The market is pretty much buzzing with the news of Michael Lewis' book Flash Boys : A Wall Street Revolt (if the name sounds familiar, he also authored The Blind Side), the IEX's formation and the battle on CNBC between Lewis/Katsuyama (IEX CEO) and BATS' President William O'Brien. So is the market rigged? (of course it is ... ) : Michael Lewis' book : http://www.amazon.com/Flash-Boys-Wa...TF8&qid=1396403541&sr=8-1&keywords=flash+boys An adaptation from the book on the NY Times website (good read) : http://www.nytimes.com/2014/04/06/magazine/flash-boys-michael-lewis.html The 60 Minutes story with Michael Lewis and Katsuyama with David Einhorn as a guest (good synopsis of the issue) : http://www.cbsnews.com/news/is-the-us-stock-market-rigged/
Just bought it for my Kindle. I had read the NY Times article yesterday and it was indeed a good read. Glad someone's doing something to fight back.
Still a good buy at $11.50? Like a dumb ass I didn't sell when it hit $21 a month back. I had bought some at $8.
The IEX CEO was hilarious in that segment - he basically just told everyone else on the panel that they were all idiots and didn't know anything about the market.
Actually, I take that back. I think that was another guy on a similar segment - he was in the HFT business.
Almost as entertaining as Ackman vs Icahn http://finance.yahoo.com/news/watch-fight-stopped-trading-nyse-173840783.html
This HFT stuff is so overblown. It is stupid. Someone like myself has a reason to complain about HFTs, but there is no reason why any regular investor should care. It is obscenely cheap to trade and invest now.
Considering that most people's retirement funds are managed by the people who are getting shafted by HFTs, technically shouldn't we all care?
Is HFT really bad? I'm not sure: Matt Levine and Felix Salmon on Michael Lewis and HFT by Tyler Cowen on April 1, 2014 at 1:20 pm in Economics | Permalink In my alternative Michael Lewis story, the smart young whippersnappers build high-frequency trading firms that undercut big banks’ gut-instinct-driven market making with tighter spreads and cheaper trading costs. Big HFTs like Knight/Getco and Virtu trade vast volumes of stock while still taking in much less money than the traditional market makers: $688 million and $623 million in 2013 market-making revenue, respectively, for Knight and Virtu, versus $2.6 billion in equities revenue for Goldman Sachs and $4.8 billion forJ.P. Morgan. Even RBC made 594 million Canadian dollars trading equities last year. The high-frequency traders make money more consistently than the old-school traders, but they also make less of it. - See more at: http://marginalrevolution.com/#sthash.07s9VFEE.dpuf
Really? And you don't think people got shafted a hell of a lot worse by the specialists? And do you really think losing a penny or 2 on a transaction is getting shafted? Also there are other dark liquidity pools that these large funds use for block trades. HFTs are really annoying for me to deal with but I have figured out ways to get around them for the most part.
I mean I guess technically I was a "HFT" before the modern HFT existed. I wouldn't frontrun orders like they do but I would be able to capitalize on inefficient market places before Reg NMS came along.
I agree that HFTs need to be reformed but this whole deal about the market being rigged by them and such is nonsense. It just totally fouls up the HFT discussion.
Well, rigging is defined as manipulating dishonestly for personal gain. Even if this is technically currently legal, it seems like everyone agrees it's at least some form of front running. So if you think the term rigging is too harsh, it's not too far off of it. But what the hell do I know. I'm just going off of what I've read in articles the last few days. Give me your opinion on the NY Times article/60 minutes show.
I disagree - HFT's take money out of the market. If an HFT makes $100MM, that's $100MM less than traditional investors are making - it's a zero-sum game, so every penny they make comes out of the pocket of either another buyer or seller. If these guys are making money, they are doing it at the expense of traditional investors, so traditional investors should absolutely care. They definitely aren't providing any value to a long-term investor or helping to properly value a stock - saving $0.01 a share on stock because of the added market-making benefits is irrelevant to the long-term investor. It really only matters to the short-term & day traders.
How do they take money out of the market? Does anyone who makes money trading the market take money out of it? I think ****ty advisors take a lot more money out of people's pockets than HFTs ever could. Further, is there no value in price discovery and making a market to you? For all the annoyances HFTs give to me they do provide value and provide liquidity which to me seems to significantly lower costs. If someone can show me they increase costs of trading compared to when specialists and market makers dominated the market then I will be happy to read it. Also, I just saw on CNBC that HFT firms profitability has collapsed since 2009 from $7 billion down to $1.3 billion. That $1.3 billion out of a total stock market capitalization of $20+ trillion. edit...and I don't think the stock market is a zero sum game....but that is for another discussion.
Let's say you and I are long-term investors, and I place an order for 100 shares of something at $100. You are willing to sell your 100 shares of that at $99.99 and that was the best ask price. Instead of me getting the shares at $99.99, the HFT firm buys it from you at $99.99 and sells it to me for $100 by seeing my order and interjecting himself in between our trade. Thus, instead of me paying you $9999, I pay $10,000, you get your $9999, and the HFT gets $1. It took money out of the market and as a result, I paid $1 more than I needed or (you got $1 less than I was willing to pay). Repeat that over and over and that's money that's coming out of the pockets of regular investors. That's the zero-sum game part of it. Every dollar that HFTs make comes from another investor. In general, yes. If people are making money without stock prices actually going up, then that money is coming out of someone else's pockets - and that's almost always the long-term investor. Traders, though, lose money as well as make money, so they also inject money into the market. So they are taking risk. But HFT generally take no risk - they don't lose money because of the way they are structured. Sure - but that's a service that people voluntarily pay for. In the example above, you and I had no choice in that scenario. Keep in mind HFT is not necessarily the same as market-making. The stuff that is most referred to in this controversy is front-running trades by having access to order books before orders can be processed. The HFT in my example was not creating liquidity or making a market - you and I already had a price set and would have had a market. They just intercept it after the fact and skim the difference of what I was willing to pay and you were willing to accept. Agreed, it's not a huge amount. But that's $1.3 billion per year coming out of investors' pockets, and probably about $20 billion since 2009. That means HFTs took 0.1% of the total value out of the market in the last 5 years. If we were talking about someone biiking investors for $20 billion over the last few years in a traditional way, it would be huge news.
