A web sleuth who told me two years ago to get out of real estate is now warning me to get out of stocks due to High Frequency Trading. Should I listen?

Yorn · 1 year

That isn't the NYSE confirming the Nanex reports. The only things even supporting the Nanex statements is the paragraphs that say "according to Nanex". In fact the majority of the article seems to be written by Nanex. In the 5 paragraphs of the article according to Nanex or Nanex says appears 6 times and then is usually followed by the entire paragraph as quoting or restating something Nanex said. Below are the two statements not made by Nanex.

"Because of the incredibly high volume that day, there were delays in the reporting on a number of stocks," said NYSE spokesman Ray Pollecchia. "We were in the process of updating our programs, and some areas that hadn't yet been updated," were unable to handle the increased load.

According to the NYSE's Pollecchia, this probably stopped most traders from trying to execute the trades.

I linked to the wikipedia article because it shows a variety of theories and is most likely being updated live. The article you cite as proof is a restatement of what Nanex said with two statements from the NYSE which really don't conclude the same things Nanex is saying, like about quote stuffing for instance.

Yorn · 1 year

The reports are pretty spot on and are not done by the government which just shows how little you know about the situation.

Yorn · 1 year

I'll keep an eye out for the report.

dave723 · 1 year

I would think hedge funds, other banks, and smaller players would fill the void as well as buy up the functioning sections of the IBs post bankruptcy. I don't think it would take as long as you think, raising capital is not that hard for people in the business with reputation and a good track record. There are plenty of foreign banks as well who would go to great lengths to fill the void left if BAC and C went under too. It would be chaotic and messy but it would still work it's self out. The natural incentives of taking those banks business is very large (obviously very profitable businesses) and the other side effect would be more focus on risk management for the surviving firms.

Yorn · 1 year

Actually I don't quite believe the nanex theory at all considering the amount of data the exchanges that had the flash crash process is significantly less even on high volume days then the options exchanges. Not to mention currently exchanges allow excess message traffic to queue up at their servers' ports, where it is processed sequentially at a fixed rate and as a result poses no threat to the exchanges. More on all that here (PDF)

Also regulators are looking into quote stuffing but already concluded it was not a major factor in the crash.

"Regulators probing the causes of the May 6 flash crash have concluded that quote-stuffing – placing and then almost immediately cancelling large numbers of rapid-fire orders to buy or sell stocks – was not a “major factor” in the turmoil, a person familiar with the inquiry said on Thursday." FT.com

Heres more info on the flash crash if you want it: http://en.wikipedia.org/wiki/Flash_crash

Yorn · 1 year

HFT didn't cause the flash crash, the exchanges said so, and the SEC even said quote stuffing was "not a significant factor" or something to that effect.

Here is what CME Group said about the issue:

Role of High-Frequency Traders – Some have questioned whether high-frequency traders (HFTs) deploying so-called algorithmic trading methods played a role in the May 6th incident. Certain HFTs were active in both spot and futures markets during this period as an ordinary course of business. However, there is no visible support of the notion that algorithmic trading models deployed in the context of stock index futures traded on CME Group exchanges caused the market fluctuations in question.

Rather, we believe that automated trading contributes to market efficiencies, generally bolsters liquidity and thereby contributes to the price discovery function served by futures markets. This view is supported in the academic literature where one study found that “the move to screen trading strengthens the simultaneity of price discovery in the cash and futures markets and lessens the existence of a lead-lag relationship.”4Another study concluded that their “results are consistent with the hypothesis that screen trading accelerates the price discovery process.”5

Source

They mostly compete with market makers delivering tighter spreads as well as each other for arbitrage purposes. CBOE even said HFT was good for small investors. Despite the fact they don't compete with you at all and it seems pretty obvious both you and the person who wrote that article know little to nothing about HFT in general if you still want to exit the market that ultimately has to be your choice regarding your financial future and I wouldn't leave it up to reddit or some other forum to decide it for you.

dave723 · 1 year

Acquiring that much capital, especially in an environment when there are no investment banks banks to lend to you.

You don't think other institutions would fill the void?

jms1225 · 1 year

Normative economics is more of an ideological debate, which you see reflected in the different macroeconomic schools of thought, and is often confused with economics as a whole, but outside of that economics is on fairly solid ground as a field, especially anything outside of macro. As soon as macro crosses into the world of policy it becomes more normative then positive which I think is what most people have issue with.

Orangutan · 1 year

Gold, 1 asset(and if you are trading gold etf's then you are just scalping because if you believe gold is a necessary hedge you want phy). Treasuries, for the long term investor those aren't going to do a whole lot for you. If you are happy making 2% in 7 years power to you.

I listed a variety of assets and asset classes that have less or even reverse correlation to the indices: bonds, currencies, and commodities included, I just used gold as an example, and no not everyone who invests or trades gold has to buy physical to be something other then a scalper. Also treasuries are just one type of bond listed, you are ignoring the broader picture by nit picking examples and are effectively not making any point against what I said. Take a non-treasury government bond example: Build America Bonds. The University of Virginia's issue has a 30-year bullet maturity and was rated triple-A by all three major rating agencies. The University of Virginia issue had a taxable rate of 6.22%, which was 154 basis points higher than the triple-A Municipal Market Data index and 255 basis points higher than the 30-year Treasury yield. California, rated A2 by Moody's and A by Standard & Poor's and Fitch, sold $5.23 billion of BABs. The BABs which mature in 2039 were priced to yield 7.43%. (Source for all that.) Though theoretically riskier then treasuries they also yield more to compensate for risk and currently the S&P500 is 2.23% higher YTD which would make these bonds out performers of those indices. I don't think I have to tell you about the recent gains in metals as another example of diversification across asset classes being beneficial to a portfolio. Without going into too much detail diversification among individual stocks and sectors also is beneficial.

But lets go back to my bigger point. IF the FTSE is down, what happens to the dow? when the dow is down what happens to the Nikki? Diversification is not nearly as powerful a tool as it once was because of the constant churning by computers looking to arb markets.

Arbitrage does not make different stocks or indexes equivalent, in its most basic form the assets being arbitraged are the same assets on multiple markets with different prices, thereby presenting an opportunity for theoretically risk free profit up to the point they have the same price. The markets correlations are not the results of arbitrage. More likely the same fundamental divers drive all of the individual markets, and then countries which depend on each other may have market correlation as the result of any import / export relationships. Countries and therefor their markets do not exist in isolation. Therefor if they (their stock indices) were not in correlation based on the degree of the real world correlation their markets have with each other then they are not functioning properly or something fundamental is changing in one of the markets that doesn't effect the other.

Orangutan · 1 year

The one thing I would point out is that across asset classes and markets there is an extremely high amount of correlation right now.

Not particularly, take GLD as our example. During the flash crash here was the historical data High of 118.62 Low of 115.57. From the high to the low thats a ~2.5% spread. Much less volatility then the Dow for instance. You will find Treasuries, Taxable Bonds, Municipal Bond, Global Bonds, Currency, and most Commodity ETF's were typically not hit as hard as the US equity markets during that micro-crash. I'm sure you will agree US Treasuries are assessable to the average investor, as are everything I listed that greatly outperformed equities that day, hence the desired effect of diversification. Even going back to the housing market investment example he showed would you like to guess how a REIT that is not publicly traded preformed on the flash crash? It is safe to assume it was unaffected. Aside from some equities on the US exchanges the flash crash was relatively inconsequential and nothing compared to say the Black Monday crash.

Leviathan_86 · 1 year

Not all things are correlated by a long shot, though some assets are reversely correlated for example when bonds rally as stocks fall, or when crude rallies with stocks while gold rallies against stocks with both commodities reversely correlated with the US dollar, though sometimes they rally together too. In short all investments moving in "statistical synchrony" is bullshit. Furthermore HFT is mostly market making activity, and I don't know why the fed would buy and sell equities to make them correlate, or how they would, or if it is even legal for them to do that, so I find that all to be total BS.

Leviathan_86 · 1 year

Fees (especially if you don't have much capital), diversification (among equities and asset classes), potentially even diversification among funds of different strategies ie: market neutral, long short, passive index funds, passive bond funds etc. You could also diversify through ETFs btw to grab specific sectors and market caps.

I would avoid investing through your main bank, banks tend to charge absurdly high commissions and many misc fees while not providing much value.

YeahNoYeah · 1 year

I'm in a double degree program for Computer Science & Economics with a math minor.

It is my view that a math minor is more or less essential for both majors if you want to understand what you are doing completely or go on to high level applications of either field (phd work). For example probability theory has machine learning and economics applications and would be very useful for both, but obviously certain parts of either field would be limited by not understanding the underlying math. Also it depends on what you want to do (obviously) but if you are not sure yet I would go math, especially since you would be starting over relearning programming at this point. Then if (read when) you need further education you will have the math prerequisites you are going to need to utilize and fully understand the material.

TLDR Math.

OpenSourceFuture · 1 year

They are mostly going out of business due to their business model which is inefficient compared to netflix and coinstar (the red rent a dvd koisks).

OpenSourceFuture · 1 year

No I meant unpopular as in providing market making activity up to a predetermined point of risk, even in times of high volatility when liquidity would be more difficult to obtain. It would still be for a profit, potentially even more profit then usual as the spread would be higher in a high vol environment. Sorry if I was unclear.

OpenSourceFuture · 1 year

however this is done at a price, in terms of volatility in prices.

Actually it is the exact opposite. As market making activity reduces the bid ask spread and therefor creates better prices for buyers and sellers. They also reduce volatility by providing liquidity and potentially (up to a predetermined point) taking the unpopular side of the trade during market making activity, reducing the short term spikes and drops due to liquidity crisis and therefor reduce market impact and reduce volatility, as they make more money from trading assets that are less liquid (and provide liquidity for) then assets that have narrower spreads where liquidity is easily accessible. That is all discussed in the SEC letter by the way.

OpenSourceFuture · 1 year

This may be of interest to you.

klmd · 1 year

These cocksuckers that keep gettting richer from ripping off the poor like this and expecting us to pay the bills for them are gonna be in for a surprise soon enough.

What are you talking about? They just exercised their stock options, lots of big companies give people stock options. You do realize lots of publicly traded companies do this right?

I am sick and tired of reading these people are making record profits while the rest of us are losing our homes and losing our jobs

So some people can't make money while some other people don't?

pappadoe · 1 year

Normally FTFY statements piss me off but you are correct, I meant most.

I'm not personally the type of person that does that but time and time again I have watched others go down the path of adjusting lifestyle to income (worse even those with variable income). I've seen on multiple occasions people end up literally bankrupt in a couple years after a major financial gain or good job because of this. More often I've seen people get in heavy debt (as most will not decrease their lifestyle to suit their finances), or at the very least with the same or lower standard of life they started with prior to more money coming in. Many people just don't handle money well, even if successful from an income perspective. Hence they are always 1 or 2 paychecks away from bankruptcy.

pappadoe · 1 year

Some people adjust their lifestyle to whatever they make regardless of how much they make, so no matter how high paying their job they are always 1 or 2 paychecks away from bankruptcy.

OpenSourceFuture · 1 year

UPS can suck my nut sac.

Considering they tend to break what they handle you might want to reconsider.

alexmai · 1 year

I'm almost certain this gets posted every 3 days on this forum.

Look here it is.

And here it is again.

OpenSourceFuture · 1 year

Jesus. If you say that then they really are the propaganda masters.

Well all things being fair cnbc has Cramer so it gets pushed to the bottom of the list.

OpenSourceFuture · 1 year

For news you cannot beat http://www.Bloomberg.com

Some others would be

Of those I would say bloomberg is the least bias and most reliable.

DrRichardCranium · 1 year

It now accounts for 73% of U.S. equity trading, removing that would be detrimental to anyone who trades or invests, if you want to see what a real flash crash looks like add a transaction tax. Also it is absurd you posted cited evidence of everything you claimed and it got downvoted.

OpenSourceFuture

TROPHY CASE

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