Skip to main content

View Diary: Krugman On "The Joy Of Sachs," As Frontrunning Truths Emerge (292 comments)

Comment Preferences

  •  Again, if you review the links towards the... (0+ / 0-)

    ...bottom of the diary, with regard to high-frequency trading, the reality, as Neroden comments on it, towards the top of the comment thread, is that processes and tiers have been in place (in some instances for quite awhile) that enable larger trading firms to frontrun the market...whether that was their intended purpose, or not. Period. And, even you tacitly acknowledge this, as well.

    Stating that it's bogus, when in fact it's there in black and white, is disingenuous...and it flies in the face of these facts.

    If you even acknowledge there are "tiers," in and of itself, that means that you're acknowledging that certain firms have a trading edge on the rest of the marketplace.

    So, what, exactly, is your point, other than the reality that you've already disproven your own contentions that this frontrunning capability--intentional or otherwise--doesn't exist when, in fact, it does?!?

    "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

    by bobswern on Fri Jul 17, 2009 at 01:25:57 PM PDT

    [ Parent ]

    •  "Tiers" does not acknowledge front-running. (0+ / 0-)

      I'm not intimately familiar with these systems. It seems completely plausible that the tiers merely mean that when there's a buy or sell order entered, certain privileged members of the exchange get the first chance to accept the offer and form the sell or buy on the other side of the trade. Front-running, on the other hand, as I understand it, means that you can see a buy/sell order come in and then, before that buy order is settled, place and settle a same-way trade of your own such that you capture the marginal uptick that is caused by the other trade when it settles a few microseconds later.

      It's totally plausible that the former is possible but the latter is not. For all I know, these privileged pools merely mechanically record and implement reserve prices by the players and don't actually pass information across to any of the players' proprietary algorithms before the trade settles. Or perhaps the timing is such that the privileged pools get enough advanced notice of the trade to have the first chance to take the other side of that trade but not enough advanced notice that they can place and settle an entirely new trade before the first one settles.

      Those are the questions that I didn't see answered, and again, if the front-running story were as simple as you suggest, you'd think the NYT/WSJ would be screaming it from the front pages.

      But again, if I missed something in the articles, please quote the relevant paragraph. I've read them as carefully as I can and I just don't see a smoking gun.

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site