[LINK] mysterious algorithm responsible for 4% US trades

[Fernando Cassia]

On Wed, Oct 10, 2012 at 7:05 AM, Rachel Polanskis <grove at zeta.org.au> wrote:
> http://www.cnbc.com/id/49333454
>
> I am thinking this is a test or it would not have been detected.  Gaming the market like
> this has global consequences worse than any computer virus.
> rachel

Reminds me of this story from last April:

http://www.businessweek.com/articles/2012-04-23/high-speed-trading-my-laser-is-faster-than-your-laser

"“Market participants are always looking for advantages,” says Percy,
meaning that speed traders continually look for ways to trade faster.
“The cost of that advantage, though, is significant. The success of a
trading strategy relies on how effectively people are able to achieve
those last few milliseconds, and so a cost-effective way of delivering
[faster speed] is really valuable, because just throwing money at the
problem doesn’t solve it.”

The problem these new cables are solving is one of speed, not
capacity. There’s plenty of fiber-optic capacity connecting most of
the world’s big trading hubs, thanks to the fiber boom of the 1990s
and early 2000s. Those cables were built before the era of
high-frequency traders, so they rarely adhere to the shortest distance
between two points: a straight line. Other than improving the caliber
of the lasers shooting beams of light through these miles of cables,
the only way to make them faster is to make them shorter.

Percy reckons that through a combination of improved lasers and
shortened cables, the day may soon come where traders can execute a
trade between New York and London at close to 40 milliseconds.
Anything faster is physically impossible, save for drilling through
the planet."

And then this:

http://www.nytimes.com/2012/09/09/business/high-frequency-trading-of-stocks-is-two-critics-target.html?pagewanted=all&_r=0

----
 From workaday suburban offices here, across from a Gymboree, these
two men are taking on one of the most powerful forces in finance
today: high-frequency trading. H.F.T., as it’s known, is the biggest
thing to hit Wall Street in years. On any given day, this
lightning-quick, computer-driven form of trading accounts for upward
of half of all of the business transacted on the nation’s stock
markets.

It’s a staggering development — and one that Mr. Arnuk, 46, and Mr.
Saluzzi, 45, say has contributed to the hair-raising flash crashes and
computer hiccups that seem to roil the markets with alarming
frequency. Many ordinary Americans have grown wary of the stock
market, which they see as the playground of Google-esque algorithms,
powerful banks and secretive, fast-money trading firms.

To which Mr. Arnuk and Mr. Saluzzi say: enough. At their Lilliputian
brokerage firm, they are tilting at the giants of high-frequency
trading and warning — loudly — of the dangers they pose. Mr. Saluzzi
was the only vocal critic of H.F.T. appointed to a 24-member federal
panel that is studying the topic. Posts from the blog that the two men
write have been packaged into a book, “Broken Markets: How High
Frequency Trading and Predatory Practices on Wall Street are
Destroying Investor Confidence and Your Portfolio,” (FT Press, 2012)
which was published in June.
---

... all of which reminds me of a great AU movie.... "The Bank"

http://goo.gl/Aagbk

:)
FC