High frequency trading : the new cash cow
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Le 3 juillet 2009, Serge Aleynikov , programmeur de logiciels financiers, est arrêté par le FBI à l'aéroport de Newark, près de New York , alors qu'il rentrait de Chicago.
It sounds like something out of The Matrix: a giant, world-spanning electronic network where high-powered machines, some of them using GPUs to gain a speed advantage, run secret, rapidly-evolving software algorithms that battle it out for profits in a high-stakes game of cat-and-mouse, attack-counterattack, that yields some $21 billion a year for the winners and can spell ruin for the losers. Except that it's not The Matrix —it's the stock and commodities markets, and the fact that these markets mainly consist now of computers trading against one another has been brought closer to the public's attention by last month's alleged theft of Goldman Sachs' proprietary trading code.
Great recap piece in the New York Times on whether or not Wall Street is picking the pockets of "non-club" investors (read - the guys who do not generate 80% returns with a Sharpe > 5.0 - can someone explain how risk/return works again?).
A former computer programmer at Goldman Sachs ' Wall Street headquarters has been charged with stealing trade secrets by downloading sensitive computer codes that drive the investment bank's automatic trading systems.
A case of financial espionage raises questions about Wall Street’s proprietary trading practices and exactly what role they play in the market. The perpetrator of the espionage, Sergei Aleynikov, is a former computer programmer and equity specialist at Goldman Sachs. He is alleged to have downloaded secret software at Goldman that is used to direct large volume, rapid-fire trades to exchanges and commodity markets, often just before the close of regular trading. At a bail hearing for Aleynikov, now in custody in New York, U.S. Assistant District Attorney Joseph Facciponti said Goldman Sachs stands to lose millions of dollars from its proprietary trading based on the stolen software. Moreover, if others in the market obtain access to these trading secrets, ”œthere is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways,” according to Facciponti.
There is a funny attempt at logic going around in trying to explain Goldman’s high earnings: 1.
“It is the hot new thing on Wall Street,” according to The Times’s Charles Duhigg, “a way for a handful of traders to master the stock market, peek at investors’ orders and, critics say, even subtly manipulate share prices. It is called high-frequency trading — and it is suddenly one of the most talked-about and mysterious forces in the markets.”
The last time I discussed dark pools , it was in the context of SEC regulation due to the increasing sense of opacity of what happens in this subset of the stock market.
Economist Paul Krugman Aug. 4 (Bloomberg) -- Goldman Sachs Group Inc., which earns more money trading equities than any other U.S. bank, sent a letter to clients explaining its high-frequency trading as regulators and politicians step up scrutiny of the practice. Goldman Sachs doesn’t use so-called flash programs “in the execution of client agency orders” and its high-frequency trading systems don’t see client order flow, the New York-based bank said.
A recent story in Advanced Trading goes after some of the minutae of High Frequency Trading and provides a glimpse of the total value that HFT may provide to behemoth PT powerhouses such as Goldman Sachs.
The data coming out from Goldman Sachs ( GS ) Q2 trading activities leaves one incredulous. I won't go into rehashing all the conspiracy theories, but as Gordon Gecko says - this is a game of information. And no one is more connected to the loop than Goldman.
Sergey Aleynikov allegedly stole some software from Goldman Sachs. While on the job, Aleynikov, a former quant at Goldman Sachs, would allegedly downlownd Goldman's software.
The New York Times has an excellent article on high frequency trading . Sergey Aleynikov , a man did something very right for the wrong reasons, even makes a cameo.
Sergey Aleynikov, a former Goldman Sachs employee, allegedly stole software from Goldman Sachs that, according to Goldman Sach's lawyer, Assistant United States Attorney Joseph Paul Facciponti, "could [be] use[d] it to manipulate markets in unfair ways." In a bail hearing held before Magistrate Judge Kevin N. Fox, Facciponti said that the software would cauue Goldman’s “profit margin [to be] be eroded.”
Array. Array. Le "high frequency trading" fait trembler la planète Finance - LMOUS