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HFT made easy with Magic Markers

The folks at Marketplace, a non-profit financial news show that airs on most public radio stations, takes on high-frequency trading. Paddy Hirsch, the program’s senior editor, does a good job explaining the nuts-and-bolts of this increasingly controversial super-fast trading style.

And best of all, Hirsch uses different colored markers to make his point. Watch the video below:

High-frequency trading from Marketplace on Vimeo.

Dear shareholder…it’s high-frequency trading

A few months ago, not many outside of the quant world were talking about high-frequency trading. But these days every one is talking about all the profits a select group of Wall Street firms and hedge funds area making from super-fast, entirely automated algorithmic trading.

So may be it’s not too surprising that some money managers are beginning to attribute some of the post-March surge in the stock market to the impact of HFT. Or that’s how money managers Steve Scruggs and Benton Bragg, see it in this recent letter to shareholders of several funds they manage:

Sergey strikes back

The case of Sergey Aleynikov, the former Goldman Sachs programmer charged with stealing some of the top secret code to the investment bank’s high-frequency trading program, is going on the offensive.

Aleynikov has filed a subpoena on his former employer, seeking access to some information–mainly his personnel file. And Goldman has responded by filing a motion in federal court to quash the subpoena. Goldman filed its motion on Aug. 6, a source familiar with the matter says.

Flash Schumer scores a victory–almost

Photo

It appears Senator Chuck Schumer, aka Flash Gordon ,is going to get his way on the dubious practice of “flash trades.” Maybe.

Schumer says the Securities Exchange Commission has told him it is close to banning flash trades–a process in which some high-frequency trading desks get a few millisecond sneak peak at market trade orders. This practice has fueled allegations that some high-frequency trading desks are getting an unfair advantage and can frontrun the general market.

Will Sergey cut a deal?

It looks like federal prosecutors may be trying to cut a deal with alleged Goldman Sachs high-frequency trading code stealer Sergey Aleynikov.

Today was the day for prosecutors to indict Aleynikov, who was arrested on July 3 on the theft charges. But in a court filing, prosecutors told the presiding magistrate judge that they need another 14 days to continue discussions with Aleynikov’s lawyer about a “possible disposition.”

High frequency fuzzy math

One of the many mysteries swirling around high-frequency trading is just how profitable the lightning-fast buying and selling of stocks, options and commodities really is.

The Tabb Group, a financial services industry research firm, recently estimated that the 300 securities firms and hedge funds that specialize in rapid-fire algorithmic trading took in some $21 billion in profits last year. But when pressed on how it arrived at this figure, Tabb representatives won’t say.

Algos gone wild

The many proponents of high-frequency trading keep saying there’s no reason to be concerned about a rogue algorithim sparking a 1987 market-style crash. HFT supporters keep saying show us a case where a rogue algo even caused a minor hiccup in the market.

Well, Bernard Donefer, a professor at CUNY’s Baruch College in New York City and a critic of highly-automated trading programs, says the world already has gotten a glimpse at the kind of mayhem a rogue or simply a misfiring algo can cause.

Wall Street meets The Matrix

Michael Durbin is no Wall Street rebel. But Durbin, who has been on the front lines of
high-frequency trading (HFT) since its early days, isn’t afraid to buck the industry line that lightning-fast trading of stock, options and commodities poses little or no risk to the stability of the markets.

Durbin says it’s reasonable to wonder whether Wall Street’s unfettered embrace of algorithmic automated trading could be setting the stage for a future meltdown.

Goldman fires back on HFT

Goldman Sachs is not known for being particularly forth coming with the press. The investment firm’s two favorite words for dealing with media inquiries are “no comment.”

But all of sudden Goldman is taking an aggressive stance when it comes to the subject of rapid-fire high frequency stock and commodities trading–an activity that is drawing increasing scrutiny from the press, regulators and even the folks on Capitol Hill.

Schumer aka Flash Gordon

There’s an old joke in New York that the most dangerous place is the space between a TV camera and Sen. Chuck Schumer. And the New York Democrat’s love of the limelight certainly was on display late last week with regards to the increasingly controversial subject of high frequency trading.

Schumer’s staff didn’t waste time on Friday in announcing that the senator had sent a letter to the Securities and Exchange Commission, asking regulators to study some aspects of highly-automated stock and commodity trading.

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