High Frequency Traders: Trouble Makers With Great Math Degrees

[Guest ValueCarl]

Over the last decade, these high-tech operators have become sort of a shadow Wall Street — from New Jersey to Kansas City, from Texas to Chicago. Depending on whose estimates you believe, high-frequency traders account for 40 to 70 percent of all trading on every stock market in the country. Some of the biggest players trade more than a billion shares a day.

 

These are short-term bets. Very short. The founder of Tradebot, in Kansas City, Mo., told students in 2008 that his firm typically held stocks for 11 seconds. Tradebot, one of the biggest high-frequency traders around, had not had a losing day in four years, he said.

 

But some in Washington wonder if ordinary investors will pay a price for this sort of lightning-quick trading. Unlike old-fashioned specialists on the New York Stock Exchange, who are obligated to stay in the market whether it is rising or falling, high-frequency traders can walk away at any time.

 

While market regulators are still trying to figure out what happened on May 6, the decision of high-frequency traders to withdraw from the marketplace is under examination.

 

http://finance.yahoo.com/news/Speedy-New-Traders-Make-Waves-nytimes-3183816332.html;_ylt=AptV1__w3NdV3yNPIc_kHHW7YWsA;_ylu=X3oDMTE1cW1vazZyBHBvcwM5BHNlYwN0b3BTdG9yaWVzBHNsawNzcGVlZHluZXd0cmE-?x=0&sec=topStories&pos=7&asset=&ccode=

[Uccmal]

One has to wonder how much taxes these guys pay..... You aren't going to be able to book any capital losses and you have to pay full taxes on all gains.  Not to mention the jobs they inadvertently create for accounting firms, auditors, hardware and software engineers, etc.     

[woodstove]

Sounds like "The Daytraders of Graham and Doddsville".

[Guest ValueCarl]

I am with Munger on what these large brains from the great learning institutions across the US and the globe would be better off doing for society at large. When one ponders carving up pennies one hundred times, one must seriously wonder how such artificial intelligence is finding or accounting for factual supply/demand inventories while pricing securities at the same time.

 

Without a doubt, they have turned ones ability to maintain a passive stake in the future prospects of a given security, into a gambling casino of neon lights flashing in front of degenerate eyes waiting for signs that say, "Jackpot."

 

Truly, it would be better for the future of investors to shut this game down in favor of, let's say, "quarterly or yearly" pegs which identify value during those snap shots in time by an agreed upon measuring system according to benchmarks established by bull and bear camps in advance.

 

Buyers and sellers can meet at those snapshots in time for those agreed upon prices. imo   

[Guest ValueCarl]

Did I say "jackpot" as though winning was the only option or direction?

 

No, no, no, my friends! "Bankrupt" or "Bust" is the other side of such computer generated lunacy.

 

Of course, the crux of such matters may be tied to understanding who the "creators" of these "algorithms" are inclusive of their names while intimately understanding what "price direction" they establish and/or coordinate amongst one another while playing such a sinister game of high risk, second by second, VIDEO POKER.

 

Winning is subjective and only comes by correctly betting "price direction" in a moments time assuming position closing takes place daily, as some suggest is done.

 

Personally, I believe "Mr. Market" should do away with such "liquidity" in less than a heart beat's moment considering what it doesn't offer!

 

Kaching!