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View Diary: "Incredibly Shrinking Liquidity" as Goldman Flushed Quant Trading (83 comments)

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  •  No, I think you've got it nailed (7+ / 0-)

    But why he felt he had to post something

    written to be useful for the security teams at NYSE and other exchanges and approximately 185 sell-side brokerages.

    here, and why he feels unable to translate into jargon free English is the odd part.

    Translation pretty much as you wrote it.  GS, through access to the system as a result of their special gov't perks, was/is able to read the data on trades before it's committed, and place their own buys or sells accordingly in that brief moment, thus allowing them to essentially steal buttloads of money every day from the rest of the punters.

    Two things come out of this:

    1. If true, this should be highly illegal, and would, in any sane country result in something like what happened to Arthur Andersen after it was found out they were deliberately helping clients shred evidence.
    1. NEVER place 'market' orders.  Always set your buy/sell prices.  Market orders are just begging for somebody in the chain to steal money from you.

    Bah. Typoed during acct creation. It's Ezekiel 23:20

    by Ezekial 23 20 on Tue Jul 07, 2009 at 03:33:44 PM PDT

    [ Parent ]

    •  I'm stealing your shit ! (0+ / 0-)

      It'll go up near top of the Body.

      Securing the Exchanges from this rather odd form of attack gets 100% of the priority. DKOS is a suitable sound board.

      Folks who want to learn the systems and law and technology -- that is a ten year project at the least.

      Angry White Males + DSM IV Personality Disorder delusionals + sane Pro-Lifers =EQ= The Base

      by vets74 on Tue Jul 07, 2009 at 03:49:20 PM PDT

      [ Parent ]

      •  I'm a ten year vet of IT (3+ / 0-)
        Recommended by:
        oldjohnbrown, wezelboy, vets74

        and I still didn't 100% follow what you said, because it's not my specialty, but I hope somebody in justice finds a way to nail em hard if indeed that's what they were doing.

        Bah. Typoed during acct creation. It's Ezekiel 23:20

        by Ezekial 23 20 on Tue Jul 07, 2009 at 04:13:54 PM PDT

        [ Parent ]

        •  Pray that DHS hammers this at NTAC tomorrow. (3+ / 0-)
          Recommended by:
          oldjohnbrown, wezelboy, Ezekial 23 20

          Secret Service can kick anybody except POTUS in the ass, hard.

          This type of attack -- effectively minting liquidity -- is seen as a form of counterfeiting. That is their original juridiction and reason for existence.

          Angry White Males + DSM IV Personality Disorder delusionals + sane Pro-Lifers =EQ= The Base

          by vets74 on Tue Jul 07, 2009 at 04:22:05 PM PDT

          [ Parent ]

        •  many financial companies (4+ / 0-)

          use a middleware software component to pass messages back and forth across their networks in a secure and verifiable way.  The two companies that are used most frequently are tibco and vitria.

          There are lots of intricacies and configurations on how to do this though, and sometimes it comes down to how your system architecture looks.  Are you trying to send messages point to point? Are you trying to construct a message bus so that many systems can participate in the same message flow?

          In the latter case, many companies setup up tibco to do multicast broadcast, so that all endpoints can receive the same message with only one broadcast, and this can span routers and switches.  

          The question then becomes, who has access to systems on the same multicast network, and how sensitive is the information being broadcasted, and (if you're a greedy prick) how could one profit from that information?

          If you answered the last question with 'in innumerable ways' then you'd be right.

          •  That's the crux (2+ / 0-)
            Recommended by:
            wezelboy, vets74

            There's no one source of stock when a large block of shares is trading hands.  A call must go out to the ~185 primary brokers mentioned in the diary, and their systems then respond as appropriate.  I could see a situation where Goldman's system "camps" on blocks of stock with a

            1. "do you have some of this at this price?"
            1. "yeah I got 1000"
            1. Instead of finalizing the quote, wait up to the allowed timeout period
            1. Either finalize the quote if another request has been intercepted, or allow the timeout to elapse and the potential trade to evaporate

            The system surely has built-in latency and timeouts, which were designed years ago for older routers and before fibre optics.  If Goldman did a ground-up internal network with consistently fast components, they'd be able to abuse the latencies and built-in timeouts to sit on stock without actually buying it.

            No on Prop 8::Sometimes I get to hitch a ride on the Democratic Bus--they let me stand on the back bumper.

            by steve04 on Tue Jul 07, 2009 at 06:08:45 PM PDT

            [ Parent ]

            •  Getting other peoples' EXECUTION REPORTS (0+ / 0-)

     the issue at hand.

              IoI's and Quote Requests, even Quotes, are not particularly valuable.

              The ER's or SWIFT messages before commit.

              Negotiation messages are point-to-point, not broadcast.

              I could discuss how Bloomberg does it, or several other general services, but that's outside of scope for this Diary.

              Angry White Males + DSM IV Personality Disorder delusionals + sane Pro-Lifers =EQ= The Base

              by vets74 on Wed Jul 08, 2009 at 05:40:29 AM PDT

              [ Parent ]

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