Tapering and Market Meltdown

[william the wie]

While I understand the argument that the tapering of QE is causing emerging market meltdown with blow back to the US economy and to some extent I even agree with it the US cannot continue to protect the EU and China from their own many failed policies.

"The Coming Collapse of China" by Gordon Chang detailing the current problems of China was published in 2001 when the current problems were smaller than today but still mind-numbingly huge.

The current EU and especially Euro-zone problems were identified prior to rollout by many Nobel laureates such as most strongly by Milton Friedman.

The EU is bigger than the US economically, the Euro-zone nearly as large and estimates of the Chinese economy are all over the map but still generally thought to be the second largest national economy.

The US choices are bite the bullet now or wait and see what something worse than the Great Depression looks like.

 

[waltky]

The Market Is 'Rigged'...

Michael Lewis, 'Flash Boys,' and '60 Minutes'
30 Mar.`14 ~ Michael Lewis gave an interview to "60 Minutes" ahead of the publication of his book, "Flash Boys."

He alleges that the stock market is "rigged" by a cabal of high frequency traders, stock exchanges, and Wall Street firms. He alleges that a lone fellow, a trader named Brad Katsuyama, figured this out and formed a new exchange, IEX, to combat abuses perpetrated against the investing community. He alleges that high frequency traders are able to front run orders, which means they are able to buy in front of you and sell them back to you when you want to buy.

The problem, he says, is in the plumbing of the stock market. In the most interesting part of the interview, they showed a moving diagram of an order that leaves downtown New York and goes to the BATS exchange servers in Weehawken, N.J. Because the exchanges all connect to each other, the order then goes to the servers of the New York Stock Exchange, which is a few miles away in Mahwah, N.J.

According to Lewis, that's where the alleged front running occurs: in this example, they imply that the existence of high-priced fiber optic lines connecting the exchanges allow traders to get from Weehawken to Mahwah faster than the "public lines" that are provided to those who don't pay the higher fees for the faster lines, allowing these traders to profit from the knowledge of the prices in the slower feeds.

Should they be allowed to do this? When pressed, Mr. Lewis reluctantly admitted that this was perfectly legal, and so it wasn't front running, which was illegal. He then took to calling it "legal front running." IEX has proposed that outgoing messages arrive at all exchanges at the same time and incoming messages go through a "speed box" that slows them down, so everything arrives everywhere at the same time. This is a simple solution to the problem.

More Michael Lewis, Flash Boys, and 60 Minutes

 

[USNavyVet]

The Market Is 'Rigged'...

Michael Lewis, 'Flash Boys,' and '60 Minutes'
30 Mar.`14 ~ Michael Lewis gave an interview to "60 Minutes" ahead of the publication of his book, "Flash Boys."

He alleges that the stock market is "rigged" by a cabal of high frequency traders, stock exchanges, and Wall Street firms. He alleges that a lone fellow, a trader named Brad Katsuyama, figured this out and formed a new exchange, IEX, to combat abuses perpetrated against the investing community. He alleges that high frequency traders are able to front run orders, which means they are able to buy in front of you and sell them back to you when you want to buy.

The problem, he says, is in the plumbing of the stock market. In the most interesting part of the interview, they showed a moving diagram of an order that leaves downtown New York and goes to the BATS exchange servers in Weehawken, N.J. Because the exchanges all connect to each other, the order then goes to the servers of the New York Stock Exchange, which is a few miles away in Mahwah, N.J.

According to Lewis, that's where the alleged front running occurs: in this example, they imply that the existence of high-priced fiber optic lines connecting the exchanges allow traders to get from Weehawken to Mahwah faster than the "public lines" that are provided to those who don't pay the higher fees for the faster lines, allowing these traders to profit from the knowledge of the prices in the slower feeds.

Should they be allowed to do this? When pressed, Mr. Lewis reluctantly admitted that this was perfectly legal, and so it wasn't front running, which was illegal. He then took to calling it "legal front running." IEX has proposed that outgoing messages arrive at all exchanges at the same time and incoming messages go through a "speed box" that slows them down, so everything arrives everywhere at the same time. This is a simple solution to the problem.

More Michael Lewis, Flash Boys, and 60 Minutes

He has a book out and has to plug it somehow. Pure bullshit though.

 

[william the wie]

The Market Is 'Rigged'...

Michael Lewis, 'Flash Boys,' and '60 Minutes'
30 Mar.`14 ~ Michael Lewis gave an interview to "60 Minutes" ahead of the publication of his book, "Flash Boys."

He alleges that the stock market is "rigged" by a cabal of high frequency traders, stock exchanges, and Wall Street firms. He alleges that a lone fellow, a trader named Brad Katsuyama, figured this out and formed a new exchange, IEX, to combat abuses perpetrated against the investing community. He alleges that high frequency traders are able to front run orders, which means they are able to buy in front of you and sell them back to you when you want to buy.

The problem, he says, is in the plumbing of the stock market. In the most interesting part of the interview, they showed a moving diagram of an order that leaves downtown New York and goes to the BATS exchange servers in Weehawken, N.J. Because the exchanges all connect to each other, the order then goes to the servers of the New York Stock Exchange, which is a few miles away in Mahwah, N.J.

According to Lewis, that's where the alleged front running occurs: in this example, they imply that the existence of high-priced fiber optic lines connecting the exchanges allow traders to get from Weehawken to Mahwah faster than the "public lines" that are provided to those who don't pay the higher fees for the faster lines, allowing these traders to profit from the knowledge of the prices in the slower feeds.

Should they be allowed to do this? When pressed, Mr. Lewis reluctantly admitted that this was perfectly legal, and so it wasn't front running, which was illegal. He then took to calling it "legal front running." IEX has proposed that outgoing messages arrive at all exchanges at the same time and incoming messages go through a "speed box" that slows them down, so everything arrives everywhere at the same time. This is a simple solution to the problem.

More Michael Lewis, Flash Boys, and 60 Minutes

while true the net return on this activity as a whole is minute and without free money from the Fed all it would be is a marginal and episodic source of net revenue. Check with Sallow and Toro if you wish Waltky but the annual cost of microwave relays to the futures and options markets in Chicago to get the full benefits of arbitrage before prices changes are extremely high. As to net positions, those are taken by idiots. The unofficial name for this activity is running in front of steamrollers to grab pennies or nickels depending on the age of the speaker,

 

[waltky]

Granny says dey better not be tradin' her Blackwater an' Halliburton stocks behind her back...

How High Frequency Trading Impacts Investors
April 05, 2014 — As technology infiltrates equities markets, some investors are proving to be more adept than others at using this technology to their financial advantage.

This technology largely surrounds high frequency trading, where complex algorithmic equations are used to analyze market data and make large stock trades. The algorithms find arbitrage opportunities that are sometimes only available for a fraction of a second.

For the past year, several government agencies, including the Federal Bureau of Investigation, the Securities and Exchange Commission and the Justice Department have been looking into whether some components of high frequency trading could be considered insider trading.

While high frequency trading is a nebulous term, it does include parts that some may perceive as providing an unfair advantage to select investors. This can include placing large quantities of trades and then canceling the order with the goal of moving the markets, paying for faster access to market moving information or trying to intervene in large stock trades for a profit.

In addition to the major exchanges, such as the New York Stock Exchange and NASDAQ, high frequency traders flock toward dozens of other independent exchanges, known as dark pools, which are less transparent. "For high frequency traders, they'll aim to identify that a hedge fund, for example, is about to make a large trade, say 1 million shares of a stock at $45 per share," says Jeff Raupp, CFA and senior investment manager at Brinker Capital, a $16 billion investment manager. "The high frequency traders will try to purchase those shares from another exchange faster, absorb the liquidity at that price and than resell those shares, or parts of it, to the hedge fund for a slightly higher price, say $45.01."

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