CBS: Is the U.S. stock market rigged?

Status
Not open for further replies.
K

King Mystery

Member
http://www.cbsnews.com/news/is-the-us-stock-market-rigged/

Steve Kroft reports on a new book from Michael Lewis that reveals how some high-speed traders work the stock market to their advantage.
Click to expand...


I don't know nothing about no markets, equity, or liquidity, and I don't know if this falls into "conspiracy theorist" territory, but I found this interview interesting.

Lock if old. I searched!

edit: CBS. Bleh. I've had too many PopTarts.
 
pJEpS.gif
 
This is no joke. Speed trading has to do with proprietary data transmission lines which shave off tiny fractions of a second of lag time for trading transactions. It gives those with access an unfair advantage. A way to mitigate this would be to introduce artificial lag on the backend side (a floor if you will) that the average ISP transmission line can keep up with.
 
Im a cynic and even I appreciate the difference between 'rigged' and 'having a knowledge of it enough to manipulate to your advantage'

The stock markets countries are founded on are ultimately dictated by peoples decision making process. Understand those peoples psychology and decision making process = away you go.

Must rewatch Trading Places
 
Saw this earlier. It boggles my mind that this isn't illegal considering the fact that if a human trader was responsible for such a thing... s/he would be doing time.

Edit:
Eh... I think people are missing the point. Computers engaging in high frequency trading is fine and dandy. What isn't fine and dandy is manipulating the trades to benefit the middleman. It's illegal for firms and institutional investors to my knowledge.
 
This isn't really a conspiracy theory. I thought it was already well known that high-trend traders have access to faster data lines? Being fractions of a second faster translates into millions and even billions of dollars.
 
thecharrr said:
It's not like having computers doing transactions faster than humans aren't some deep secret, or services that have ultra low latency to traders in Chicago. Hell, computers caused the second biggest single day swing on the DOW.
Click to expand...

So, why allow this? Why should a small group of trading firms have an advantage over everyone else when it comes to transactional technology? Introduce a floor for transaction speed and everyone can compete on an equal playing field.

What this amounts to is scalpers leveraging bots to buy up all the tickets to a concert immediately after they go on sale online and reselling them at inflated prices (i.e., a middle man tax).
 
Isn't Michael Lewis the author of the big short?

Because that book was phenomenal, his insight definitely counts a lot more than you'd think.
 
Not Spaceghost said:
Isn't Michael Lewis the author of the big short?

Because that book was phenomenal, his insight definitely counts a lot more than you'd think.
Click to expand...

Yes, he wrote The Big Short. And Liar's Poker many years ago. And about half a dozen great articles on the economic meltdown for Vanity Fair, from the perspective of Greece, Iceland, Ireland, Germany, etc.
 
thecharrr said:
It's not like having computers doing transactions faster than humans aren't some deep secret, or services that have ultra low latency to traders in Chicago. Hell, computers caused the second biggest single day swing on the DOW.
Click to expand...

It's not a deep secret, but I'm willing to bet people vastly underestimate the percentage of automated trades versus regular ones.

Mr. Hunsader: The new world is now a war between machines. For some perspective, in 1999 at the height of the tech craze, there were about 1,000 quotes per second crossing the tape. Fast forward to 2013 and that number has risen exponentially to 2,000,000 per second. And yet there are fewer market participants today and actually less trading. All this noise comes from the High Frequency guys trying to game each other or fool traders. Today, 90 to 95 percent of all quotes emanate from High Frequency machines…… This doesn’t imply share volumes just quotes traveling on the tape.
Click to expand...

http://www.forbes.com/sites/richard...against-ordinary-human-traders-and-investors/
 
Damn, maybe someone here can help me, either Radiolab, Frontline, or Big Picture Science has a very good twenty to thirty minutes on the science behind microtrading and the tech infrastructure it requires. A lot of it was rewired after the aforementioned flash crash in 2010.
 
There's nothing "rigged" about high frequency trading. It just gives companies that use it an edge over traditional investors.
 
Muppet of a Man said:
So, why allow this? Why should a small group of trading firms have an advantage over everyone else when it comes to transactional technology? Introduce a floor for transaction speed and everyone can compete on an equal playing field.
Click to expand...
So how exactly would they ensure that the entire world is able to receive updates regardless of physical location? The system they have in place currently allows them to control exactly when they get the information at the expense of being not infinitely scalable.

afternoon delight said:
Damn, maybe someone here can help me, either Radiolab, Frontline, or Big Picture Science has a very good twenty to thirty minutes on the science behind microtrading and the tech infrastructure it requires. A lot of it was rewired after the aforementioned flash crash in 2010.
Click to expand...
http://www.radiolab.org/story/267195-million-dollar-microsecond/
 
afternoon delight said:
Are these two viewpoints compatible?
Click to expand...

Only if you use "rigged" as in "some dudes have an advantage over some other dudes", instead of "I've arranged for this situation to happen exactly as I want so I can take advantage of it". There's still an element of uncertainty with HFT.
 
Blader said:
This isn't really a conspiracy theory. I thought it was already well known that high-trend traders have access to faster data lines? Being fractions of a second faster translates into millions and even billions of dollars.
Click to expand...

The fact that there is high speed technical trading going on is not a conspiracy, but saying that it means the whole market is rigged is a conspiracy theory though.

Everyone needs to realize that the quote price on an equity is fucking meaningless and is easily manipulated, and was easily manipulated before high frequency trading was a thing. The only people high speed trading hurts are daytraders, and since daytrading is basically gambling, It's not like it was a good idea to begin with.

Also the particular high frequency margin trading trick that the article discusses is easily avoided. Use limit orders instead of market orders. Everyone should be using limit orders all the time anyway, because it is risky as hell to use market orders for low volume stocks.

The benefit of this high frequency computer trading is increased market liquidity and lower transaction costs. It benefits everyone except the day traders.
 
Jb said:
Only if you use "rigged" as in "some dudes have an advantage over some other dudes", instead of "I've arranged for this situation to happen exactly as I want so I can take advantage of it". There's still an element of uncertainty with HFT.
Click to expand...


That is one definition of rigged.


Having an unfair advantage over someone else is rigged. Especially if the person who has the advantage is controlling the methods by which to have the advantage. Making better choices should be the real way to win these situations, not having the lowest latency and fastest computer
 
liquidtmd said:
Im a cynic and even I appreciate the difference between 'rigged' and 'having a knowledge of it enough to manipulate to your advantage'

The stock markets countries are founded on are ultimately dictated by peoples decision making process. Understand those peoples psychology and decision making process = away you go.

Must rewatch Trading Places
Click to expand...

Pretty much, a Trading Places scenario isn't even that difficult to pull off if you use the right resources and have insider info.

Take what happened with Zynga and King, anyone who put optioned or shorted could have easily made a fortune.
 
Cosmo Clock 21 said:
So how exactly would they ensure that the entire world is able to receive updates regardless of physical location? The system they have in place currently allows them to control exactly when they get the information at the expense of being not infinitely scalable.


http://www.radiolab.org/story/267195-million-dollar-microsecond/
Click to expand...

Notice how I explicitly mentioned transactional time--not update/feed time. There might still be some difference in the time it takes for people to receive updates/feeds but since transactions would have artificial lag introduced into them, it would allow those with average speed transmission lines to not get totally cheated.

It might work by randomly awarding/prioritizing a trade to those who trade within that artificially introduced lag window.
 
I remember reading something where somehow these people could get maybe a milisecond notice that a large fund was about to perform a buy and then are able to hurry up and buy in advance. Thereby screwing people over. That would be pretty rigged imo.
 
Hari Seldon said:
I remember reading something where somehow these people could get maybe a milisecond notice that a large fund was about to perform a buy and then are able to hurry up and buy in advance. Thereby screwing people over. That would be pretty rigged imo.
Click to expand...

thats how it is.. for the companies fortunate enough to have the technology...


rubes.. the whole lot of ya!
 
Aylinato said:
That is one definition of rigged.


Having an unfair advantage over someone else is rigged. Especially if the person who has the advantage is controlling the methods by which to have the advantage. Making better choices should be the real way to win these situations, not having the lowest latency and fastest computer
Click to expand...

In terms of making money overall on the stock market?

It is.

This type of high frequency trading Is not really all that lucrative, and it is rapidly becoming less so as the algorithms have to compete with each other:

http://www.businessweek.com/article...lost-high-frequency-tradings-rise-and-fall#p2
 
Hari Seldon said:
I remember reading something where somehow these people could get maybe a milisecond notice that a large fund was about to perform a buy and then are able to hurry up and buy in advance. Thereby screwing people over. That would be pretty rigged imo.
Click to expand...

This is exactly what happens. People do not actively participate in these trades. They are all black box automated, making this even worse. There is very little risk in this game. Which is exactly why it is "rigged".
 
Hari Seldon said:
I remember reading something where somehow these people could get maybe a milisecond notice that a large fund was about to perform a buy and then are able to hurry up and buy in advance. Thereby screwing people over. That would be pretty rigged imo.
Click to expand...

The other documentary I linked, was mostly about a way certain groups can cut in line regardless of the time factor, by designating their order as a type of a priority order, while people who were legitimately faster get ignored.

http://online.wsj.com/news/articles/SB10000872396390443989204577599243693561670

AstroNut325 said:
Pretty sure that counts as "rigged" per the formal definition of the word.
Click to expand...

Rainier Wolfcastle picture.
 
Status
Not open for further replies.

Similar threads

Nvidia Stock Recovering!!
33
1K
Kamina replied
China's Efficient AI Model DeepSeek Sends U.S. Tech Stocks Plummeting
2 3
102
8K
Heimdall_Xtreme replied
  • Locked
Tesla sales tank in Europe as stock drops 40% in a month
NSFW  12 13 14 15 16
769
36K
Cyberpunkd replied
  • Locked
Tesla sales crater 76% in Germany, stock down 40% since December 2024
Business  2
51
2K
Puscifer replied
The current job market.
14
2K
indigo-cyclops replied
Top Bottom