Rigged Wall St.Trading and the Guys Who Figured It Out

[Perknose]

A fascinating story, well worth the read.

My comment? The depth of piggish corruption on Wall St. runs deep indeed. :twisted:

 

[PottedMeat]

ADD 60 Minutes version:

http://www.cbsnews.com/news/is-the-us-stock-market-rigged/

( will read much more detailed article later )

 

[Anarchist420]

Dr. Paul caught it like 45 years ago. If there was no legal tender, then there would be no Wall Street. in other words, what is good for the largest banks and the wealthiest banksters is not good for everyone else.

 

[mrjminer]

ADD 60 Minutes version:

http://www.cbsnews.com/news/is-the-us-stock-market-rigged/

( will read much more detailed article later )

Nice, I didn't know CBS put these mini 60-minutes segments online.

I heard about this going on a few years ago, but nothing was ever done. Perhaps something will be now that the media has latched on to something worth latching on to.

 

[Newell Steamer]

Pish, posh,.. since they are the money experts, they know what they are doing!!

You guys need to stop bashing Wall Street - we all know 2008 happened because a bunch of black people borrowed money they never intended to pay back.

 

[Kwatt]

but nothing was ever done.

Nothing will be done about it until a new way to beat out retail investers is found.

Or nothing will be done about it at all.

The "job creaters" and "Market Makers" must flurish above all else.

 

[KB]

I blame the exchanges for allowing certain groups to take an unfair advantage. They should be the ones ensuring trust in transactions and if they don't then they should be buycotted. It will be interesting to see if the new IEX exchange will be the default exchange since trust has been lost in the others.

 

[BoberFett]

Tagged for later.

 

[mrjminer]

Nothing will be done about it until a new way to beat out retail investers is found.

Or nothing will be done about it at all.

The "job creaters" and "Market Makers" must flurish above all else.

Yea, this is the kind of thing that the FTC should be handling immediately. Obviously, they've been paid off to overlook this.

I caught some of that video while I was working, it looks like the guy that brought the issue to the forefront started / is on-board with a different stock exchange market -- IEX? Not 100% sure since I didn't get a chance to pay attention to the whole thing, but something along those lines was mentioned :O

 

[Atomic Playboy]

Good article, but it's not really surprising in any way. Smart people are going to find ways to exploit loopholes or vulnerabilities to put themselves in an advantageous position. True altruism is rare, and in a culture that deifies wealth, there's little incentive to point out an inequality in a system rather than seek to capitalize on it. I was a little bit surprised that Goldman kept getting mentioned as one of the good banks, seeing as how we like to vilify them for their seeming revolving door policy with the treasury department.

 

[yllus]

Nothing I didn't already know, but insane nonetheless.

 

[Kwatt]

Good article, but it's not really surprising in any way. Smart people are going to find ways to exploit loopholes or vulnerabilities to put themselves in an advantageous position. True altruism is rare, and in a culture that deifies wealth, there's little incentive to point out an inequality in a system rather than seek to capitalize on it. I was a little bit surprised that Goldman kept getting mentioned as one of the good banks, seeing as how we like to vilify them for their seeming revolving door policy with the treasury department.

Agreed as long as there is a "baby seal" left there is going to be someone willing to club it.

.

 

[Attic]

Good article, but it's not really surprising in any way. Smart people are going to find ways to exploit loopholes or vulnerabilities to put themselves in an advantageous position. True altruism is rare, and in a culture that deifies wealth, there's little incentive to point out an inequality in a system rather than seek to capitalize on it. I was a little bit surprised that Goldman kept getting mentioned as one of the good banks, seeing as how we like to vilify them for their seeming revolving door policy with the treasury department.

Agree here, particularly with the bolded.

Wall St can get away with a lot because they control money and money controls laws and politics in a kelptocracy like ours. Jailing thieves is obviously done on a selective basis in our system. This is because laws are made to legalize theft for powerful rulers. Combine that with a selective application of law, that has as a result of the selective application, no moral deterrent for the connected and/or wealthy, and even the most obscene corruption shouldn't surprise anyone.

I'll only add HFT has been poison in the markets and it's been known for quite awhile. Amongst others, Zerohedge has been pointing this out for a long time.


One of the many parts of the article that stood out, but this the most,

That was the problem, Puz thought. From the point of view of the most sophisticated traders, the stock market wasn’t a mechanism for channeling capital to productive enterprise but a puzzle to be solved. “Investing shouldn’t be about gaming a system,” he says. “It should be about something else.”

But it's not about anything else really, it's a quite clever and sophistacted way to strip and skim the benefits of production from the masses and shift it to the few. It is the vehicle to game societies wealth. Just look at tax laws that viciously benefit "income" attained in different ways. That the game system itself, the stock market, was being gamed further I think might be a bit myopic in terms of the larger problem and issues with what the stock market does.

We sit in a period of the worst economic inequality the country has seen for over 100 years. Look where the wealth went and ask who has the most access to that, and then figure out how our government operates. There will not be change to any of this by traditional means. I just take that for what it's worth and acknowledge most people succumb to trying and game anything they can because that's how the whole thing is setup.

 

[Kwatt]

But it's not about anything else really, it's a quite clever and sophistacted way to strip and skim the benefits of production from the masses and shift it to the few. It is the vehicle to game societies wealth. Just look at tax laws that viciously benefit "income" attained in different ways. That the game system itself, the stock market, was being gamed further I think might be a bit myopic in terms of the larger problem and issues with what the stock market does.

Losing to someone of better skill is one thing losing to someone paying the dealer(the exchanges) to deal off the bottom is different. At least it is different to me.

.

 

[Attic]

Losing to someone of better skill is one thing losing to someone paying the dealer(the exchanges) to deal off the bottom is different. At least it is different to me.

.

The larger problem is what the casino has been setup to achieve and is achieving. A few cheats going on inside are bad, but what about the big massive cheat the entire operation has been molded to achieve.

 

[momeNt]

Zerohedge was on this a while ago and called for markets to institute a minimum latency barrier, which is effectively what the fiber coil is doing, in order to stop the harmful market effects that the HFT algobots bring to the game.

Glad to see somebody finally stepped up and made it happen and was able to see some market backing.

There are a few algo traders on these forums, wonder what they think of it.

 

[Fern]

I thought this sort of thing has been known, or at least suspected, for some time? I mean particularly the electronic front-running and slow-market arbitrage. I never heard of rebate arbitrage.

There's a reason traders were seeking faster trading times. Again, I thought the push for faster trading times had been in the news before.

But these guys did a good job catching up to those who had already figured this out and were gaming the system.

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It seems to me that the stock market only went 'retail' in the early 80's. I was studying finance & accounting in college until '82 and while I was in college Wall Street brokerage firms could be purchased for as little as $100K. That's how little demand there was.

But beginning in the early 80's companies began shifting from traditional (DBP) pension plans to 401K's etc (DCP). Also IRA's started taking off: http://www.ici.org/pdf/per11-01.pdf

This brought a ton of (new) individuals into the stock market.

I guess my point here is that by the end of the 80's the little guy was already getting screwed. It was just a different methodology. They allowed trades to be executed not on time of order, but prioritized by size. If the market moved one way or the other, the little guy got screwed. E.g., I had a client who had +$1 mill in the market and moved to sell on Black Monday in '87. His sell order was pushed out of the way by larger orders and by the time it was executed he had lost about 90% of his money. To rub salt in the wound, he executed a buy order when the market was at bottom. Well that order also got pushed aside by the larger ones and ended up getting executed after the market topped out that day.

----------------------

No system is perfectly fool proof (or cheat proof) and I'm sure the next gaming methodology is already being figured out somewhere by somebody.

Fern

 

[Oldgamer]

There was another news article about all the servers and electronic trading that has been going on for years that are putting a lot of smaller businesses and banks out of work, because the programs and servers using them are massive and incredibly fast. It is a very rigged game as that news article had pointed out. I still don't get how we let this go for so long without inacting laws against the use of this type of trading. It seems that who ever has the biggest and baddest servers and systems wins. Anyway I need to go find it. It really did say in so many words it amounted to cheating Americans and business owners on a massive scale.

 

[Pocatello]

It's the old Wall Street mentality with new technology. Cheaters win, every time, or most of the time.

 

[Zstream]

I thought this sort of thing has been known, or at least suspected, for some time? I mean particularly the electronic front-running and slow-market arbitrage. I never heard of rebate arbitrage.

There's a reason traders were seeking faster trading times. Again, I thought the push for faster trading times had been in the news before.

But these guys did a good job catching up to those who had already figured this out and were gaming the system.

----------------------

It seems to me that the stock market only went 'retail' in the early 80's. I was studying finance & accounting in college until '82 and while I was in college Wall Street brokerage firms could be purchased for as little as $100K. That's how little demand there was.

But beginning in the early 80's companies began shifting from traditional (DBP) pension plans to 401K's etc (DCP). Also IRA's started taking off: http://www.ici.org/pdf/per11-01.pdf

This brought a ton of (new) individuals into the stock market.

I guess my point here is that by the end of the 80's the little guy was already getting screwed. It was just a different methodology. They allowed trades to be executed not on time of order, but prioritized by size. If the market moved one way or the other, the little guy got screwed. E.g., I had a client who had +$1 mill in the market and moved to sell on Black Monday in '87. His sell order was pushed out of the way by larger orders and by the time it was executed he had lost about 90% of his money. To rub salt in the wound, he executed a buy order when the market was at bottom. Well that order also got pushed aside by the larger ones and ended up getting executed after the market topped out that day.

----------------------

No system is perfectly fool proof (or cheat proof) and I'm sure the next gaming methodology is already being figured out somewhere by somebody.

Fern

Yes, that is why everyone tries to get as close to the stock market servers as possible in New York. They literally place data centers in large apartment/condo buildings downtown. It's crazy stuff and it's been happening for years.

 

[momeNt]

It's the old Wall Street mentality with new technology. Cheaters win, every time, or most of the time.

I don't see HFT as cheating, they are just using existing conditions of these markets to their advantage. Since many people do find it unfair, or unsavory at the very least, a market has popped up that purports to be able to remove some of the unfairness that HFT was taking advantage of. I don't see how that is cheating.

Now there are a lot of other aspects of Wall St. that are completely unfair to the rest of America and the world for the most part, but this isn't one of them.

 

[Ns1]

read this a while ago, but not in such detail.

 

[werepossum]

Good article, but it's not really surprising in any way. Smart people are going to find ways to exploit loopholes or vulnerabilities to put themselves in an advantageous position. True altruism is rare, and in a culture that deifies wealth, there's little incentive to point out an inequality in a system rather than seek to capitalize on it. I was a little bit surprised that Goldman kept getting mentioned as one of the good banks, seeing as how we like to vilify them for their seeming revolving door policy with the treasury department.

That may be why they are mentioned as one of the good banks. When it's an insider secret and everybody's doing it there's no problem, but it's difficult to maintain truly high level government employee exchange once it comes out into the open and people know it exists. After all, the secret to a good con is knowing when it's over before the rube knows it's over, right? No one really knows what goes on inside these "dark pools", and if a bank goes with a fair exchange once one is available, what more can one ask of it? I do wonder though if some people couldn't be prosecuted for executing in-house orders it was directed to send to IEX.

Great article, Perknose. I had read a little about people using very high speed automated trading to buy up stock and offer it at a higher price knowing someone wants to buy, but I had no idea that it was in fact so systemic and basically dishonest.

 

[werepossum]

I don't see HFT as cheating, they are just using existing conditions of these markets to their advantage. Since many people do find it unfair, or unsavory at the very least, a market has popped up that purports to be able to remove some of the unfairness that HFT was taking advantage of. I don't see how that is cheating.

Now there are a lot of other aspects of Wall St. that are completely unfair to the rest of America and the world for the most part, but this isn't one of them.

I disagree. If you are taking a fee to broker a stock purchase, using technology to buy that stock yourself and sell it at a higher price is the essence of cheating.

 

[rudder]

I don't see HFT as cheating, they are just using existing conditions of these markets to their advantage. Since many people do find it unfair, or unsavory at the very least, a market has popped up that purports to be able to remove some of the unfairness that HFT was taking advantage of. I don't see how that is cheating.

Now there are a lot of other aspects of Wall St. that are completely unfair to the rest of America and the world for the most part, but this isn't one of them.

Maybe cheating is a harsh word.... How about unfair advantage. The big Wall Street firms are controlling these HFTs and are able to get their servers located near the exchange servers to get this unfair advantage.