Unstructured Finance

Former stock market ‘scalpers’ are vocal HFT critics

By Emily Flitter

REUTERS/Rebecca Cook

While the Securities and Exchange Commission maintains it does not need to do much to reign in the high frequency trading machines that have taken over Wall Street, a group of traders who understand how HFT firms make money—because it’s similar to the method they used to use themselves—have become vocal HFT critics. Yes, they may complain because they don’t make as much money as they used to, but they also think the machines are destabilizing the market.

Meet Dennis Dick, a prop trader in Detroit and a member of a league of stock market participants who have had to change their trading strategies now that they are no longer the fastest guns on the Street.

Dick is in the company of critics like Joe Saluzzi and Sal Arnuk, the co-founders of Themis Trading whose book, Broken Markets, details their concerns about the machines.

“We used to be shorter-term traders, scalpers who were also market makers,” Dick said. “Now we’re just trading a longer time horizon. You can’t come in and expect to scalp.”

Dick, who works for Bright Trading and also founded his own research firm, Premarket Info, has met with SEC staff to discuss his concerns about high frequency trading. He emphasizes that while he and the other scalpers might not deserve a great deal of sympathy, the other humans in the stock market—retail investors—certainly do, and they are being treated the same way.

Jamie Dimon’s teflon coating

By Matthew Goldstein and Jennifer Ablan

Jamie Dimon’s coat of teflon is wearing well, even as the criminal and regulatory investigation into the London Whale trading scandal deepens.

Shares of JPMorgan Chase, which plunged more than 20 percent in the days after the bank revealed in May that the trading losses were much worse than previously believed, have rallied back. The stock is now trading around $38.66 a share. On May 10, when the bank disclosed after the bell that it had lost at least $2 billion on derivatives bets made by a group of London-based traders, the stock closed at around $40.

When Dimon was called before Congress to testify on the trading scandal in June, he was generally treated like the king of Wall Street by congressman and senators. At the time, bank’s internal probe had not yet found evidence that the three traders may have tried to hide their losses, so the fallout from the scandal appeared limited. The bank disclosed those finding to federal authorities before releasing its second-quarter earnings and restating its numbers for the first quarter.

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