Dark Pools and high frequancy Trading = market scalping?

[bimetalaupt]

Yes, Scalping the NYSE is as old as the market. I got much of my trading training from an old man that earned a living plus several by scalping the cotton market during the 1930's. He bought in the morning when the farmers sold and no one was buying. He sold in the afternoon when the factory were buying and there was no supply.  He made a living by supply liquidity.

In the past you know you were going to be scalp by 1/8 now it is a penny. That is the price for liquefy in the price?  I keep noting the market moving around me. Back to Expert 50/50 or New Rebalances 63/37 to reduce risk as the effect is to be at the Efficient Frontier, IE Long Term Hedging Investing.

Is this how you see HFT or am I seeing the world with my Rose color glasses?

Just a thought,

Bruce

PS: I did not say "RIGGED";  FTI MIGHT HAVE!

[Aman A.K.A. Ahamburger]

B ,

Sorry I did not mean to infer that you were saying HFT makes a "rigged" market, I was talking about this clown Michael Lewis who has been making headlines recently. What a maroon!

No you don't have rose colored glasses on at all. Stock day trading is as old as the market itself, exactly. I have been working nights on getting readg for a big job this week..

What I ment by that crap is, if you think you can beat/play the trading game along with wall street while not working in finance, it's a crap shoot at best. I'm sure some can do it, but at the same time a gambler will never tell you his losses.

I don't think the market is "rigged" at all. I think, at least I hope, that people understand wall street works on commission. Same as a car salesman, or any salesman, so by definition its their job to make sales to eat. If the market were rigged it wouldn't be based on production, earnings, and the overall economy. It would be based on pure speculation, you know, like GLD!!!

This is why for all us nonfinancial types, long term investing has always produced the results people chase. Heck B, you're a type of finance guy and all you do is talk about the power of long term compounding.

It's easy to be pissed off at the world and act like we are all doomed and being screwed over by "the man", the media does nothing but fuel it. Why? nothing sells like controversy.. This is also something that isn't new, at all.

Bottom line, over the long term, We the people win because winners choose not to give up. A.K.A. OTSS!

[Sum Dum Gai]

The only real issue with this is the potential for the computers to go a bit haywire like they did in the flash crash.  We've allowed automated software to trade billions of dollars worth of securities in fractions of a second.  Any glitches in that software can potentially screw up the market.

There is a slight fairness issue at play as well.  These computers see my order coming in to purchase say 50 shares of Apple.  They immediately buy 50 shares of Apple and sell it to me at a very slight markup.  I just paid more for my 50 shares than I would have if those computers weren't there.  They're legally picking my pocket.  And yours.  And every other small traders.  It's adding a second middleman into the transaction, and middlemen get paid by increasing the underlying cost of the item being sold.

[bimetalaupt]

Apr 2, 2014 16:38:29 GMT -5 Sum Dum Gai said:

The only real issue with this is the potential for the computers to go a bit haywire like they did in the flash crash.  We've allowed automated software to trade billions of dollars worth of securities in fractions of a second.  Any glitches in that software can potentially screw up the market.

There is a slight fairness issue at play as well.  These computers see my order coming in to purchase say 50 shares of Apple.  They immediately buy 50 shares of Apple and sell it to me at a very slight markup.  I just paid more for my 50 shares than I would have if those computers weren't there.  They're legally picking my pocket.  And yours.  And every other small traders.  It's adding a second middleman into the transaction, and middlemen get paid by increasing the underlying cost of the item being sold.

Toys,

I Take that to mean the "Co-location Computers" are "SCALPING THE MARKET": AGREE.

B

[Aman A.K.A. Ahamburger]

When I buy shares, when I hit buy, that is the price I pay. They add in the commission to the overall price and that's why the price is higher. At least that is how it works on the BMO platform.

I have heard of ticker tape trading, but that applies to large volume trades from institutions. I'm sure that hft played into the flash crash, but so did human programmed stop losses. I'm sure there is "scalping" going on, it has always gone on. This is why I choose to be an investor as opposed to a trader, I choose not to play their game because I don't work in finance.

On the same note, I'm sure that most realize that not everyone pays the same price for that brand new car, non?

[Aman A.K.A. Ahamburger]

B,

I hope u don't mind me posting your point here, but you're so right. To think an 1/8 of a point is a big deal, when in the 1840's to like what, 1989, it was 1/2 a point because the banks filled the orders through their own equity is laughable. Yes, once again further proof we are working in the right direction..

Great stuff!!

[Virgil Showlion]

The biggest negative impacts by HFT are on the big guys. I say "biggest" rather than "only" because flash crashes, which also affect retail investors, are also caused by HFTs.

But of course the "big guys" are your mutual funds, pension funds, university endowments, insurance companies, etc., and so every million scalped off by HFT firms is a million pulled out of main street's pocket.

HFT is parasitic. It's a perfectly fair way to describe it.

I'm proud it was a Canadian who took one of the biggest steps in recent memory to expose it for what it is.

[Aman A.K.A. Ahamburger]

You're not getting any arguments from me. Europe has already taken steps to eliminate it, bully!!!

My points are, it's no worse than scalping in the past, just different, and because we live in a country where we can talk about it, we can keep working on making it better. To claim it makes the market "rigged" is erroneous because again, "scraping" is as old as the market. It's not about moving the market, its a way "to make money".

While we are at it, might as well break up some of these big banks, like we did with Standard Oil.

[Sum Dum Gai]

While we are at it, might as well break up some of these big banks, like we did with Standard Oil.

It should have been a condition of TARP.  Too big to fail is too big to exist.  Period.

[bimetalaupt]

Apr 3, 2014 14:18:37 GMT -5 Sum Dum Gai said:

While we are at it, might as well break up some of these big banks, like we did with Standard Oil.

It should have been a condition of TARP.  Too big to fail is too big to exist.  Period.

Toys,

Great point

What A+++ is talking about is the GS act to remove risk from Banking.  In the past Tear1 capital was 50-60% of assets and they made markets for stocks. ( 1820's). 

B

[Deleted]

I don't think the market is "rigged" at all. I think, at least I hope, that people understand wall street works on commission. Same as a car salesman, or any salesman, so by definition its their job to make sales to eat. If the market were rigged it wouldn't be based on production, earnings, and the overall economy.

HFT is not a commission, it is giving the mob their take.

[Aman A.K.A. Ahamburger]

Exactly B, but you have to understand history to get the point, and since most people find history boring....

Latebloomer, for someone who started a thread on the topic yesterday because you had no idea what HFT was, you sure have become an expert quickly on the matter...

First of all, the commission point was to the point of how the market isn't rigged, it had nothing to do with how HFT firms make their money.

Second, I wonder if you even understand that HFT firms are just that? Firms, that have been setup to make money. Did they find a way to exploit the day trading system for their firms benefit, yep! At the same time lots of people have made money off these HFT companies, as they are publicly traded companies.

Third, did you actually watch the video that b2 posted, or did you just hear what you wanted? It was, if fact, some of the biggest trading desks and hedge funds on wall street that exposed how these guys are making their money!

This is why people who don't have any idea what they're talking about should spend some time researching a topic instead of acting like a know it all. You are trying your hardest to make HFT=Wall street A.K.A "the mob". This isn't the case at all, and by trying to spin it as such, you are exposing your emotional bias which doesn't stand on this area of the board...

Here how about a different perspective from a finance prof at Cornell??

The Stock Market Is Rigged. So What!

Cornell University finance professor Maureen O’Hara sent out an email blast yesterday that takes an opposite view of Lewis. O’Hara, who co-authored a book called High Frequency Trading: New Realities for Traders, Markets, and Regulators wrote that the trading data says otherwise: “Virtually all academic research looking at transactions costs and volatility find that U.S. markets are better now than in the pre-high frequency era.” That’s because most brokers have “best execution” requirements, meaning that civilians get the same price as the pros. In this view, the HFTs are adding information to the market and thus aiding price discovery.

[Virgil Showlion]

That’s because most brokers have “best execution” requirements, meaning that civilians get the same price as the pros. In this view, the HFTs are adding information to the market and thus aiding price discovery.

That's like saying bank robbers are good because cities hired on tons of cops to combat the plague of bank robberies, and now because of all those cops there's less jaywalking and graffiti.

[bimetalaupt]

A+++,

Thank-you for you kind words. What is going on with the market is the profit profile of Large funds do not cover the charges the funds charge to manage your money.  WXYZ has a point to buying a long term system , reinvest dividends and never sell. I may miss the point but the penny cost is less then missing the bull market in bonds to 2009 or stocks from 2009.  It is the price I know I have to pay. 

On the other hand Chuck is mad as hell, and should be.  HFT is stilling his business.  Day trading is a lowing expectation game, just no one is making money (I Know) like the old tape readers.   This has been a great year TO SELL BONDS. "REBALLING" THE CASH. 

Just a thought,

BiMetalAuPt

[Deleted]

First of all, the commission point was to the point of how the market isn't rigged, it had nothing to do with how HFT firms make their money.

Since you understood enough to make this clarification, you understood that I was not

trying your hardest to make HFT=Wall street A.K.A "the mob".

Latebloomer, for someone who started a thread on the topic yesterday because you had no idea what HFT was, you sure have become an expert quickly on the matter...

Thank you. When something captures my attention I tend to be a quick study.





 

[Aman A.K.A. Ahamburger]

Well from your comments on your thread, LB, you seem to be trying real hard to draw the comparison. So tell me then, who is this "mob" you speak of ?

Apr 3, 2014 17:10:31 GMT -5 Virgil Showlion said:

That’s because most brokers have “best execution” requirements, meaning that civilians get the same price as the pros. In this view, the HFTs are adding information to the market and thus aiding price discovery.

That's like saying bank robbers are good because cities hired on tons of cops to combat the plague of bank robberies, and now because of all those cops there's less jaywalking and graffiti.

Is it Virgil? Have you gond through the data points she's talking about? Or are you doing the same thing as LB here, lumping all HFT in together? I mean you are aware that personally managed accounts from the banks are HFT accounts, and platforms like etrade and so forth are also HFT accounts, right?

[bimetalaupt]

Late b. ,

Question. I hear that in 2009 HFT had revenue of $7 billion but only $1.3 Billion in 2013.  In 2009 I worked with two back room trading firms to gain direct floor access for VAT, both rejected it on legal reasons.  I think it will not hold up in courts.   Have you heard anything about the income and thinning of operation margins? or legal questions?

Thank-you,

B

[Aman A.K.A. Ahamburger]

Apr 3, 2014 17:40:31 GMT -5 bimetalaupt said:

A+++,

Thank-you for you kind words. What is going on with the market is the profit profile of Large funds do not cover the charges the funds charge to manage your money.  WXYZ has a point to buying a long term system , reinvest dividends and never sell. I may miss the point but the penny cost is less then missing the bull market in bonds to 2009 or stocks from 2009.  It is the price I know I have to pay. 

On the other hand Chuck is mad as hell, and should be.  HFT is stilling his business.  Day trading is a lowing expectation game, just no one is making money (I Know) like the old tape readers.   This has been a great year TO SELL BONDS. "REBALLING" THE CASH. 

Just a thought,

BiMetalAuPt

No problem B, you are a good man! 

Yes buy, hold, and reinvest the dividends!  

Yes, all the brokers are mad that more and more people are HFT on their own.  It's too bad that these flash traders have been able to get in there.  All because of fiber optics, eh?

Time for more work.

God bless,

[Deleted]

Ahamburg my apologies, I am using the new topics feature and didn't realise this thread is on the Investing Perspectives board. It's a different discussion here.

That said, I was referring to the guys (still not totally clear on exactly who they are) that have advance access and are intercepting trades. To me that scenario is exactly like the mob in the sense that they have set up a situation where you have to buy all your supplies from them. That is the analogy I was making. And bimetal the difference between this practice and your old guy buying in the morning and selling in the afternoon is that the orders had not already been made.

Let me get back to you on that other stuff.

[bimetalaupt]

Apr 3, 2014 18:57:02 GMT -5 laterbloomer said:

Ahamburg my apologies, I am using the new topics feature and didn't realise this thread is on the Investing Perspectives board. It's a different discussion here.

That said, I was referring to the guys (still not totally clear on exactly who they are) that have advance access and are intercepting trades. To me that scenario is exactly like the mob in the sense that they have set up a situation where you have to buy all your supplies from them. That is the analogy I was making. And bimetal the difference between this practice and your old guy buying in the morning and selling in the afternoon is that the orders had not already been made.

Let me get back to you on that other stuff.

Me bad, but I only pull the trigger when I see I am ahead.  Trying to add income by  leveraging my trading capital to offer liquefy, like Walter thought me. We have increased our KA$$H reserve.

B  

We were sell at close to add liquefy to facilitate buy at close orders.  Check Trade Station for current offers. 

[Virgil Showlion]

Apr 3, 2014 18:29:50 GMT -5 Aman A.K.A. Ahamburger said:

Well from your comments on your thread, LB, you seem to be trying real hard to draw the comparison. So tell me then, who is this "mob" you speak of ?

Apr 3, 2014 17:10:31 GMT -5 Virgil Showlion said:

That's like saying bank robbers are good because cities hired on tons of cops to combat the plague of bank robberies, and now because of all those cops there's less jaywalking and graffiti.

Is it Virgil? Have you gond through the data points she's talking about? Or are you doing the same thing as LB here, lumping all HFT in together? I mean you are aware that personally managed accounts from the banks are HFT accounts, and platforms like etrade and so forth are also HFT accounts, right?

I'm well aware than HFT comprises more that just computers skimming pennies off of trades, but for the sake of this discussion, HFT refers to "HFT arbitrage algorithms" and "rogue HFT algorithms that create false market depth and cause flash crashes" as opposed to the full repertoire of HFT algos.

[Aman A.K.A. Ahamburger]

I'm with ya Virgil, and yeah, it's totally awesome that a 30 yr old canuck figure it out!!

Apr 3, 2014 18:57:02 GMT -5 laterbloomer said:

Ahamburg my apologies, I am using the new topics feature and didn't realise this thread is on the Investing Perspectives board. It's a different discussion here.

That said, I was referring to the guys (still not totally clear on exactly who they are) that have advance access and are intercepting trades. To me that scenario is exactly like the mob in the sense that they have set up a situation where you have to buy all your supplies from them. That is the analogy I was making. And bimetal the difference between this practice and your old guy buying in the morning and selling in the afternoon is that the orders had not already been made.

Let me get back to you on that other stuff.

LB, now that's the tone we like around here! Thanks for the apology, much appreciated! Im sorry if i came off a bit harsh as well.

Feel free to post here all you want, especially financial related topics. The Bruce of Bruce here(bimetal) has forgot more than I know and I always ask him about historical precedents.

You are talking about the guys who set up these flash HFT firms, and yes it's very crafty work. Unfortunately this tactic has come from something that is actually beneficial to smaller investors. In the past(before the internet) people had to call there broker, then the broker called the floor and then your shares were bought. In all reality, you had to trust the line to fill your order as most people didn't have stock tickers at there disposal.

There is another great poster on here that goes by the name Tyfighter, he has a story about being at one of the first firms to have a computer in the Midwest!

Again, feel free to stop in and chat, you'll find we aren't so bad.

[Aman A.K.A. Ahamburger]

Apr 3, 2014 18:32:11 GMT -5 bimetalaupt said:

Late b. ,

Question. I hear that in 2009 HFT had revenue of $7 billion but only $1.3 Billion in 2013.  In 2009 I worked with two back room trading firms to gain direct floor access for VAT, both rejected it on legal reasons.  I think it will not hold up in courts.   Have you heard anything about the income and thinning of operation margins? or legal questions?

Thank-you,

B

You guys probably dodged a bullet there, eh? 

[Aman A.K.A. Ahamburger]

Apr 3, 2014 17:40:31 GMT -5 bimetalaupt said:

A+++,

Thank-you for you kind words. What is going on with the market is the profit profile of Large funds do not cover the charges the funds charge to manage your money.  WXYZ has a point to buying a long term system , reinvest dividends and never sell. I may miss the point but the penny cost is less then missing the bull market in bonds to 2009 or stocks from 2009.  It is the price I know I have to pay. 

On the other hand Chuck is mad as hell, and should be.  HFT is stilling his business.  Day trading is a lowing expectation game, just no one is making money (I Know) like the old tape readers.   This has been a great year TO SELL BONDS. "REBALLING" THE CASH. 

Just a thought,

BiMetalAuPt

B,

Sorry I was running short on time. Yes, I agree the penny cost that these guys have been taking is way less than missing the bull runs! That's why guys like you, me, and WXYZ, keep our noses down and rely on compounding. We may each have our own styles but the result is the same, kash!!!!

Day trading is for the birds without a doubt, and I'm happy that Chuck is mad!

Can you imagine the spread on those old tapes? Great point about bonds, don't want to end up in the woodshed with Bill G.

Thank you for all your time!

[bimetalaupt]

Apr 3, 2014 23:42:58 GMT -5 Aman A.K.A. Ahamburger said:

Apr 3, 2014 18:32:11 GMT -5 bimetalaupt said:

Late b. ,

Question. I hear that in 2009 HFT had revenue of $7 billion but only $1.3 Billion in 2013.  In 2009 I worked with two back room trading firms to gain direct floor access for VAT, both rejected it on legal reasons.  I think it will not hold up in courts.   Have you heard anything about the income and thinning of operation margins? or legal questions?

Thank-you,

B

You guys probably dodged a bullet there, eh? 

A+++,

I sent you an E-Mail on the VAT and HFT.

Bruce

[bimetalaupt]

Todays had minor empty trust action turned into major moves by HFT: Dark-pools.

Example would be TXN  : make chips for data transferring systems off 4.39% on 2 x volume!! WHY: HFT.  How can you win short term. BNY and Manage? REINVEST DIVIDENDS.

Of the twenty stock I watch close for CATS9 DUK and XOM were up!! Both with 80+ Blue(black) line for FAST STOCHASTIC.  BOTH ARE CORRELATED TO INTEREST ON T-BOND 30 YEAR.  SO STOCHASTIC SAID SELL WHAT LOOKS LIKE A BUY! BUT VOLUME ON DUK IS 50% NORMAL.  HFT GIVE THE MARKET MIXED SIGNALS.  KRAZZZY DATA CREASTED BY HFT: A WORLD OFF !!

Texas Instruments Inc. (TXN) -NasdaqGS 
46.34 Down 2.13(4.39%) 4:00PM EDT
After Hours : 46.57 Up 0.23 (0.50%) 6:10PM EDT

You have the option to change the %K and %D periods of the Fast Stochastic above. The default %K and %D periods are set to 5 and 3, respectively. The Fast Stochastic compares where a security’s price closed relative to its price range over a given time period, and is displayed as two lines. One line is called %K. A second line, called %D, is a moving average of %K. Buy when the Oscillator (either %K or %D) falls below a specific level (e.g. 20) and then rises above that level. Sell when the Oscillator rises above a specific level (e.g. 80) and then falls below that level.Buy when the %K line rises above the %D line and sell when the %K line falls below the %D line. Look for divergences. For example, where prices are making a series of new highs and the Slow Stochastic Oscillator is failing to surpass its previous highs. - "Technical Analysis from A to Z" by Stephen Aechlis

[Aman A.K.A. Ahamburger]

Ladislaus Bortkiewicz? The more I read that formula, the more I realize that traditional trading models will have a hard time with volume. Am I off?

[bimetalaupt]

Apr 25, 2014 23:40:40 GMT -5 Aman A.K.A. Ahamburger said:

Ladislaus Bortkiewicz? The more I read that formula, the more I realize that traditional trading models will have a hard time with volume. Am I off?

A+++,

My point exactly: EXPERT 50/50 OR MMXV-BETA: DO NOT USE THESE SO WE GET 180 DEGREES OFF. BALLANCING AND REALLICATIONS.  THIER CALL- PUT WENT TO MORE BONDS ON DEC 2013 THEN LESS BONDS IN FEB 2014.  IT IS RUFF BETTING AGAINST THE TREND. 

I tried to show the action with TXN and DUK.  Also DUK and HD have a -57.029365883883900% correlation.  How does the Russian Army exercises effect the long term discounted cash value of HD?

Just a thought,

BiMetalAuPt

Both Gupta and Gupta and E.P.C. Coppice's  Trendex  used Ladislaus Bortkiewicz's work. Both missed the Delta for major 3rd derivative of position (black swan) events.  We used both for major buys. 

[Aman A.K.A. Ahamburger]

Dr. L,

It sure is ruff betting against the trend. Lots of sour grapes as well.

I understand what you're saying about certain sectors moving with bonds. Take those dividends from one sector and buy on the red elsewhere. Like POT, biggest one in the world is here in Sask and it was a great buy when the news was bad last year. Still at a nice discount on the last bit of news.

Russian troop movements on long term cash for HD... Emotions? People run the economy. HD is nice because their growth comes from withing the US AND Canada.. Like DUK, or BMO... Not Like AAPL, NKE, KO, and some other big ones, which need the global economy to keep revenue growing.. Well that's more of a now to 7-10 years issue; so not really that long term either.

I think the mainstream trend(thinking) is still that diplomacy will win the day. Russian troops in Ukrainian air space, weird flu viruses, Mid East out of control, China's economy on the brink says to me the mainstream is where it usually is, off center.

I will say I think it's cool that Putin is lining your pockets. I will always take the opportunity to buy on the news for the long term.

Keep watching the 3rd. God bless,

[Aman A.K.A. Ahamburger]

More bad news for the big guys. As if layoffs, reduced trading revenue, and a lack of quality mortgages wasn't bad enough.

Dark Pools' Face New SEC Probe

The Securities and Exchange Commission is investigating a number of big "dark pools," according to people familiar with the probes, as stock-market regulators ramp up pressure on the private trading venues.

Investigators are exploring whether the trading systems are properly disclosing to clients how they operate, treating all investors fairly and protecting confidential client information, among other concerns, the people said.

After years of unchecked growth in off-exchange trading, regulators are increasingly concerned that the level of activity in dark pools is harming investors. SEC Chairman Mary Jo White said in a speech Thursday that the agency is examining whether the amount of trading in dark pools and other off-exchange trading venues "risks seriously undermining" the quality of the U.S. stock market....

.....New York Attorney General Eric Schneiderman has issued subpoenas to high-speed trading firms and is investigating whether they get preferential treatment from some dark pools. On Monday, the Senate's Permanent Subcommittee on Investigations said it plans to hold a hearing next week focusing on potential conflicts of interest between trading venues and some of their customers.

Among the dark pools under investigation by the SEC is one operated by Barclays PLC, the people said. Barclays' dark pool, called LX, was the second largest by trading volume in early May behind Credit Suisse Group AGs dark pool, Crossfinder, according to data compiled by the Financial Industry Regulatory Authority.

It isn't clear which other trading systems the SEC is investigating and if the probe will lead to an enforcement action. If it does, it would be the first SEC case against a major dark-pool operator in the U.S. in recent years.