Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

HFT Rats Find New Targets Even as They Flee Banks

Stock-Markets / HFT Aug 17, 2014 - 10:34 AM GMT

By: Money_Morning

Stock-Markets

Shah Gilani writes: Rats are fleeing their listing ships.

Of course, that’s not surprising.

The Financial Times reported yesterday that high-frequency traders are leaving investment banks for hedge funds, prop trading houses and their own startups.


Oh, you didn’t realize that investment banks – in other words, too-big-to-fail banks – had high-frequency trading (HFT) desks?

Surprise, surprise, surprise. HFT isn’t the exclusive purview of specialized trading shops.

HFT is a proven money-raking machine, and today I’m going to tell you that’s why it’s part of most so-called investment banks’ trading operations…

Get Into the Game

HFT is a complicated game – um, I mean, business model.

Super-smart computer scientists design mega-fast machines that intercept trading orders from the airwaves or cable conduits. Their machines read these orders – the orders you send to your discount broker, the orders institutions send to dark pools… everybody’s orders.

And before all those orders can be brought together and matched up so a trade gets executed, HFT boys pick off the orders they want.

They also send out their own orders, billions of them every day. They don’t want these orders executed, but want other machines to see their orders and move after them, which are canceled before they can be acted on. It’s about faking out other traders’ machines to set them up to be picked off.

It’s beautiful.

What’s the endgame? Insider trading. Legalized insider trading.

These aren’t tips from an insider. It’s trading on inside data flows that aren’t protected, but sold to HFT desks to be traded against, with an advantage that only the HFT players have.

The HTF rats are leaving the TBTF banks because of the Volcker rule.

The Volcker rule, which has to be implemented by July 2015, puts an end to certain “proprietary” trading. Proprietary, or “prop,” trading is that done for the house and not on behalf of any clients.

Yes, banks trade for clients. And yes, banks are liars about trading for clients by taking the other side of their clients’ trades and not calling that what it is… prop trading.

Anyway, prop trading is going to get a closer look as we get to July 2015. European banks are looking at maybe two years before they get their own Volcker-type rules.

So, the rats are leaving their listing ships (they’re listing because their trading revenue streams are going to dry up) for swamps where they can run wild and get paid what they’re worth.

Good News, Bad News

Anything that reduces the risk TBTF banks take with depositors’ and taxpayers’ money is a good thing.

The bad news is that these same banks will just buy big brokerage operations in order to sell their order flow to the HFT players. And those players will pay them handsomely to pick off their brokerage customers. In fact, they’ll be able to pay even more to peek under skirts everywhere, because not being “banks” means they won’t be subject to having their own skirts looked up and will pay their traders whatever they’re worth.

The TBTF banks are already selling out their brokerage customers. They’re selling raw order data to HFT desks and giving their own HFT desks access to their clients’ dark pool orders. Barclays is under investigation for abusing its dark pool clients, and inquiries have been sent to Goldman Sachs, UBS, Deutsche Bank and Credit Suisse about how they operate their dark pools.

What does this all mean? Nothing. It’s just moving around deck chairs.

Until HFT is brought to heel, it will remain a legalized, institutionalized pick-off-the-suckers game. All the exchanges will make their profit, and so will all the trading desks.

It’s business as usual.

“The strong seem to get more, while the weak ones slave. Empty pockets don’t ever make the grade. Momma may have and Poppa may have, but God bless the child that’s got his own.”

Source : http://www.wallstreetinsightsandindictments.com/2014/08/hft-rats-find-new-targets-even-flee-banks/

Money Morning/The Money Map Report

©2014 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in