By Sal L. Arnuk
The markets have developed at breakneck pace up to now decade, and alter has sped up dramatically on the grounds that 2007's disastrous regulatory "reforms." An unrelenting specialise in expertise, hyper-short-term buying and selling, velocity, and quantity has eclipsed sanity: markets were hijacked by way of high-powered pursuits on the cost of traders and the total capital-raising method. A small consortium of avid gamers is making billions via skimming and scalping unaware traders -- and, in so doing, they have reworked our markets from the world's envy right into a barren barren region of terror.
Since those occasions all started, Themis Trading's Joe Saluzzi and Sal Arnuk have provided an unwavering voice of reasoned dissent. Their small brokerage has stood up opposed to the hijackers in each venue: their day-by-day writings at the moment are by means of traders, regulators, the media, and "Main road" traders world wide. Saluzzi and Arnuk do not take prisoners! Now, in Broken Markets, they clarify how all this occurred, who did it, what it capacity, and what is coming subsequent. you are going to comprehend the genuine implications of occasions starting from the crash of 1987 to the "Flash Crash" -- and notice what all of it ability to you and your destiny. caution: you'll get offended (if you are not already). yet you are going to recognize precisely why you are indignant, who you are offended at, and what has to be done!
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Extra info for Broken Markets: How High Frequency Trading and Predatory Practices on Wall Street are Destroying Investor Confidence and Your Portfolio
SOES Bandits spooked market makers, with the result being wider spreads to compensate for the risk of getting picked off by the bandits. SOES Bandits were a bane on capital markets in those times. HFT firms, enabled by the stock exchanges, are their direct descendants. Perhaps similarly, late trading in mutual funds was a strategy whereby traders were taking advantage of slow-to-update (once per day) mutual fund net asset values (NAVs). Here, too, the “late trading” was done at the expense of long-term investors.
9 We say hogwash. Momentum ignition does not bring about price discovery. It distorts it. A telling example of a “price discovery” algorithm is what happened to the book The Making of a Fly on Amazon. 93-plus shipping,10 CNN reported how predatory algorithms drove up the price of the book from $199 34 Broken Markets to $24 million in ten days. It was not due to small supply and rabid demand. 998 times the price of the first algorithm, creating a positive feedback loop. Momentum ignition is extremely damaging to long-term investors.
3 Today only four DMMs control the trading on the NYSE: Goldman Sachs, Knight, Barclays, and newcomer GETCO. They are the HFT powerhouses on Wall Street. Most industry professionals we talk to believe these four horsemen are responsible for 40–50% of all trading on the NYSE. With their electronic savvy and prowess, they optimize their automated trading programs to maximize the money they earn from trading as well as from rebates paid to them by NYSE. ” The exchanges have adopted complex pricing mechanisms that reward the adding of liquidity with a small rebate, while charging a small fee for the taking Chapter 2 • the Curtain pulled BaCk on high FrequenCy trading 27 of liquidity.
Broken Markets: How High Frequency Trading and Predatory Practices on Wall Street are Destroying Investor Confidence and Your Portfolio by Sal L. Arnuk