High Frequency Trading, beginning of the end, SEC awakes from slumber

HFT Strategies

The SEC has at long last risen from its torpor and now is preparing to remove some HFT firms from trading and to impose stricter rules on trading. Zero Hedge broke the HFT story five years ago. Michael Lewis just made it front page news with his new book ‘Flash Boys’. Goldman Sachs (yes, Goldman Sachs) says HFT is dangerous, destabilizing, and needs to be abolished. While this is certainly a welcome move by SEC, why is it reacting only now, after others put the facts directly in its face, rather doing its job as regulators and stopping HFT years ago?

Among the odious practices that need eliminating are kickbacks for placing orders with dark pools and private exchanges, frontrunning orders, placing huge orders to influence prices then instantly cancelling them, and allowing 150 order types, most of which are geared solely at allowing HFT parasites to manipulate prices.

With any luck, many of the HFT vermin will have their firms go broke and find themselves wallpapered with indictments and lawsuits.

Michael Lewis slams Bloomberg sock puppet over High Frequency Trading

hft

Michael Lewis is making serious enemies with his new book Flash Boys, which details how High Frequency Trading rigs the stock market. Good. He’s been slamming their errand boy newscasters whose pretend ‘objectivity’ masks their slavish defense of financial crimes.

Lewis, a respected maverick financial journalist, has forced the issue into the mainstream. He deserves out support. Zero Hedge exposed HFT five years ago with their landmark articles. Banksters have attempting to slime ZH ever since, to no avail. Now the corruption is out in the open where all can see it. Our government has been permitting this front-running for years. Now that the heat is on, they make actually have to pretend to do something about it.

Pay attention to the defenders of HFT. They are the enemy.

ERIK SCHATZKER (Bloomberg): Well, it’s rigged only inasmuch as…

MICHAEL LEWIS: Why are you so invested in the idea this is fair? Why are you even arguing about this? It’s so clear.

SCHATZKER: Me?

LEWIS: Yes, you seem to be. I mean, it’s very interesting. But you seem to be – you can see, it’s very clear that people are being front run in the market. There’s plenty of evidence in the book.

SCHATZKER: Their orders are being anticipated…

LEWIS: Anticipated and run in front of, that’s right.

Michael Lewis. “The market is rigged’ by High Frequency Trading

Flash-Boys

Financial author Michael Lewis documents the story Zero Hedge broke five years ago. High Frequency Trading, done with a wink and a nod from the government, allows big money to buy and sell milliseconds before everyone else. Their profits are thus guaranteed and the market is rigged. A millisecond is all they need to make, say, a penny a share. They do millions of times a day. The government pretends this big pocket money are “market makers” and thus allowed to act on orders before anyone else can, which of course shows how crippled and complicit the government in actually regulating markets.

For those who missed it, here it is again. In the video below, Lewis explains how an extra millisecond allows high-frequency traders to exploit computerized trading in the U.S. stock market. By “beating” investors to exchanges, Lewis argues that high-frequency traders can buy stocks and quickly sell them back at higher prices.

SEC awakes from slumber, probes manipulation by ‘advanced trading systems’

The U.S. Securities and Exchange Commission is “rigorously” investigating whether traders are using technology to manipulate markets, the agency’s enforcement and inspections chiefs said today.

The initial reports and investigations into high frequency trading and the like came from financial blogs like Zero Hedge and Naked Capitalism. The SEC paid attention. Good.

High Frequency Trading for beginners

High-frequency trading from Marketplace on Vimeo.

Not only do market makers get to see and act on trades before everyone else, they get a rebate every time they trade. Watch their whole video. Our stock markets are rigged, gamed, and give preferential treatment to insiders. Seems corrupt to me.

Via Zero Hedge, who has played a major role in forcing this into the open. Congress is investigating and flash trading will be banned. The outrage against HFT started on blogs, yes it did.