How To Fix High-Frequency Trading

Submitted by Anthony Tassone of Green Key Technologies, Solution to HFT Debate: Match Based On Price & Quality, Not Time. The recent public outcry over high frequency trading is pointless. Solutions exist. Virtually every comparable market in the world uses them already. But, some electronic exchanges may not willingly adopt them. Doing so may disrupt their current business model. The incentives are misaligned, and competitors or regulators may need to force the issue to see change. Luckily, the issue to be forced is far simpler than most think. It’s time to add quality to the matching process. Over thousands of years, every naturally evolved market has headed this direction – from the ancient Greeks to Alibaba.com. It’s time for Wall Street to realize what they lost along the way, and how it can fix far more than just HFT. In 500 BC, the Greeks were auctioning off war plunder, […] Read More

Three Market Factors Which Citi Says Are Worse Now Than In 2007

When it comes to the current state of the market, everyone knows – whether they admit it or not – that it is broken. And we aren’t talking HFT which while rigging price discovery, generally does so on a microburst momentum basis which at most lasts for the duration of the trading day. The real culprit of the broken market is the Fed, a Fed which as we have explained over the years, is simply seeking to compensate for the collapse in stock (and flow) from the unwind of shadow banking which was nearly crushed in the days after Lehman. Citigroup‘s Stephen Antczak admits as much: “QE has obviously created a huge distortion in the marketplace, pushing risk-free rates and risk premiums well through many “fair value” metrics. But that said, doesn’t every credit cycle seem to have distorting factors of some sort? For example, one can easily argue […] Read More

“Timestamp Fraud”: A Rigged Market Explained In One Simple Animation

The topic of High-Frequency-Trading quickly dissolves into a smorgasbord of mnemonics and ‘inside-baseball’ technical terms – just complicated enough to lose everyone that matters or should care about its implications. Despite the fair-and-balanced defense from the mainstream media business channels (sponsored by the belief in the status quo fair markets that ‘America the free’ is known for), the fact is that HFT does front-run (perfectly legal under the umbrella protection of Reg NMS) order flow, but there may be one more wrinkle – one which would cement the Michael Lewis (accurate) allegation that the market is rigged. Because if as Nanex shows below, there is in addition to everything else the element of timestamp fraud involved in the distribution of NMS “compliant” trading data for Direct Feed-to-SIP matching purposes, this means that not only is the market rigged, but its rigging goes from the very top all the way […] Read More