Watch this -- if you dare ...
Gumball Automatic Trading Program
http://www.youtube.com/...
Now speed up that automated, computerized Trading Action by about a MILLION Times, across the entire universe of Tradeable Markets -- SIMULATANEOUSLY and in Real Time -- and you may get an inkling of what our "traditional" 401k's, our Mutual Funds, our Pension Funds, are up against.
They don't stand a (competitive) chance.
I hate to say it but --
The Machines (from the future) may have already won.
The change was imperceptible at first. Computers were our assistants. Computers were only a tool. They're were Calculators on Steroids.
Computers were merely employed to help us gain, that competitive edge.
Or so we thought, in those hopeful early days. That thinking seems quaint now, by comparison ...
High-Frequency Trading (HFT) -- wikipedia
High-frequency trading is the execution of computerized trading strategies characterized by extremely short position-holding periods. In high-frequency trading, programs running on high-speed computers analyze market data, using algorithms to utilize trading opportunities that may open up for only a fraction of a second to several hours.[1]
High-frequency trading, often abbreviated HFT, uses quantitative investment computer programs to hold short-term positions in equities, options, futures, ETFs, currencies, and all other financial instruments that possess electronic trading capability.[2][3]
High frequency traders compete on a basis of speed with other high frequency traders, not long term investors (who typically look for opportunities over a period of weeks, months, or years), and compete with each other for very small, and very consistent profits.[2][4] As a result, high-frequency trading has been shown to have a potential Sharpe ratio thousands of times higher than the traditional buy-and-hold strategies.[5]
By 2010, High Frequency Trading is accounting for over 70% of equity trades taking place in the US, and is rapidly growing in popularity in Europe and Asia. Aiming to capture just a fraction of a penny per share or currency unit on every trade, high-frequency traders move in and out of such short-term positions several times each day. Fractions of a penny accumulate fast to produce significantly positive results at the end of every day.[2]
What have the forces of unbridled Greed and cold Competition created?
Behold. It's Alive!
We now have World Markets that are on Automatic Pilot.
We now have mega-market battles occurring on a nearly invisible microsecond battle field. Their ultimate prize -- All the POTENTIAL Long-term gains that are out there ... you know that pot of gold, at the end of our 401k Rainbows.
And don't think for a second, that Wall Street Banks haven't noticed this trend -- indeed they, once again, have been the main enablers -- afterall ultrafast, high-tech battles take Billions in hardware to get off the ground ...
And who has Billions, sitting on the sidelines, just looking for "an Opportunity" ?
Stock Traders Find Speed Pays, in Milliseconds
By CHARLES DUHIGG, NYTimes.com -- July 23, 2009
Powerful computers, some housed right next to the machines that drive marketplaces like the New York Stock Exchange, enable high-frequency traders to transmit millions of orders at lightning speed and, their detractors contend, reap billions at everyone else’s expense.
These systems are so fast they can outsmart or outrun other investors, humans and computers alike. And after growing in the shadows for years, they are generating lots of talk.
Nearly everyone on Wall Street is wondering how hedge funds and large banks like Goldman Sachs are making so much money so soon after the financial system nearly collapsed. High-frequency trading is one answer.
And after these Trading Drones, went haywire for a day earlier this year, it wasn't long, that everyone was talking about them -- for a few weeks or so -- then it was back to Business as Usual, in most circles. Perhaps you remember the buzz?
Big Sigh! Another Wall Street Armageddon was avoided -- thankfully, Whew!
But those few "bungee jump" market days was enough to set some real journalists, into action ...
How Speed Traders Are Changing Wall Street
CBS, 60 Minutes -- Oct. 10, 2010
Steve Kroft Gets A Rare Look Inside the Secretive World of "High-Frequency Trading"
It may surprise you to learn that most of the stock trades in the U.S. are no longer being made by human beings, but by robot computers capable of buying and selling thousands of different securities in the time it takes you to blink an eye.
These supercomputers - which actually decide which stocks to buy and sell - are operating on highly secret instructions programmed into them by math wizards who may or may not know anything about the value of the companies that are being traded.
It's known as "high frequency trading," a phenomenon that's swept over much of Wall Street in the past few years and played a supporting role in the mini market crash last spring that saw the Dow Jones Industrial Average plunge 600 points in 15 minutes.
Most people outside of the industry know very little, if anything, about it. But the Securities and Exchange Commission and members of Congress have begun asking some tough questions about its usefulness, potential dangers, and suspicions that some people may be using computers to manipulate the market.
Watch Steve Kroft's full report.
For a closer look at the HFT's "Nerve-center" check out this brief 60 Minutes Overtime clip. Those HFT Pod spaces, don't come cheap, do they?
Even Investment Traders themselves (the "Traditional" human variety) are speaking out against the HFT-bots that they now have to compete against.
Could it be, a scam is a scam, no matter how much High-tech Flash it has as window dressing? or to cover up its "front-running" tracks ...
In-Depth Look - Flash Trading Debate - Bloomberg
http://www.youtube.com/...
Joseph Saluzzi: Were for a level playing field.
The real issue is Co-location of their [HFT] servers and how they gain an advantage by paying the Exchanges, to have their servers there.
[...]
Rebates: [...] it's a payment-for-order-flow scam.
[...]
How about a 1 Second minimum for Orders?
[...]
If you're really an Investor Mr. Flash Trader put it out there for 1 Second -- I dare you.
[...]
99% percent of these Flash Orders are Canceled [...] How is that providing Liquidity.
Liquidity, has been the rationale the HFT firms have used to justify their neo-parasite-type actions on the world markets. Mr. Saluzzi has just said that this supposed Liquidity is an illusion -- that 99% of the Flash Trade "Offers and Bids" are Canceled before any Real Trader can take them up on their offers.
That hardly sounds fair ... nor rational ... nor Liquid. Sounds more like a Virtual Market, than a Liquid Market (or even a Real one) to me.
You can get the Best Price at any time -- IF you can catch it! (just buy a supercomputer, and one of those Pod spaces.)
Isn't this really just more "Gaming of the System" -- to the extent that the Law and Regulators will allow? ... or perhaps, not even notice?
This next "traditional" Investment Trader takes a more "balanced" approach, and he sees "a role" for HFT speculation, but also thinks things are way out of whack at the moment, in huge favor of speculators.
Inside Look - High Frequency Trading - Bloomberg
http://www.youtube.com/...
Alfred Berkeley, Charmain of Pipeline Trading, and former head of the NASDAQ
Berkeley: The HFT firm is actually not so interested in buying a stock to hold it [...] they're looking for temporary imbalances in Supply and Demand -- fleeting -- sometimes in nanoseconds.
[...] they try to buy the Stock up -- much the way a Scalper would at a ball game -- and come back and sell to people who have a demand for it, at a higher price.
[...]
It's a question of degree, these are not goods and bads -- these are balances acts, these are Tipping Points. And the question that has aroused everybody now:
Is there so much HFT that the true citizen saver who's 401k is coming to market through a large mutual fund or under an investment adviser, are they being disadvantaged?
[...]
About 73% of all the trades are HFT
[...]
Questioner: So more than 70% of the trades that are done, are done by 2% of the participants?
That's right. And these are HFT firms that are spending a LOT of money to be very fast, to be very smart. They're providing Liquidity, but they are also taking out what some people think are excess profits -- from the mutual funds, investment advisers' pension funds -- which ordinary Americans count on.
Questioner: What do you think?
I think we have set up a market structure that is TOO much in favor of speculation vs investor -- these are balancing acts.
The really scary part about that last clip is how Alfred Berkeley, former president of the NASDAQ, instead of calling for more regulation to curtail the HFT practices, -- has instead decided to try to "Fight Fire with Fire:
He is now employing his own firms computers and software, to try and out smart the HFT programs -- to turn the "Prey into the Predator" as he puts it ... to battle for those Microsecond Profits that the HTF-bots now have all to themselves ... so that his Pension-fund stakeholders, can hopefully get a piece of that "micro-profits-action" too.
Simply chilling ... in its long-run implications, if you ask me.
You know the Long-run, where Real People work, and live, and invest ... and strive to make the world better and a more equitable place.
Auto-pilot drone programs, transacting the World's wealth, on a time scale, that humans can only hope see -- AFTER the damage is done, after the fact --
Well that doesn't bode well for that Long-run world, and its prospects; nor its inhabitants either, don't you agree?
And where in the world (virtual or otherwise) is the SEC in this turf battle for the high ground in this wild west, high-tech casino, that "unfettered," unrestrained, pure capitalism has brought us?
Well you have to check out my rant-critique-review from yesterday, to get up to speed on that. (Hint: The SEC once again, seems to be outgunned, and outmatched, in short Outwitted.)
All told it was a very GREEN Christmas for Wall Street, this Year
by jamess -- Dec 25, 2010
And many thanks, for spending about a few million microseconds of your time, here, to learn about Wall Street latest "contributions to society" -- I hope they were Seconds, well spent.