High Frequency Trading - Tickerguy's View

[ownerowner100]

you really do I great job explaining things in your vids

[badsign1980]

wall street exists for max profits in seconds you cant have that without destroying worlds economy, variations like that can only be done by speculation attacks in combined terroristic attacks by media rating agencies and these computers alg. for cornering worlds demand, and offer if this goes on this means usa does not give shit about their own economy or country or any other country or economy because manip in usa means worldwide changes in prices this decease was to stop, now

[badsign1980]

you ppl are so dumb in usa dont get that these markets work because of peoples savings and prey on your dumb asses and you greed, greed is the poison they suck you win, after u get adicted to the casino they start the real game its called robbing the american sucker blindly while controlling gov and laws to do it, because of the american greedy sucker this speculation is destroying the world economy making some ppl have to work for nothing and others to starve markets exist not for fast profits

[badsign1980]

manipulating the prices making huge wins for their costumers and companies while destroying whole segments economy you ppl didnt got it yet do you this crap is terrorism disguised as capitalism witch is just a word made up by jews to basically ran sack an economy cornering the wealth in the 1% of the pop is also creating real scarcicity, they make up this scenerio to invite the idiots with savings in and then suck their money in market manipulation, market mai is actually world mani. its illegal

[RomanEmpire3k]

I was a little confused in the beginning, I think there's a small mistake. You can't have both bids and offers at $20 (the same price), because then those orders would execute.

I've been trying to understand the problem with flash orders, and I think I get it. It seems to me like you would be an idiot to make a bid at a price higher than the best offer though. Good thing most exchanges have stopped flash orders!

[Roelandvinken]

Might these flash trade algorithms explain the stock trade peak days before 9/11?

[louielamson2000]

High-Speed Trading Stockbrokers Play like “Kentucky Horse Race-Trading? Or like Bingo game? Pucker Game Machines in Casio at Lat Vegas?

[SigmaHFT]

you couldn't be more wrong

Flash orders were introduced to save route-out fees and they are intended to be used by computers

hm

So you call someone who uses a computer for a function that was clearly intented to be used by computers a Front-Runner?

FAIL!

Acquaint yourself with some facts:

seekingalphaDOTcom/article/151­430-high-frequency-trading-we-­fear-what-we-do-not-understand

zerohedgeDOTcom/article/dark-p­ools-price-discovery-and-level­-playing-field

[believersunderground]

they own the cops. it's sad they sold the soul of the USA out. Scott (BUG)

[HYorker]

Great video, clear explanation and pointing out the problems

[mcakes]

The following diagram does a better job of explaining the true situation:

static.seekingalpha. com/uploads/2009/7/26/saupload­_flash_orders_diagram.jpg

[mcakes]

Your toy example is a bit simplistic, and doesn't really make a lot of sense (though people seem to eat it up without much critical thinking). You can't trade through the order book; if someone is willing to sell at 20.00, and I want to buy at 20.10, I will get a (partial, depending on liquidity) fill at 20.00. Nobody is going to step in front of me because they're faster or received a flash order and force me to pay more.

[wbradd3797]

front running= electronic insider trading

[VVi11]

Thank You Karl!

Agree 100%

[Azbx23]

Another great video, Karl. Thanks.

Government officials will never speak out against HFT because they're indirectly profiting from it through campaign donations and job security when they choose to enter the private sector.

[brettrobson1984]

This is how they have fixed the stock market. Think of it as plasters on the wounds

[ForbiddingDurian]

Thanks

excellent video...

[eatmealiveplease]

good vid KD

[stephanieco28]

SUPER SMART, TY

[kkklownknight6699]

As long as we have Capitalism then markets will always be rigged and manipulated.

There is no level playing field in capitalism, The big finance and corporate elites have the advantage. They run the system so they'll shape it as they see benefits them.

Don't bother trying to change anything.

[Renegen1]

....or you could change it! Why give up and act so defeated.

[MacroTraficante]

good to hear someone who actually knows what there talking about on you tube, Keep it up!

[sorrysonuvabitch]

You are bald.

[Nuanceqwest]

looks like fraud.

This is along the same lines as insider trading i.e. trading based in internal info before the public gets wind of it.

[kryogenikz]

Good video!!!! Well said

[WunderMaus]

Hey Karl,

You may be conservative in your political view but there are many progressives (Even LIBERALS!?) that appreciate your straight talk on the crooked business antics of wall street. I've been posting links to your youtube videos at a discussion forum "democratic underground" with the intent of showing the criminal actions of the money manipulators is not a conservative or liberal issue, it is an AMERICAN issue. Thanks for sharing your intellect and insight with the online community.

[bertly71]

Thank you for explaining this. It is not something that inspires confidence in the markets, knowing that this goes on.

[cosmicguerilla1]

yeah ! where are the cops ?

[putittogether]

cosmicguerilla1 - The "cops you refer to are the government. It is called regulation. In this case the SEC. They are the "regulator", and for anyone whom has studied governments knows, they are nothing more that a mob hit squad, protecting the real criminals and killing of the small competition, so that the big fish like Goldman Sacks can continue unabated in its theft.

[smithma01]

Thank you Sir.

[somefellow12345]

People like you Karl are why I still have faith in a select few finance experts. Thank you for giving such easy to understand, yet comprehensive insight day in and day out.

[thbyrnes]

Who is John Galt?

[davincij15]

John Galt? Sounds familiar is it from the Ayn Rand book I must get around to reading?

[mcgrawtim123]

Where ARE the cops?

[pookiecatblue]

thanks ticker guy! i'm staying out of these markets.

[bicstic8]

lol

[Gilgamesh73]

Mr. Denninger, you are a model for everyone to look up to. Keep up the great work sir!!!

[UpTick21]

The game is Fixed!!!!!!! The market should have gone down this week . . . instead . . . it went up? Higher stock prices with little volume . . . I have had it . . . I no longer trade in US stocks. With the week dollar I am investing overseas. I am sick and tired of the market manipulation. BASTARDS!!

[Roelandvinken]

@UpTick21 Its a year later now. Look at the commodities market. India and CHina and Brazil have trippled their consumption levels, look at the market....... totally down.

There is just no market-structure driving the stock exchange, leaving no room for intelligent investment decisions. This sucks, buy gold and build businesses is the only way it seems.

[DefenceSpeech]

damn, new camera?

[curtcoffee]

Corruption, power, greed and narcissism are impossible to stop. They cause war and revolution, are pervasive, found throughout history in all age groups and all walks of life, even the righteous, including those making and enforcing the rules. These behaviors stem from basic human survival instincts, therefore, genetic modification will be required to fix this issue otherwise these traits will persist through natural selection.

[Gilgamesh73]

curtcoffee -- You are making excuses for Evil. Evil exists and it has an origin. It has all been explained in every major world religions. Are you saying they are all completely wrong?  Wake up.

[curtcoffee]

Sorry, I would have not dreamt of that at all.

[davincij15]

I just read the short children's story on scrib called:

The Kingdom of Moltz by Irwin Schiff

It's very good.

Anyhow about this video... There are many examples of manipulation and stealing in our "free market". The point is not to point at them and tell the authorities. The Madoff scam among others, proves calling the authorities does not work. The point is the tell the public those that it effects and provide them with a plan of action so they are not affected.

[davincij15]

For example there is more than enough evidence to prove that silver is manipulated. There have been more investigations in silver manipulation than Madoff's 20 year ponzi. Like the Madoff scam the public realization that silver has been manipulated will not occur until there are major industrial shortages.

Therefor it is logical for individuals to buy PHYSICAL silver as it will expose the crime and be profitable.

[1mealperday]

hey davinci, 700 oz so far. most @ 14. or less

[davincij15]

Good for you. I was hoping it would last longer but if they Goldman suck guy, Gary Genslerat the CFTC is for real about reducing position limits, silver will melt up to $100+ dollars.

I would love to by more cheep silver for a few more years. It will be funny to see the looks on peoples faces when the MSM talks about how silver above ground is more rare than gold now because we used it up.

Right now to everyone else it's bullshit like Madoff was NOT running a ponzi before he admitted it.

[1mealperday]

may go beyond 100. as i understand from many posts read lately , it is possible to 300.per oz. Question is will it happen and how soon. Heres hoping!

[BlackFlagParty]

If your monitors are strobing and such you can either sync all the video and your camera with a sync generator (very expensive) or you can adjust the shutter on your video camera. On my camera, slowing the shutter just a bit solves the scan issues with video monitors.

Hope this helps! Great videos! Always glad to see a new one posted.

[BOBSMOKETV]

Why participate in the market when you know its rigged?

[wpg420]

I appreciate your opinion and look forward to additional videos...

[reptarman7]

I think of HFT as scalping not frontrunning or market manipulation which is what this is. If I tried to do this as a retail trader, I would be in prison by now. We don't need more regulation. We need government to enforce rule of law and protect the commons from these types of abuse. The large corporations shouldn't be able to determine regulations and be above the law while the little guy pays for it all.

[lightleague]

excellent video, fav'd

[Annihilate3275]

thanks!

[banjojambo]

wheres the rage? you were a lot more judgemental against people who got ninja loans .

[jembocc1347]

Thank you for that

[galikazoid]

thanks for sharing your views with us!!

[fal2grace]

Great video! Thanks!!!

[navtel]

excellent vid karl, no argument here.. things should be done but when the government is in the pocket of GS what will be done?

[MournelitheCalix]

One word, Deregulation. Smell it. The fact of the matter is that for the last 10 years the popular political opinion was that regulation was bad. If you were no longer needing to be regulated, where is the need for regulators? In fact during the hearings for Secretary Geithner he stated point blank that he wasn't a regulator. Unfortunately that was exactly what he was supposed to be doing. So with the cats away, the rats do play. Want to get rid of the rats, unleash the cats.

[justjacqueline2004]

Gosh Karl your videos are painful because they carry so much truth.I love 'em and can't wait to see them on national TV although I shall not hold my breath.Exposing wrong with clarity-go Karl.

[landofbile]

Rather than advocating more government regulation why not go to the exchanges and try to convince them to ban the practices. If that fails goto the customers and explain to them what's happening so they keep an eye out for such things.

I'm also failing to see a real problem unless this is against the contracts signed between the individuals/companies. If you ask for 20.10 or less and they provide it at 20.04 and there is no condition indicating it must be lowest available then all is fine.

[southshores777]

Three black helicopters at lakeland fl airport all week.

[gmfutube]

Where are the cops?

Busy bustng meth labs and arresting people for pot.

Isn't that what s really important?

[mejt223]

LOVE IT KARL

[Ape65]

Do you think we're in the middle of a large-scale "pump and dump" operation?

[spazznout]

without a doubt! Is it intentional or a consequence of these horrid and illegal systems in place is yet to be determined for me. I tend to lean a bit to the "tin foil" side and believe this is all a grand plan thus making this quite possibly the largest ever conspiratorial "pump and dump" ever in the history of ALL of mankind. Yet we the sheeple just keep sitting quietly watching it all go by. Its like a horror movie in slow motion.

[tenagliac]

Sounds like things are moving too fast. Isn't the purpose of stock "ownership" ? Pehaps require any share bought has to be held a year before being eligible for sale again. Think would cause more thinking and careful behavior ?

[neil9327]

Do they not have "marketmakers" in the USA? In the UK there are marketmakers who always quote a price at which they will buy or sell a stock from you at any time. There is a spread between the two prices that provides a small profit for the marketmaker in return for providing the service.

So if you want to trade, just accept their prices and the trade is done, with no uncertainty about the price, and no manipulation. You accept their price instantly, and they are not allowed to back out.

[maverickgoose123]

he's talking aboujt electronic trading systems where orders are done via computers and not over the phone. some trading desks exist purely to receive info from the xchange electronically milliseconds before everyone else (use expensive hardware to reduce latency) anf therefore can effectively trade in front of other people.

get it?

[kroqster]

whats an example of "info from the xchange", that could be used in an example of high frequency trading?

[maverickgoose123]

prices

[kroqster]

right... effectively a trade right?... and HFT machines know and act on it before other people know about the trade yeah?

[maverickgoose123]

yep

[kroqster]

How does the HFTM know the trade wasnt just another HFTM trade? Karl is talking about someones *intention* to do something and a HFT machine knowing about this intention and acting before that someone can act on it themselves. how can it know about an intention? From Karls example, why would anyone let anybody else know of their intention to pay 2 spreads higher?

[maverickgoose123]

Leaving aside your somewhat childish attempt (for a 32 year old man) to engage in the Socratic dialectic over teh intarnet, let's continue the discussion. If you want to point something out or explain something then do it, don't waste time.

Most of it is very simple speed game of arbitrage. They either arb cash vs futures markets or in equities they get hit/taken in one ECN and sell/buy on somewhere else.

[kroqster]

i have no idea what that first paragraph was about (queue an insult about my lack of intelligence? fyi i'll prolly get over it) or where it came from...you sound paranoid... i dont know why you would be. they were sincere questions. you said trades in your first answer. how does the HFT machine know the trade is a legitimate trade? and not just another HFT trade, or from a human trader that has spotted an algo and is trying to manipulate it? is this not a fair question? what is ECN?

[maverickgoose123]

Electronic Communication Network. Come on man, you can look these things up yourself you're obviously intelligent.

[kroqster]

fair point... in fact i think i'll think ill look up hft myself...thanks

[maverickgoose123]

what do YOU mean legitimate trade? the price is on the screen, therefore its dealable.

yest the computers can pass securities back and forth between themselves.

[kroqster]

by legitimate i just meant non hft trades... ie you cant hold that high freq. trades are legitimate and try to get the practice banned at the same time right?

[maverickgoose123]

they are legitimate by the letter of the law. SEC allowed ATS (alternate trading systems) to be created in 1998 which led to the explosion of ECNs (a form of ATS).

i dont think they are in line with the spirit of the law though.

i find it difficult to reconcile my Austrian School free market beliefs sometimes when practices like this arise. It just leads to other "good" sharks setting up companies to "defend" institutionals from the "bad" sharks. but they take a cut too....

[kroqster]

im not 32 either

[maverickgoose123]

Some few firms do microseconds momentum trading, they realize someone is coming in with orders and they jump ahead of the orders(because they are faster to reach the market) they push the market one cent and sell back to the original buyer.

They also use flash orders to jump head of big orders.

Most of the strategies are not mathematical but related to microstructure of the markets.

[kroqster]

im sure utube word count restrictions limit the ability to provide an easy to understand comprehensive example of HFT. so do you know where i can find an easy to understand explanation that is comprehensive? i have, what i believe are obvious, questions every time i hear/read someone explaining HFT. not to question their legitimacy, just for clarification purposes. but seems the more questions i ask the further away i get. now im in a soractic dialectic over teh intranet argument!

[maverickgoose123]

I think what Karl is talking about here is flash orders in aprticular. This has more to do with the split second propogation of orders form ECN to the next.

[maverickgoose123]

Effectively, you can flash orders for 1/2 second on exchange. Exchanges allow this to maintain maret share. BUT, people on the same ECN with fast enough infrastructure can see this before it is propogated to other ECNs. They can then use this to game the orders across different ECNs.

[StandUp555]

You ask ... "where are the cops ?"

... you mean for the last ca. 15 years I presume.

Not a single arrest for NAKED short selling of any consequence.

Oh yeah , the last "cop" that was a ( investing ) public hero was conveniently removed due to a "convenient" small scandal ... Eliot Spitzer.

If you still don't believe in "coincidence" theories, maybe it's time to start now !

;-)

PW: Good video ... Thx.

[glenbob99]

>Not a single arrest for NAKED short selling of any consequence.

well, Martha Stewart was arrested for short selling, but she wasn't naked....hee, hee

[Atoyota]

Also.... you stay up late Karl, this was posted at 1am?

You seem a bit tired in this one, not as crisp as usual. The content is all good, just a meaningless critique on the presentation. That and the last couple vids you've done you are not at your lovely desk.

You do great work Karl, loyal fan here. I've learned a lot from you and reading your blog.

Thank you

[Ape65]

He seemed perfectly crisp to me.

[kdenninger]

I rearranged my office - the lovely credenza is no longer there. :) I was going to have my usual seascape-style background on my monitors but it "beats" badly with the camera and looks TERRIBLE, so I shut them off. I'll get that fixed.

The video was posted well before 1:00 AM but I'm now using my studio-quality HD camera and microphone setup, and as a result the post-processor on my end and then again on Youtube takes a LONG TIME to process it. It was actually recorded around 10:00 PM. :)

[0PsycoDad0]

Guess what, the guy who produced the malinvestment with synthetical derivates in the Hypo Real Estate debacle was sent to Ireland to manage the then emerging housing bubble.

Thanx to the internet pissed off citizens can now "beat back the crocks with liberty bonds".

XD!

[Atoyota]

This reminds me of people playing online video games, one guy has a lan to the server where the other guy has a 300 baud modem connection. Guess who wins all the time :P

That and price sniffing algorithms both seem a bit unethical.

Solution may be to hold offers for a set time, then talley the buys and quantity then sell to every buy relative to the quantity of shares they were willing or asking for and the quantity offered. Meaning every buy gets a piece of the pie. Sells the same in reverse.

[freedomfighterone]

Goldman Sachs is cheating again with their high speed computer trading scam.

[soulharvest2012]

The fox has greased his chin with another goose, and the farmer and his wife sleep through it...again.

[theanteater]

VERY interesting.

If volume & liquidity can be manipulated so easily to inflate.

Kind of makes you wonder about those who point to major moves in the market "supported" by heavy volume.

That support will inevitably be proven false when the computers are turned off.

Scary.

[GoldenFireReviews]

You're a man of integrity. The world could sure benefit from more "Tickerguy's" like you. Kudos.

[frontier1701]

absolutely excellent explanation

[Mr1openmind]

GS = PPT

Stop playing their game?

[tuktukktotam]

class action lawsuit would be nice .

[theanteater]

Agreed.

[tuktukktotam]

you can go and buy almost any business for what it makes in a year plus inventories and equipment . Why would anyone want to purchase stock in any company for 20x -100x mark up ? And have zero control . It is utterly insane . Especially when your own brokerage company using u as a sucker .

[1mealperday]

why keep on trading in this market? A walk out by all trders would be cheered by those of us who see whats going on. I agree where are the cops?

[bdc03]

the cops all SHUT UP, cuz they know if they do they can get a kush job at GS or some other scandalous firm.

[U2ForNow]

1meal,

Many of us make a good living trading. We are not going to stop in order to make a point. Besides, our volume isn't enough to make a difference.

[gmfutube]

As long as you are making "a good living" fuck everyone else, heh?

[U2ForNow]

gmfutube,

If you can convince the entire trading community to stop then I will. Until that happens why don't we get the rules enforced.

Naked short selling is not legal, yet still happens. Where is the protest there?

You really think retail traders could make a difference? I doubt they could.

[1mealperday]

peronally, i remove myself for my own integrety and self respect. Money is not everything, in fact its worth less day by day

[lakaitrading]

Only way to stop this is to make ban all these ECN's from giving rebates for "adding liquidity" also up the threshold for canceled order fines

[linux23dragon2008]

Yea, you do see funny volatility moves even in the smallest time frames. The best trading indicators are not as effective as they once were.

[psxwarrior]

Given the fact that these people are probably being allowed to do this by the fed to help drive up the stock market to fool people into believing the economy's getting better, it's no wonder they are getting away with it.