High-Frequency Trading 101: The Good, the Bad and the Truth

Forget the paper chase. Solipsism and narcissism are the collapsing twin towers of the failed philosophy that led to the financial crisis. Thinking or saying something does not make it so...it is not about you. There is an objective mathematical reality, however seldom it is mentioned by the press. Rome is burning. Hear the music?

HOW ABOUT A NICE "FAT TAX"ON STOCK TRANSACTIONS.!!!LIKE one cent per share. when sold..I MEAN CMON "EVERYTHING ELSE IS TAXED...CMON TAX MAN "STICK YOUR HAND IN THE HIGH FREQUENCY TRADING ,,AND USE IT TO LOWER DEBT...

HOW ABOUT A NICE "FAT TAX"ON STOCK TRANSACTIONS.!!!LIKE one cent per share. when sold..I MEAN CMON "EVERYTHING ELSE IS TAXED...CMON TAX MAN "STICK YOUR HAND IN THE HIGH FREQUENCY TRADING ,,AND USE IT TO LOWER DEBT...

HOW ABOUT A NICE "FAT TAX"ON STOCK TRANSACTIONS.!!!LIKE one cent per share. when sold..I MEAN CMON "EVERYTHING ELSE IS TAXED...CMON TAX MAN "STICK YOUR HAND IN THE HIGH FREQUENCY TRADING ,,AND USE IT TO LOWER DEBT...

just like the burlington bristol bridge"YOU PAY TO LEAVE NEW JERSEY...."its free to enter,,,,,toilet paper is taxed, so tax every share a little,, most of it is already "down the toilet"or will be .

I was trying to be objective until I heard "price improve" uhmmm WHAT???

How about A nice & Big.....Financial...."Armageddon"...Coming Down The ...PIPELINE....FINANCIAL...ARMAGEDDON..... Remember the "Word"....You Fools..!!!!

"Preferred clients"... ? That is really the problem. It is not a level playing field if some people are able to get the information before others. How much do "preferred clients" pay for this service? How much do they make from it?

Why does the description of High Frequency Trading sound like FRONT RUNNING which is illegal??????

hhhmmm - perhaps technology has outsripped our ability to control it?? -- perhaps technology is no longer our friend??? -- or perhaps I've been watching too much sci-fi movies??

The whole market is rigged. HF trading can't be beat. Let the computers siphon the blood out of every company and any hap hazzard investor foolish enough to try to make a buck or two. I won't be playing that game any more. - Putting my cash under the mattress where I know it'll be safe.

you get ripped a new one when you buy a house,and you get ripped a new one when you sell a house..how about ripping WALL STREET a new one "every time theres a transaction or a stock SALE..and help remove some of the high frequency trades and eliminate a lot of the.001cent garbage

Hogwash! Make no mistake about it. HFT IS A TAX ON YOU AND ME.

NO, No, No. It not about HFT. It is about TWO tiered market.IT is not JUST about retail investors. IT is about HUMAN corruption. Henry, your question is RIGHT ON. You have absolutely nailed it. The man is changing the subject!! See the point 2 below: ********* So far despite ALL the economic datapoints that depict a decidedly downward trajectory (yes, the most positive data is the slower DECLINE YoY), corrupted zombie bankers have acted in sheer defiance. Lately there are more frequent references to "pitchforks and torches". It begs the question: Is talking still effective? ************ The following are what I believe the hottest "hot button" issues that must be vigorously contested as soon as possible. 1.PEOPLE finally have enough of it. The trigger could be the next round of Wall Street bonus bonanza. I agree with Chris Whalem, we have effectively nationalized our too big to fail financial firms by Guaranteeing a $1.4 trillion of their debts via FDIC, these firms are effectively the GSEs like Fannie Mae. The real taxation without representation is in the AIG $180 billion bailout, which in turn bailed out their counterparties such as GS and JPM. Without the former, all these ponzi-scheme participants would have gone under in a matter of days due to 1)CDS market implosion 2) the freezing of bank to bank lending as PARTIALLY witnessed in the last fall. Without the latter, all these bank would have no sufficient capital to survive.The real crime is: How the hell can Wall street be entitled to bonuses again when they are still on lift support by us? We, the tax payers own the entire God damn financial joints, make no mistake about that. How dare could they even possibly think about bonuses? How could any of them make a TRUE profit after paying their fair shares of the above two?? ********** 2. Every rational individual knows this market is not functioning. Not only does price no longer reflect the underling value of stocks, but also there is a divergence or even dichotomy of the these two: YoY earnings have been going down at a pace of 30% to 35% so far whereas stock price have been going up. The problem is not with computers or algorithms. The problem is the TWO-TIERED markets. When a selected few have an advantage of seeeing the orders before the rest, given the speed of computing power, they are in a 100% sure position to be able to front run the rest. Ladies and Gentlemen, this is where the HUMAN corruption is.This is why market has been manipulated to an UNPRECEDENTED level, well above 130 S&P P/E. Everyday, more and more people are watching an intellectual equivalent of "a savage rape" in the broad daylight right in front of us. Despite overwhelming evidences, SEC has stubbornly refused to pursue this case citing the perpetrator does not break the law. Using the insufficient existing laws as an excuse is as lame as there is. Front running, by the nature of that, is purely pattern driven. SEC can easily see the foul play EVERYDAY by its unmistakable volume and frequency! The SES wants a letter from perpetrator saying that it indeed has been manipulating the market!! This is as absurd as it gets. The time has come for us to tell (yes, tell, not ask) our congressional servants to pass a sensible law to ban the unfair business practice of "two tiered markets" and the front running in NYSE. Strong and swift actions must be taken to prevent further damage to the market. Talk is no longer effective. I hope Tyler Durden of Zerohedge.com will play a leadership role to make this happen ASAP. ************ 3. This financial crisis started with bad banks and it must end with bad banks. The entire charade is based on a logic fallacy: Banks are the same as banking. Ladies and Gentlemen, these two are fundamentally different concepts. Not only does banking mean the population of all banks, which include many good regional ones that did not take part in the global financial ponzi scheme, but also it represents the financial intermediary function of economy. Can Larry Summers answer this question, are bad banks too big to fail or is the banking too big to fail? The resolution of the bad banks through bankruptcy does not mean we lose the function of banking. On the contrary, the good banks emerging from the bankruptcy renews the robust function of banking. Why does the Hussein Obama team employ such a scare tactic to protect these zombie banks? Because bankruptcy wipes out equity and then debts. This means a loss by a negligibly tiny percentage of the population such as Warren Buffet, CEOs of the banks and institutional morons, as well as large debt holders such as Bill Gross' PIMCO. Benefiting a few ultrarich club members at the expense of tax payers ensures that our economy will be mired in zombie bank morasses in years to come. Such a critically important issue has never been informed to public via fact finding, much less vigorous national debates. Where is democracy? Zombie banks must be nationalized so that banking can be TRULY "too big to fail". (con't below)

(con't from above) 4.The media has become a propaganda machine churning out biased MIS-information in the name of confidence boosting. CNBC aired an interview with that dishonorable analyst named Meredith Whitney, who inexplicably sugarcoated what turned out to be an ugly bank earning reality RIGHT BEFORE the major zombie banks reported their earnings. But CNBC never mentioned the opposing views held by many observers with far more compelling evidences to back them up in the meantime. Then it ended the week by intentionally misinterpreting the Roubini's view on the recession as he had improved his outlook. Both events triggered an unjustifiable rally. No, I have not watched CNBC for at least 8 weeks. I got this from the internet. I could not stand the talking heads. They gave me a headache. A simple analysis reveals the very troublesome conflict of interest: its parent company GE is a direct beneficiary of this "too big to fail" bad banks charade--Its GE Capital is the recipient of TARP money. ************* 5.The mark to market accounting change. This entire event is based on another logic fallacy: little (not absolutely zero) participation of willing buyers and sellers is the same as no existing market. Market dislocation can go from one extreme to another. In the case of various ABS and its derivatives, these paper assets have gone from extremely liquid during the peak of its valuation to extremely illiquid. Right now we are at the extremely illiquid end of this. Such a perspective easily defeats the notion that there is no market for these papers. On the contrary, this is precisely a market. It is called an extremely illiquid market in which the market value of these papers is 0 or near 0. The very notion that we have been able to observe such a wild swing in market conditions is due to that we had a standard called mark to market. Otherwise, HOW the heck could banks even complaint about the zero value of these papers, in the first place???? Another equally important question: Since we have changed our mark to market standard, why shouldn't we go back and change the value of these papers at the upside of market dislocation when the price is way above the par value? The very definition of the standard means it affects not just the present, the future, but also it does the past. Otherwise, as it stands, bank earnings have been unduly inflated on the upside. Such an asymmetric adjustment of financial data easily exposes the true nature of this m2m change, it is called CHEATING! M2M must be restored. If banks believe these papers are worth more, they can recover the value later through, the very same Mark to market standard. ****************** 6. The truth behind these figures "on the stage". What are Larry Summers' personal financial ties to the zombie banks? Why did Tim Geithner only report to IRS his tax issues ONLY after he knew he was nominated as the Sec. of Treasury. Perhaps the biggest question is this: Is Hussein Obama a natural born US citizen? Where is the original birth certificate with a seal on it? Is Certificate of Live Birth the same as the Birth Certificate? Where are the school records? Why seal the records? Why not answer this question straightforward? If he were not a natural born US citizen, then he would have to resign for the sake of our constitution. ****************** These are what I categorize as direction changers to the right path of our country in an epic battle between truth and lies, between PEOPLE and manipulators, and ultimately, between right and wrong.

We live in a society where people artificially enhanced by steroids are allowed homerun records as if they achieved it solely by their own natural abilities and where white collar crime is punished with a watered down country club prison environment even if it has taken food off people's tables like any other common act of crime. Since the time of Michael Milken and the S&L crisis to Enron, WorldCom, Subprime loans, payday loans, and the current reigning champion, Bernie Madoff, there have always been those who have hidden their questionable practices behind the trappings of educated industry jargon, titles that only mean a person has the "potential" to achieve something legitimately, and the validation of an entourage of "yes" men. So is it a real surprise that the next incarnation of "justified greed" should be the unnatural, impossible to compete against "supertrades" of machines?

The "game" has always been rigged to some degree but we are now at the point where massive amounts of people can see that something is unfair and speak up but it proceeds anyway. For example, where is the "popular consent" when bailouts are rushed through without a vote by "We the people"? How can our money be "volunteered" to rescue people who are out of touch with everyday living and act in ways that would send most readers here to the poor house after being told "take responsibility for your actions". This "dig your way out of the hole" thinking began under the last administration and continues into the current.

Wow,you get to see the order(ahead of everyone else) and then use that information to run ahead and make a trade. If you werent Goldman(see every financial goverment officials resume) it would be FRONTRUNNING. You try what they are doing and your going to jail and the presure to procecute will come from Goldman. Who also has a lot of friends at the SEC that they use to keep competition out of their franchises.

I am taking some profits today...whew its been a great 3 months..thanks folks..

Sickening how all these analysts are popping up telling us that HFT is good for the market! It's a ponzi scheme...on top of the ponzi schemes they already run. These greedy SOB's werent having enough fun using these analysts. They are jacking everyone, every trade.