Don't blink you might miss it -- there goes the Stock Market -- again.
High-frequency traders aim to make a profit with ultra-fast computers, allowing them to dip in and out of markets in fractions of a second, jumping ahead of others to benefit from short-lived pricing anomalies others are too slow to detect.
These traders only make between $0.001 and $0.002 per share -- before costs -- on each U.S. equities deal, according to a 2009 estimate by Rosenblatt Securities Inc, so they need to turn over huge volumes in order to make meaningful profits.
The U.S. Securities and Exchange Commission said last year that HFT firms [High Frequency Trading] were partly to blame for the "flash crash" on May 6, 2010, when the Dow Jones index fell nearly 1,000 points before bouncing back in a matter of minutes.
On Wednesday the European Union proposed a tax on transactions which would raise 57 billion euros ($78 billion) a year, though it is moot whether the plan will become law as it needs unanimous approval from EU states.
Speed-trading firms most threatened by EU transaction tax
by Douwe Miedema, Reuters London -- Sep 30, 2011
OK, imagine for a second, you were "rich enough" to profit on those tiniest of profit margins: "between $0.001 and $0.002 per share" ... ticking away each second ...
How many shares would have to trade say, to make $100 per second?
The answer is somewhere between 50,000 and 100,000 shares ... and you too can be a $100-a-second-aire. OK, but that sounds like the territory of those endangered Mega-Millionaires.
Hmmm, how many seconds are there in a "Trading day" anyways?
(Somewhere around 25,000 seconds in 7 hours -- that's a LOT of E-Z $100 dollar bills, by COB.)
Cha-Ching! ... and all at those E-Z "cap-gains tax rates", to boot too.
Moving economic mountains/molehills -- "faster than you can blink an eye" ...
This gave high-speed trading ''systemic implications'' because of its potential to amplify a financial shock.
Typically, the hedge funds and banks that engage in high-frequency trading generate profits through a large number of small-size trades. But this also implies they take little risk per transaction compared with traditional market-makers.
What sets high-frequency traders apart from traditional trading is the frantic pace that powerful computers can detect and act on opportunities. Indeed, some high-frequency traders can detect and trade in less than a millisecond. As a guide, it is said to take about 150 milliseconds for a human to blink.
High-frequency trading amplifies moves
by Eric Johnston, smh.com.au -- Sept 28, 2011
Don't Blink -- or you'll miss the action.
Hmmm, how many milli-seconds are there in a "Trading day"?
Somewhere around 25,000,000 milli-seconds -- now that's REALLY A LOT of $100 dollar bills (on their exclusive, micro-profits frontier).
No wonder those Investors Hedge Fund-Bookies -- no wonder they don't want the government getting a piece of the action -- it's their Gravy-Train afterall. They Created It -- out of thin air!
Does anyone know, how many "Jobs they create" with each micro-second trade?
From this stat -- it kind looks like they've put thousands of "classic traders" -- out of work:
In the United States, the share of HFT is more than 50 percent, according to Tabb data, having rapidly risen from 20 percent in 2005. At that time, high-frequency trading was practically non-existent in Europe.
intro link
Seems like 'thar's mega-gold in them micro-second hills!" Better 'stake your claim' now -- while the staking's good ... anyone know a good Hedge Fund? What! -- the minimum deposit is a $30,000 for day trading? ... that's too rich for my budget ...
Financial Trading at the Speed of Light
Technology has allowed the pace of financial trading to approach its theoretical limits
by David Schneider, spectrum.ieee.org, October 2011
"Everyone is driving toward zero latency," says Graeme Burnett, who has worked for Deutsche Bank and ABN Amro Bank in the Netherlands and now runs Enhyper, a consultancy in England that specializes in financial engineering. "We've literally done every optimization you can imagine."
The impetus is a recent phenomenon called high-frequency trading. Typically, a high-frequency trading firm -- or rather, its computer systems -- buys and sells financial instruments while holding on to them for perhaps just fractions of a second. High-frequency traders make money by exploiting tiny and fleeting disequilibriums in the markets -- say, when the price of one asset changes and the price of another that should be equivalent in value doesn't shift immediately to match.
A few parting questions to ponder, about this "service" Wall Street provides:
1) If "disequilibriums" are just tiny ripples in the Financial Market pond -- and programmed high-speed trading, in theory, just smooths out the pond again -- then where do those Amplified Tidal Waves come from? ... Almost every other week now, Hmmm? ... Could there be some sort of stampede-swarming, happening when all those Micro-Bulls, ALL see the same market ripples, at once?
2) Is it possible that High Frequency Trading firms who's goal is to "exploit these disequilibriums" -- are they possibly creating them too? Are they not themselves throwing their own "big rocks" to the pond too? ... or is that just a million tiny pebbles, all at once?
3) Besides theoretically creating "Liquidity" -- which presumably only other robotic trading systems can see and react to -- How does making 'a thousand trades per second', actually help "Human" economies grow?
[ Up or Down -- it's all the same to T2 automatons. Bull, Bear, they don't care -- it's all Green to them! ]
4) If these mechanical super-fast money-changers turn out to be say, Parasitic in behavior, or at best Super-Amplifying -- just Echoing 'what was going to happen anyways' -- how can us mere mortals, with money invested in mutual-funds, 401-k's and pensions, ever possibly compete with such "automated rationality" -- that knows nothing of OUR puny time-scales?
5) If warring High Frequency Trading Programs ultimately "bungee cord" the Financial Markets to Zero (remember they can make money, when prices go down too, buckets avalanches of money) -- Who is it, that is going to "take the ultimate bath", in the Zero-worth economy they leave in their tracks?
6) Why should we -- and the Federal Reserve -- coddle the Big Banks and Hedge Funds -- Why should we NOT Tax each HFT Transaction, on the same scale that the profits happen -- are they not part of the National Economy, too? Do they not benefit, leverage, or otherwise exploit, the hard-won dollars us mere mortals invest into the long-run Stock Market, from our work-a-day human time-scales?
7) Who's zooming who? (to borrow an old question) The Wall Streeters or the "Super Committee" tasked with Trillions in revenue-raising?
Us mere humans, who make decisions on the minutes and hours -- sometimes days -- time-scales, would really like to know. Who's zooming who?
How do us mere citizens get a piece of this whirling, churning, casino-take that our lifetimes of labor have made possible?
How do we get OUR poker chips out of this Billion-dollar casino?
And finally, how in the world did our plan-for-the-future slow-and-steady growth economy ... ever come to this -- a high-stakes poker game, on a wild west, virtual frontier?
Where only the fates, and the laws of chance, know where it will all end ... and who will walk away, with ALL the marbles. And who will be left with 'the crumbs' ...
All hail, the TBTF Job Creators.
... er well, the living, breathing, actual People, in a unified voice say,
No, Thank you, Wall Street! ... PS. Where are the Jobs?