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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 (36557)	11/2/2010 7:28:11 AM
From: axial	Read Replies (2) \| Respond to of 46821

stocktrading.com blog.themistrading.com mrswing.com Debunking Six Myths of HFT highfrequencytradingreview.com --- Frank, there are several varieties of HFT, and issues differ. Some are ethical, some operational. Already, some changes have been made. I've seen no study that relates HFT to garden-variety crashes that we've known in the past. This paper compares such crashes to forest fires: math.uu.se --- In principle, it seems logical that HFTs should replace liquidity driven from the market (see the first link) and which their collective trading practically eliminated in the Flash Crash. But if they are forced to provide liquidity, will that solve the problem? Or are the objections of HFTs based simply on the fact that providing liquidity increases costs, or reduces profits? The failures in financial reform have taught us how deeply (and apparently irreparably) the financial sector has captured regulators and legislators. We have good reason to mistrust their rationalizations, which appear to be guided more by self-interest and profit than the public interest. How are we to interpret the complaints (above) by Bright Trading and Themis? Are they just bad-mouthing change, or are they saying something valid? Finally how HFT affects, and will be affected by garden-variety crashes appears to be unknown. Once again, nobody seems to have projected outside the box. Evidence so far is discouraging: by itself, HFT has crashed markets many times, and losses have been incurred. In a still-greater market event, what makes us think that HFT will do anything but magnify the impact and damage? Is the alleged increase in efficiency worth the added risk? No one knows. This is an addition to a "system" where no simulations were run, no risk evaluations, no input screens. We've already seen allegations of algorithmic failures sufficient to make us believe it's possible to intentionally crash the markets. In view of facts it seems obvious that HFT's effect on markets is still a big unknown, slanted to the negative. Probably a big crash would be worsened. Beyond that we are guided only by predictions of Mandelbrot and others: time and probability may reveal that once again the financial sector took the profits while the cost and the risk was borne by the public. Jim

To: Frank A. Coluccio who wrote (36557)	11/2/2010 10:40:51 AM
From: Maurice Winn	2 Recommendations Respond to of 46821

Warren Buffett said that Mr Market comes to his door each day and offers to buy and sell. When Mr Market offers a bargain, Warren says it's a deal. He is surely aware of the Flash Crash and the prospect for profits if Mr Million Mile a Minute Computer offers him a train-load of stock at a bargain. He is no doubt also aware that the regulators will cancel his trade in favour of the MMaM Computers. <The regulator is concerned that the group, which provides between 40 percent and 50 percent of all liquidity in the market, shirked its duties to support stock prices during the May 6 downdraft, and should be asked to do more. That could mean forcing HFTs--essentially proprietary traders without customers--to register as market makers with the exchanges where they hold membership. > It would be best for the regulators to go and get a real job, or just take the day off. Leave the MMaM computers and Warren and me to decide for ourselves what share prices should be. Others too will pile in and buy bargains if MMaM computers go stupid. Competing and smarter MMaM computers will also be looking for those bargains, The main calculation to make is whether the regulators will cancel your trades and rob you, handing the proceeds back to the computers which caused the "problem". It's probably best to hold off buying until the prices are really low and panic is setting in and the regulators announce that they will not cancel trades if some buyers would please, please, step in to the carnage and buy some cheap shares. Being first in after the announcement [or on the rumour] will be necessary ... the MMaM computers will of course be first in. It's hard for Joe Public to beat The Regulators, Warren Buffet and the MMaM computers. Mqurice

To: Frank A. Coluccio who wrote (36557)	11/10/2010 10:47:34 PM
From: axial	2 Recommendations Respond to of 46821

The Flash Crash, in Miniature ' “It’s like seeing cracks in a dam,” said James J. Angel, professor at the McDonough School of Business at Georgetown University. “One day, I don’t know when, there will be another earthquake.” Andrew W. Lo, director of the Laboratory for Financial Engineering at M.I.T., said: “I am worried about the potential instability that these technologies create in market dynamics. The U.S. equity markets have become the Wild, Wild West.” ' nytimes.com Jim

To: Frank A. Coluccio who wrote (36557)	1/4/2011 12:39:17 PM
From: axial	Read Replies (1) \| Respond to of 46821

Algorithms Take Control of Wall Street "Algorithms have become so ingrained in our financial system that the markets could not operate without them. At the most basic level, computers help prospective buyers and sellers of stocks find one another—without the bother of screaming middlemen or their commissions. High-frequency traders, sometimes called flash traders, buy and sell thousands of shares every second, executing deals so quickly, and on such a massive scale, that they can win or lose a fortune if the price of a stock fluctuates by even a few cents. Other algorithms are slower but more sophisticated, analyzing earning statements, stock performance, and newsfeeds to find attractive investments that others may have missed. The result is a system that is more efficient, faster, and smarter than any human. It is also harder to understand, predict, and regulate. Algorithms, like most human traders, tend to follow a fairly simple set of rules. But they also respond instantly to ever-shifting market conditions, taking into account thousands or millions of data points every second. And each trade produces new data points, creating a kind of conversation in which machines respond in rapid-fire succession to one another’s actions. At its best, this system represents an efficient and intelligent capital allocation machine, a market ruled by precision and mathematics rather than emotion and fallible judgment. But at its worst, it is an inscrutable and uncontrollable feedback loop. Individually, these algorithms may be easy to control but when they interact they can create unexpected behaviors—a conversation that can overwhelm the system it was built to navigate. On May 6, 2010, the Dow Jones Industrial Average inexplicably experienced a series of drops that came to be known as the flash crash, at one point shedding some 573 points in five minutes. Less than five months later, Progress Energy, a North Carolina utility, watched helplessly as its share price fell 90 percent. Also in late September, Apple shares dropped nearly 4 percent in just 30 seconds, before recovering a few minutes later. These sudden drops are now routine, and it’s often impossible to determine what caused them. But most observers pin the blame on the legions of powerful, superfast trading algorithms—simple instructions that interact to create a market that is incomprehensible to the human mind and impossible to predict. For better or worse, the computers are now in control." wired.com Jim