High-Frequency Trading as High-Tech Robbery

By Mike Whitney

Where are the Regulators Who Will Regulate?

weekend edition April 16-18th 2010

The Securities and Exchange Commission (SEC) knows that High-Frequency Trading (HFT) manipulates the market and bilks investors out of tens of billions of dollars every year. But SEC chairman Mary Schapiro refuses to step in and take action. Instead, she's concocted an elaborate "information gathering" scheme, that does nothing to address the main problem. Schapiro's plan--to track large blocks of trades by large institutional investors-- is an attempt to placate congress while the big Wall Street HFT traders to continue to rake in obscene profits. It achieves nothing, except provide the cover Schapiro needs to avoid doing her job.

High-frequency trading (HFT) is algorithmic-computer trading that finds "statistical patterns and pricing anomalies" by scanning the various stock exchanges. It's high-speed robo-trading that oftentimes executes orders without human intervention. But don't be confused by all the glitzy "state-of-the-art" technology. HFT is not a way of "allocating capital more efficiently", but of ripping people off in broad daylight.

It all boils down to this: HFT allows one group of investors to see the data on other people's orders ahead of time and use their supercomputers to buy in front of them. It's called frontloading, and it goes on every day right under Schapiros nose.

http://www.counterpunch.org/whitney04162010.html

It's usually needed before prosecuting a party that may be guilty of a crime.

“This rule would give us prompt access to trading information from large traders so we can better analyze the data and investigate potentially illegal trading activity,” said SEC Chairman Mary Schapiro.

401Ks are the biggest scam in history, mark my words. As more and more Boomers with 401Ks retire the market will crash again and the Big Guys will make a fortune as they short-sell to high heaven, leaving younger Boomers and Gen-Xers screwed.

... should be in the neighborhood of, oh, 90%.

wall street should be a place for investing, not gambling and market manipulation and herd mentality.

I have no problem with long-term rates being rather low.

Yeah, I know, it'd screw fluidity. Tough.

Nothing too outlandish, say something on the order of $1 per trade, which may or may not need to be linked to the volume of shares per trade. That wouldn't hit anybody but the high-frequency traders trying to run their stock manipulations, and it would generate money to pay to fix the mess.