HFT / financialization
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What goes on in stock markets appears quite different when viewed on different timescales. Look at a whole day’s trading, and market participants can usually tell you a plausible story about how the arrival of news has changed traders’ perceptions of the prospects for a company or the entire economy and pushed share prices up or down. Look at trading activity on a scale of milliseconds, however, and things seem quite different.
LRB · Donald MacKenzie · How to Make Money in Microseconds
Today marks the first anniversary of the flash crash. During the afternoon of May 6, 2010, U.S. stock prices plunged in a matter of minutes. The sudden downward move caused stop orders for many stocks to be executed, leaving some shareholders with unanticipated losses or realized capital gains. The events of that afternoon brought to the surface a few important points for individual investors. The first is the involvement of high-frequency trading firms.
Lessons From The Flash Crash - Intelligent Investing - Ideas from Forbes Investor Team - Forbes
HFT Has Disconnected Commodities From Fundamentals | ZeroHedge
High-frequency traders have caused U.S. commodity futures prices to disconnect from market fundamentals of supply and demand since the 2008 financial crisis . An extensive and detailed analysis by the United Nations Conference on Trade and Development just confirms what we have shown again and again ( most recently here in Silver ) that HFT's impact on the world is not all unicorn-tears and liquidity-providing. Markets are more exposed to 'sudden and sharp' corrections , and as Reuters notes "The strategy of those involved in high-frequency trading tends to reinforce the correlation between equities and commodities ". In a somewhat stunning conclusion from an academic treatise, the authors find "We are not saying that it's all about speculators and (that) fundamentals don't matter. But we are saying that they tend to matter less, except in extreme cases,".Schapiro Questions Role of High-Frequency Traders - WSJ.com
WASHINGTON—The Securities and Exchange Commission is looking to curb high-frequency traders' huge influence on stock trading and is considering charging fees for the myriad buy and sell orders that are later canceled, among other options. SEC Chairman Mary Schapiro said a large portion of equities trading has little to do with "the fundamentals of the company that's being traded." She said it had more to do with "the minuscule aberrational price move" that computer-assisted traders with direct connections to the exchange can "jump on" in fractions of a second.
The Reign of Robots Is Closer Than You Think: Buchanan - Businessweek
The futurist Ray Kurzweil has famously predicted that humanity is approaching a “singularity,” a fateful moment when our technology becomes smarter than us and able to learn faster than we can, when it becomes the principal creator of new technologies and machines race far ahead of us. Humans may effectively fall out of the loop -- a species demoted, if not eliminated. For now, this world remains science fiction, at least at the level of humanity. But finance is flirting with a similar transition, as ever-faster computing and communications technology takes high-frequency trading into a regime of speed where human beings can no longer keep up. In fact, we may have already arrived. The Flash Crash of May 6, 2010, was a landmark event hinting that something may be amiss in the high frequency markets.
Nanosecond Trading Could Make Markets Go Haywire | Wired Science | Wired.com
Photo: © Copyright 2006, The Nasdaq Stock Market, Inc. The afternoon of May 6, 2010 was among the strangest in economic history. Starting at 2:42 p.m. EDT, the Dow Jones stock index fell 600 points in just 6 minutes. Its nadir represented the deepest single-day decline in that market’s 114-year history.The crusade against High Frequency Trading which Zero Hedge started well over two years ago , is now coming to an end. Reuters reports that U.S. securities regulators have " taken the unprecedented step of asking high-frequency trading firms to hand over the details of their trading strategies, and in some cases, their secret computer codes. " As everyone knows, the only thing of value within the sub-penny scalping HFT universe are the odd nuances in computer code. Which is why its supreme and undisputed secrecy is sacrosanct. As soon as anyone, especially a regulator, has a whiff of understanding how any given algorithm works, it becomes the equivalent of collapsing the wave function: observing the HFT theft-scalping duality in action eliminates the Schrodinger equation associated with any simplistic algo and collapses its "wave function" to a worthless series of ones and zeros. Said otherwise, this is the end for HFT. More from Reuters :
Goodbye High Frequency Trading - Regulators Seek Secret HFT Codes | ZeroHedge
Age of the Algorithm
Content farms depend heavily on search engines for traffic. Photograph by Marc Rimmer. SOUTH BEND , Ind.—Tony Bucciferro put the Michigan State Spartans on his back Sunday and spurred them to a 3–0 win over the Notre Dame Fighting Irish (7–11) at Frank Eck Stadium. Bucciferro kept the Fighting Irish off the board during his nine innings of work for Michigan State (12–4).
Mathematicians and their trading programs are increasingly taking the place of professional investors in financial centres across the world Trading floors were once the preserve of adrenalin-fuelled dealers aggressively executing the orders of brokers who relied on research, experience and gut instinct to decide where best to invest. Long ago computers made dealers redundant, yet brokers and their ilk have remained the masters of the investment universe, free to buy and sell wherever they see fit .
BBC News - Quant trading: How mathematicians rule the markets
Algorithms Take Control of Wall Street | Magazine
Today Wall Street is ruled by thousands of little algorithms, and they've created a new market—volatile, unpredictable, and impossible for humans to comprehend. Photo: Mauricio Alejo Last spring , Dow Jones launched a new service called Lexicon, which sends real-time financial news to professional investors. This in itself is not surprising. The company behind The Wall Street Journal and Dow Jones Newswires made its name by publishing the kind of news that moves the stock market. But many of the professional investors subscribing to Lexicon aren’t human—they’re algorithms, the lines of code that govern an increasing amount of global trading activity—and they don’t read news the way humans do.
Finance capitalism - curators...
Several years ago, my son, who did a PhD thesis on the reception history of Max Weber, the founding father of sociology, introduced me to two influential essays by Weber, entitled respectively Science as a Vocation and Politics as a Vocation . In them Weber discusses what problems you have to face, and what personality and character you have to own, if you decide to make these fields your calling, and he’s surprisingly thoughtful and yet practical about it.I thought it would be interesting to begin to think about the same questions with respect to entering the field of Quantitative Finance, particularly from a practitioner’s point of view. Financial “ Engineering “?!
Financial engineering as a career: Part 1 | Emanuel Derman
Structured Finance / Securitization
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Financialization
In Crapshoot Investing: How Tech-Savvy Traders and Clueless Regulators Turned the Stock Market into a Casino , James McTague, Barron’s Washington Editor, chronicles the effects of High Frequency Trading (HFT) from the crash of October 1987 to last year’s Flash Crash. McTague say that equity markets are now “high-speed casinos rigged against individual investors.” In the book, he traces the development of HFT, explains why the Flash Crash happened, and why the odds strongly favor a major re-occurrence again. Due to high technology of super heated computers, co-location, and heavy algorithmic trading activity, stocks bought and then sold all in a matter of milliseconds, with profits of a tenth of a cent per share traded.
Crapshoot Investing: How Tech-Savvy Traders and Clueless Regulators Turned the Stock Market into a Casino | The Big Picture
The latest quarterly report from the Office Of the Currency Comptroller is out [shows] that the top 4 banks in the US now account for a massively disproportionate amount of the derivative risk in the financial system. Specifically, of the $250 trillion in gross notional amount of derivative contracts outstanding (consisting of Interest Rate, FX, Equity Contracts, Commodity and CDS) among the Top 25 commercial banks (a number that swells to $333 trillion when looking at the Top 25 Bank Holding Companies), a mere 5 banks (and really 4) account for 95.9% of all derivative exposure …. the top 4 banks: JPM with $78.1 trillion in exposure, Citi with $56 trillion, Bank of America with $53 trillion and Goldman with $48 trillion, account for 94.4% of total exposure. As historically has been the case, the bulk of consolidated exposure is in Interest Rate swaps ($204.6 trillion), followed by FX ($26.5TR), CDS ($15.2 trillion), and Equity and Commodity with $1.6 and $1.4 trillion, respectively.