U.S. stock markets are rigged, says author Michael Lewis

Re:U.S. stock markets are rigged, says author Michael Lewis by cynicalkane on Monday March 31, 2014 @07:05AM (#7500690)

You'll notice that any accurate argument against HFT can be applied to any kind of trading.

There's nothing sinister about HFT except that it's a faster version of ordinary market making. If you think market making is evil, then you'll think HFT is evil. But market making is perfectly healthy, economically speaking. Information advantages and speed have been part of this world in the 400-odd years that centralized trading has been a thing.

HFT is a threat to other market makers, but you're smart enough to know that common people shouldn't be market making and can (provably) only benefit from reduced spreads and increased liquidity. Right?

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Re:U.S. stock markets are rigged, says author Michael Lewis by jellicle on Monday March 31, 2014 @07:45AM (#7500797)

Nonsense. HFT is a variety of front-running, which is provably only a detriment to "common people", and is illegal in most cases.

They even have an example in the linked article of a trader being forced to pay higher prices for his buy orders due to HFTs front-running his orders; you literally couldn't be bothered to even read the linked story.

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Re:U.S. stock markets are rigged, says author Michael Lewis by yummyfajitas on Monday March 31, 2014 @07:59AM (#7500847)

HFT is a variety of front-running...

Please explain the mechanics of this.

...a trader being forced to pay higher prices for his buy orders due to HFTs front-running...

Clearly you didn't understand the article, which was about predatory trading increasing market efficiency. It was not about front running, which is when your broker trades in front of you in violation of his fiduciary duty to act in your best interest. (Note that your competitors do NOT have the duty to act in your best interest.)

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Re:U.S. stock markets are rigged, says author Michael Lewis by jellicle on Monday March 31, 2014 @08:41AM (#7501012)

Just because the exploit is illegal in one circumstance and not in another doesn't mean it's not an exploit.

When the exchanges are complicit in the deal - being paid for sending information early to particular parties - it's pretty easy to argue there is a conspiracy to defraud the general public, and so regulators have regularly argued:

http://www.gotgoldreport.com/2014/03/why-new-york-ag-wants-c...

I assume that when these practices are finally banned you will change your tune, right?

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Re:U.S. stock markets are rigged, says author Michael Lewis by yummyfajitas on Monday March 31, 2014 @09:35AM (#7501322)

I don't understand. Using the multicast quote stream (which costs a few thousand/month) is an "exploit"? Or are traders somehow obligated to ignore the actions of other traders? Perhaps anyone using a computer is obligated to act as an agent for people without a computer, rather than a competitor?

I truly don't understand what you are arguing. Could you please explain the mechanics of what you believe should be illegal?

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Re:U.S. stock markets are rigged, says author Michael Lewis by mmaldacker on Monday March 31, 2014 @09:47AM (#7501389)

The article you linked calls it insider trading and not front running. In addition, the issue discussed in the article is about making company information public earlier to a select group of people (which is insider trading). However, most HFT (particularly market makers) do no care about this and rely only market data provided directly from the exchanges. This data is provided fairly to everyone.

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Re:U.S. stock markets are rigged, says author Michael Lewis by crdoconnor on Monday March 31, 2014 @12:20PM (#7502371)

>Please explain the mechanics of this.

You say that a lot.

I already explained the exact mechanics in this comment: https://news.ycombinator.com/item?id=7500223

...which you did not respond to.

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Re:U.S. stock markets are rigged, says author Michael Lewis by yummyfajitas on Monday March 31, 2014 @11:07PM (#7505931)

I previously ignored your comment because in the context of the conversation, it was completely irrelevant. In the comment you replied to, I was asking how one can "cut in front of you". Your comment was just about rapidly trading and rapidly waving one's hands in order to somehow do something evil.

"Use pattern recognition software to outcompete other traders" is not a trading mechanic.

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Re:U.S. stock markets are rigged, says author Michael Lewis by mmaldacker on Monday March 31, 2014 @09:53AM (#7501431)

no, the higher price was due to arbitrage and not front-running. Large orders always move the market (this is simple supply/demand economics), HFT makes this move much faster than before. Large orders are usually cut-up in smaller pieces to minimize this price move and get a better price. Katsuyama is just butt hurt that his 1990's trading style doesn't work anymore.

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Re:U.S. stock markets are rigged, says author Michael Lewis by theorique on Wednesday April 02, 2014 @10:21AM (#7515658)

It has absolutely nothing to do with front running. Front running has a very specific definition in market regulation.

Front running refers to a broker placing his orders (i.e. the BROKER'S orders) in front of his customer's orders. This is a violation of fiduciary duty, SEC regulations, FINRA regulations. When the broker gets a customer order, it must be given priority over the broker's proprietary trading. This has been in place for decades, well before trading was electronic.

If an HFT (or any other trader, regardless of speed) places an order into the limit order book of an exchange or other trading venue AHEAD of another customer of that exchange, that is not front-running. That is the normal and correct functioning of the markets, which operate by price-time priority.

tl;dr - trading faster or more frequently than other market participants (who are not your brokerage customers) is not front running.

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