swiss, House of Saud, The Chinese. I can't see how this is not global.

But, I am afraid it is now WAY beyond a "Perp. Walk" for the criminals and that it is institutionalized as moving to a NWO.

Now I don't wear a tin foil hat, but something ain't "natural" in capitalism right now and as an average daily investor I don't like it.

My opinion only...

Sorry, the cat is trying to help me type this, so it may have spelling and grammar errors in it...

I agree that something is massively failing the smell test. But what? I don't subscribe to the accident hypothesis (yet), but you would be a voice in the wilderness at best. Speaking truth to power does not always result in accidents, especially when "being sent to Coventry" actually works better, leaves less of a trail and costs less in time and effort.

Another hypothesis that I have a hard time subscribing to is the NWO theory. I have worked in the belly of the beast as a contractor for several years and on several projects. Displays of bureaucratic competency are best described as random and infrequent. If there is a NWO, they need to attend some remedial project management and organizational efficiency classes.

But I digress... My understanding is that a stock market was originally intended to allow businesses to raise capitol on the open market. Companies offered a slice of the pie in return for a capitol investment. The value of that pie slice was determined by investor's estimates of how well the company would perform over some varying period of time that was unique to each investor. If only 30% of the volume in the market still uses that as a guidance, and I am skeptical that the number is that high, then the market has essentially failed and no longer operates to form capitol. Welcome to the casino!

Where does business acquire capitol then? The bond market? Borrow from the banks? Private lending sources? Profit?

I think that capitalism has fractured into two distinct paths. Let's call them large Capitalism and small capitalism. They do not have the same rules, by any means.

Capitalism, represented by the FED, the House of Saud, the Swiss, the Big Financial Institutions far and wide, Government in all it's forms, Multinational Companies, and a fair number of other Companies listed on various stock exchanges play by an entirely new set of rules that have evolved and have been refined over the last 40 or 50 years. They can manipulate the game to achieve success, hence they succeed.

"capitalism", practiced by everyone else in the world, has basically the same set of rules that it has always had, with local variations for regulation and culture. Small capitalism is dying, strangled by current circumstances. Because of the sheer volume of capitalism, no one notices that capitalism is being strangled.

Capitalism thinks that it controls and leads because it has access to the media, financial resources and government. Capitalism thinks that is is doing reasonably well. Capitalism is no longer capitalism, it is Corporate Feudalism.

Hence, it may not even matter that you could prove that 70% of trading activity is HFT activity. The feudal lords and barons of the financial kingdom have determined that this is a profitable activity, and that is enough.

My instinct tells me that this is the case in auto's, aircraft, military technology, computers, government services (bureaucracy, the hired grunts) and a whole bunch of other industries.

Boy, that's a lot of words, huh?

[gates]

This is a complex issue - well beyond my full understanding - however Denninger has written a TON on this topic in his free "Ticker" area of the Ticker Forum - basically, the big firms use these trading programs to do a couple of things, skim fractions of a cent off of millions and millions of transactions - the second and more serious action - according to Denninger - is to move the prices of stocks and the indices by trading the shares back and forth with other firms "black boxes" AND place shadow bids to lure real buyers into buying at higher and higher prices - the CONSEQUENCES of all this are these - it provides the ILLUSION of mkt liquidity when one looks at the volume - when serious selling shows up the mkt goes NO BID because there was no REAL liquidity and we get the FLASH CRASH - it happened before and it WILL happen again.

[offshore44]

I read KD almost every day that I'm not out in the woods these days. The 70% figure is actually his.

So this is not just a way to make a little cash in the course of business for the big trading houses?

Interesting...

[gates]

no

[Skilter]

off...
I agree with your post above. Problem is, I am in little capitalism. Little capitalism is the American Way... It is what drives GDP and jobs. The current administration does not believe in "little capitalism". Yeah, it may create bubbles from time to time, but that is what the free market does...

Dogs and cats sometimes DO live together... Bubbles happen, bankruptcy reprices assets, the market absorbs them, etc...

But I digress. I read the ticker too so we may be beating a dead horse here, but we are all in agreement I think... HFT is doing all the market moving (actually, lack thereof) for now.

Let's watch today... Jobs are being shed... the report is AWFUL... if the market goes up... WHY/

[offshore44]

The current administration doesn't believe in little government or little bureaucracy either.

Well, it looks like someone somewhere decided that the current unemployment numbers are worth about -120 +/- points on the DOW.

Back to my capitalist struggles of the moment!

I am forming some rather strong opinions and guidance lately. But that is a discussion best left for the Politics forum, or off the internet, or over a cold beer and a pool table.

You guys (and gals?) have a great day and enjoy your Friday

[2barearms]

You can see the trading programs kick in when the bad news spooks
'investers' in the morning and the markets head south, by 2 o'clock
the programs will usually pare the losses to around 20 pts or even
go positive by a few.

[offshore44]

Yup. the mythical PPT and all that.

[Skilter]

bingo...

Happened Friday.

[offshore44]

I saw that... I don't even get all worked up about it any longer. Well not much anyway. Just because you're paranoid doesn't mean that someone isn't out to get you, and just because it's a conspiracy theory doesn't mean it's not a conspiracy...

I guess that I'll keep working on capitalism and organizing myself so the Capitalists can't mess with me more than absolutely necessary.

Like the F117 pilots say: "I'd rather be invisible, than bulletproof."

Of course, posting on the interweb makes you rather less than invisible, doesn't it?

[Skilter]

I got my diving card, pilot's license, own guns, have a small business, am a NRA member, etc... I am sure I am already on so many lists that it doesn't really matter any more!

[gates]

heh - buy a couple class III toys and you will be sure:-)

[Skilter]

Yeah, I am pretty sure...

Let's see what the market does today... Down pretty hard early. Let's see if we get that bump around 2:30 CST.

[Skilter]

It stayed down... workin hard today to keep it up, eh?

[juanni]

Out of the stockmarket completely.

So I watch from the concession stand, wolfing down a dog/brew as only as a 1/4 interested spectator as Algo vs Algo slug it out in the ring.

Seeing how volume is steadly shrinking and mutual funds are walking away in droves I guess I am not the only one who could give 2 shits less about this rigged fight.

So HOTT ring girls would help.




................juanni