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24th July 2009, 14:41 |
#1
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Mania Member
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‘Secretive’ firms dominates USA share trading
‘Secretive’ firms dominate US share trading http://www.ft.com/cms/s/0/a5f03366-6...nclick_check=1 FINANCIAL TIMES By Jeremy Grant in London Published: July 10 2009 17:17 | Last updated: July 10 2009 17:17 A tiny minority of a new breed of electronic trading firm is driving almost three quarters of all US equities trading volume and generating $21bn in annual profits doing so, Tabb Group, a consultancy, said on Friday. The disclosure is one of the first attempts to quantify the impact of so-called “high frequency” trading firms that have quietly grabbed a huge slice of trading in the world’s equity markets. Some of the trading firms – such as Getco, Peak6, RGM Advisers and Hudson Bay Trading – are far from household names in the markets. Many are based in Chicago and grew out of the city’s options trading pits. However, they appear to have built up such a significant presence in the markets that they look set to eclipse familiar Wall Street names in their collective influence. Such firms have grown especially quickly as they filled a gap in the markets left by hedge funds. They typically employ trading strategies that are based not on company earnings prospects and other fundamentals, but on arbitraging minute differences in share prices and trading speeds – known as latency – between exchanges and other trading venues. Robert Iati, partner at Tabb, said: “They are, as a rule, secretive, stealthy, smart, and relatively unknown. “The incredible capabilities offered by technology have given meteoric rise to a relatively few high frequency proprietary trading firms that now wield far greater influence on the markets today than most people recognize,” he added. Tabb estimated that such firms, which include the new breed also known as “electronic liquidity providers”, represent about 2 per cent of the 20,000 or so trading firms operating in the US markets. But they accounted for 73 per cent of all US equity trading volume. Trading venues have altered their fees structures to attract such firms, which often look for platforms to offer monetary incentives to encourage firms to post liquidity with them in so-called “maker-taker” fee models. The London Stock Exchange this month abandoned a maker-taker fee model introduced only in September last year, a move that its smaller rivals such as BATS Europe are likely to welcome as it could drive more high-frequency traders to them. The firms included proprietary trading desks for a small number of major investment banks, less than 100 of the most sophisticated hedge funds and hundreds of “the most secretive prop shops, all of which operate with one thing in mind: capture profit opportunities by being smarter and faster than the closest competition”, Tabb said. Firms engaged in high frequency trading (HFT) use complex computer algorithms to drive their trading strategies, and guard them jealously. The value of such algorithms was exposed this week when US federal prosecutors charged Sergey Aleynikov, a former Goldman Sachs computer programmer, with stealing computer code from the bank’s HFT business. Copyright The Financial Times Limited 2009 |
24th July 2009, 14:46 |
#2
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Mania Member
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It's quite a startling news from financial times there..
But it is to no surprise really.. The stock market has always been a manipulated arena.. Where trading are mainly thru electronic/computer stream.. the house always wins.. Somewhere I once read, only 400 or so firms dominates 75% of the whole US stock market!!.. and I also read Goldman Sachs owns 25% of that alone.. So this means, the trading floor we all usually see are just for PR purposes.. not much deal made there.. the bigger deals are made via electronic network.. Well.. it is a make-believe world after all |
25th July 2009, 18:35 |
#4
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Addict Member
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My gun ... err... computer is bigger that yours ....
http://www.nytimes.com/2009/07/24/bu...g.html?_r=1&hp |
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25th July 2009, 22:42 |
#5
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Mania Member
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Quote:
Spoiler
I don't see any difference between the Robot-Traders and the usual practices that done by some ordinary traders who try to follow "the Smart Money", except they're doing it faster. Since their decision to buy based solely on trend movement, they still have to face below problem (Please CMIIW): a. There will always competition among the high-frequency-traders in order to outsmart the others, using the faster computer and the more and more sophisticated Algorithm. In the end, their power will neutralize each other. b. I don't know whether this Super-Computer traders will reap off money by using their lightning-speed-Powers, but one thing for sure there are parties who will always get the money off from hyperactivities in the market : 1. Government, they get Tax from the activities. 2. The Promotor, since they get the fee. Eventhough the high frequency traders get the quantity discount by their bulk activity, they still have to pay a lot of sum of money to the Broker. For the value investors, activity is not equal with productivity. Profit decreases as activity increases. c. Since Fundamental data are not the factor in their buy or sell decision, one day they'll realized that smart-money is not always as smart as they thought. |
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Status : Hybernating
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26th July 2009, 07:22 |
#6
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Mania Member
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Quote:
and minimize losses.. a good trader should have its own unique entry and exit strategy.. most disciplined traders ALWAYS stick to its own set of trading rules.. i think a "5% profit / 5% loss rule" to exit is pretty norm. |
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26th July 2009, 07:23 |
#7
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Mania Member
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Quote:
nice article Mr Blin. I thank you. |
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26th July 2009, 07:30 |
#8
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Mania Member
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Quote:
It's a dog eat dog world in that market.. like the Hedge Fund world.. who uses supercomputers constantly updated with software to corner certain segments of the market. Why wall street is being left alone ( by the Gov) doing all the despicable activities.. the reasons are pretty clear.. the gov made money too eh Quote:
Smart Monies that invest in stock market isn't smart at all.. well.. sure.. one can argue.. that smart monies are riding for long term.. but still.. many smart monies are proven to have lost money on their investments in stock market.. it happens with Singapore smart money where they invest in US bank stock.. they got in and only to see the stock price lower a further 40% Smart monies shall not invest in stock market.. It's speculative market.. no good.. they should invest in real tangible assets.. like what the chinese are doing.. |
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