US Stock market "Rigged"
- Thread starter thethe
- Start date
I prefer real estate, but gotta diversify so I throw some in the stock market as well.
zitothebrave
Connoisseur of Minors
The market is where rich people make money. Or traders make money.
Edit - Can't forget politicians.
Tapate50
Well-known member
So you are argueing against yourself without an alternative?
zitothebrave
Connoisseur of Minors
There are plenty of ways to make money.
NinersSBChamps
<B>Voted Worst Poster <br> 2015 (Co-Winner)</BR>20
Get the scoop on natural disasters before they happen. Invest in whatever substance will aid in things and you are golden. I think there was some guy who invested a ton into salt and after the blizzards and such down south he made a killing.
zitothebrave
Connoisseur of Minors
I invested a ton of money in Tacos before Colorado and Washington legalized pot. I'm rolling in the tortilla wraps.
NinersSBChamps
<B>Voted Worst Poster <br> 2015 (Co-Winner)</BR>20
I want to open up a White Castle out here. (Colorado)
Oklahomahawk
Boras' Client
I would think a simple kiosk or children's style lemonade stand that served brownies and Doritos would also clean up, possibly some Tylenol for any residual headaches?
acesfull86
Well-known member
Another view on this story:
1. HFT doesn’t prey on small mom-and-pop investors. In his first two TV appearances, Lewis stuck to a simple pitch: Speed traders have rigged the stock market, and the biggest losers are average, middle-class retail investors—exactly the kind of people who watch 60 Minutes and the Today show. It’s “the guy sitting at his ETrade (ETFC) account,” Lewis told Matt Lauer. The way Lewis sees it, speed traders prey on retail investors by “trading against people who don’t know the market.”
The idea that retail investors are losing out to sophisticated speed traders is an old claim in the debate over HFT, and it’s pretty much been discredited. Speed traders aren’t competing against the ETrade guy, they’re competing with each other to fill the ETrade guy’s order. While Lewis does an admirable job in the book of burrowing into the ridiculously complicated system of how orders get routed, he misses badly by making this assumption.
The majority of retail orders never see the light of a public exchange. Instead, they’re mostly filled internally by large wholesalers; among the biggest are UBS (UBS), Citadel, KCG (KCG) (formerly Knight Capital Group), and Citigroup (C). These firms’ algorithms compete with each other to capture those orders and match them internally. That way, they don’t have to pay fees for sending them to one of the public exchanges, which in turn saves money for the retail investor. For a detailed map of the market’s plumbing and how orders get filled, check out this Bloomberg Businessweek graphic from 2012.
Many retail investors enter the market through buy-side institutional investment firms such as pension and mutual funds. Lewis contends that these big, slow traders are also getting screwed by HFT. While that certainly might have been the case a decade ago, they caught up years ago. Talk to most chief investment officers at these big firms today and you’re more likely to hear how efficient trading is today, compared to 20 years ago—back in the era when orders got routed through human market-makers standing on the floors of exchanges.
Last year, I spoke with Gus Sauter, the former chief investment officer at Vanguard, one of the biggest buy-side investment firms in the U.S. By the time he retired in 2012, he had about $1.75 trillion under his watch. Rather than decrying speed traders, Sauter praised the benefits it had brought to him and his clients. By his estimate, speed traders helped him save him more than a $1 billion a year.
2. Speed trading isn’t hugely profitable. Lewis gives the impression that high-frequency trading firms are rolling in dough. The reality, however, is that HFT’s best days are behind it, and many firms are barely keeping their heads above water. Getco, which merged with Knight and was once a titan of HFT, experienced a profit drop of 90 percent in 2012. That year, according to estimates from Rosenblatt Securities, the entire speed-trading industry made about $1 billion, down from its peak of around $5 billion in 2009. That’s nothing to sneeze at, but it isn’t impressive once you put it into context: JPMorgan Chase (JPM) made more than $5 billion in profit in just the last quarter.
1. HFT doesn’t prey on small mom-and-pop investors. In his first two TV appearances, Lewis stuck to a simple pitch: Speed traders have rigged the stock market, and the biggest losers are average, middle-class retail investors—exactly the kind of people who watch 60 Minutes and the Today show. It’s “the guy sitting at his ETrade (ETFC) account,” Lewis told Matt Lauer. The way Lewis sees it, speed traders prey on retail investors by “trading against people who don’t know the market.”
The idea that retail investors are losing out to sophisticated speed traders is an old claim in the debate over HFT, and it’s pretty much been discredited. Speed traders aren’t competing against the ETrade guy, they’re competing with each other to fill the ETrade guy’s order. While Lewis does an admirable job in the book of burrowing into the ridiculously complicated system of how orders get routed, he misses badly by making this assumption.
The majority of retail orders never see the light of a public exchange. Instead, they’re mostly filled internally by large wholesalers; among the biggest are UBS (UBS), Citadel, KCG (KCG) (formerly Knight Capital Group), and Citigroup (C). These firms’ algorithms compete with each other to capture those orders and match them internally. That way, they don’t have to pay fees for sending them to one of the public exchanges, which in turn saves money for the retail investor. For a detailed map of the market’s plumbing and how orders get filled, check out this Bloomberg Businessweek graphic from 2012.
Many retail investors enter the market through buy-side institutional investment firms such as pension and mutual funds. Lewis contends that these big, slow traders are also getting screwed by HFT. While that certainly might have been the case a decade ago, they caught up years ago. Talk to most chief investment officers at these big firms today and you’re more likely to hear how efficient trading is today, compared to 20 years ago—back in the era when orders got routed through human market-makers standing on the floors of exchanges.
Last year, I spoke with Gus Sauter, the former chief investment officer at Vanguard, one of the biggest buy-side investment firms in the U.S. By the time he retired in 2012, he had about $1.75 trillion under his watch. Rather than decrying speed traders, Sauter praised the benefits it had brought to him and his clients. By his estimate, speed traders helped him save him more than a $1 billion a year.
2. Speed trading isn’t hugely profitable. Lewis gives the impression that high-frequency trading firms are rolling in dough. The reality, however, is that HFT’s best days are behind it, and many firms are barely keeping their heads above water. Getco, which merged with Knight and was once a titan of HFT, experienced a profit drop of 90 percent in 2012. That year, according to estimates from Rosenblatt Securities, the entire speed-trading industry made about $1 billion, down from its peak of around $5 billion in 2009. That’s nothing to sneeze at, but it isn’t impressive once you put it into context: JPMorgan Chase (JPM) made more than $5 billion in profit in just the last quarter.