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Technology Stocks : The *NEW* Frank Coluccio Technology Forum -- Ignore unavailable to you. Want to Upgrade?


To: Frank A. Coluccio who wrote (36020)10/2/2010 8:15:00 PM
From: Frank A. Coluccio  Respond to of 46821
 
[Continued] For those interested, several additional references and prior postings on NANOG concerning the Spanair crash in my preceding #msg-26862717 can be found in the trailers of this post: merit.edu

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To: Frank A. Coluccio who wrote (36020)10/4/2010 2:32:29 AM
From: axial  Read Replies (1) | Respond to of 46821
 
Frank, on matters where we're not practitioners, we try to find ways to evaluate the information.

We read conflicting opinions from different sources. A key determinant for me is whether the source is invested in the sector. This has a dual effect. If an invested source speaks positively about a questionable practice, we give a certain "weight" to comments, in the same way we would give weight to tobacco company testimony about smoking. How about this for hyberbole?

"The current equity market structure is under attack, brought on by a handful of politicians and some of the mainstream media who argue that the US system is fundamentally broken. Based largely on misunderstanding and perhaps other less forgivable reasons, these opponents are calling for major reviews, repairs, and outright intervention...
... Taking an active role in working through the Concept Release process is a way for our industry to go on the offense against those that would seek to regulate and/or tax the securities industry out of existence."


batstrading.com


Oh yeah: regulation. Don't want that. Next thing you know, they'll be talking about the public interest and fairness.

OTOH, if the invested source acknowledges dangers (i.e., voluntarily speaks against his own interest) to me that gives great weight to his testimony. It's evident that some players are making huge profits from HFT, and not speaking of abuses. So comments from someone like Joe Saluzzi of Themis are very credible - and BTW, this is hardly the first time Joe has spoken about the matter.

Another aspect of interest-based analysis is that exchanges are no longer non-profits, impartially dedicated to a fair and orderly market. Now they're profit-generating enterprises, with a compelling financial interest in HFT which pays them very well, thank you. So we can no longer expect exchanges to give a rat's ass about investors, because nobody's paying them for that: quite the contrary.

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In the current political and moral climate, we simply can't expect the same standard of legislation, regulation and prosecution that once formed the bedrock of capitalism. Those days are gone. We'll get some flimflam orchestrated by lobbyists and politicos and financed by special interests who'll have the exchanges fighting on their flank, protecting their newfound generators of unimagined riches.

And so it will go. In the short run we know who'll win. In the long run we know who'll lose -- and beyond money, what will be lost.

Jim



To: Frank A. Coluccio who wrote (36020)10/13/2010 6:55:19 PM
From: axial  Read Replies (1) | Respond to of 46821
 
Norwegians convicted for outwitting algo

' The case, involving Timber Hill, a unit of US-based Interactive Brokers, comes amid ­growing scrutiny of automated trading systems after the so-called “flash crash” in May, when a single algorithm triggered a plunge in US stocks. Svend Egil Larsen and Peder Veiby had won admiration from many Norwegians ahead of the court case for their apparent victory for man over machine.

Prosecutors said Mr Larsen and Mr Veiby “gave false and misleading signals about supply, demand and prices” by manipulating several Norwegian stocks through Timber Hill’s online trading platform.

Anders Brosveet, lawyer for Mr Veiby, acknowledged that his client had learnt how ­Timber Hill’s trading algorithm would behave in response to ­certain trades but denied this amounted to market manipulation.“They had an idea of how the computer would change the prices but that does not make them responsible for what the computer did,” he told the Financial Times. '

ft.com

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We now have computers spoofing markets, and humans preying on computers. Probability of escalation is high, the motivation being profit. Predatory high-speed transactions are designed not to trade, but to capitalize on trading by others. Two questions:

[1] This trend can be expected to continue. A day will come when markets are exposed to escalation of predatory transactions. On any given day, predatory transactions may become the market's primary activity. Then, how will trading skew? Will it reflect accurately on the underlying, or will it distort valuations and trading activity?
[2] On otherwise heavy trading, will it increase or decrease volatility and the possibility of a crash?

Jim