Saturday, September 15, 2012

If You Still Believe the Market is "Free" Read This

New York Stock Exchange Settles Case Over Early Data Access. Sep 14, 2012. The New York Times by Ben Protess

[Excerpted] In the latest federal action against a major exchange, the New York Stock Exchange settled accusations on Friday that its trading data gave select clients a split-second advantage over retail investors.
The Securities and Exchange Commission issued a civil enforcement action citing the Big Board for "compliance failures" that allowed certain customers to receive stock data before the broader public. The improper actions, which began in 2008, ran afoul of safeguards set up to promote fairness in a system known for favoring elite investors....
Majia here: Customers who receive stock data before the broader public are able to "scalp" markets by buying and selling before other, slower investors. Inequality in access to information means the market is not free.

Furthermore, market players with super fast computers can also push out buy and sell orders and then pull those back in micro-seconds, triggering slower investors' buy and sell programs. 

This is called "quote stuffing" and it is essentially a kind of fraud because there never is any intention to execute the transaction.

The market is essentially rigged and the big powerful players are in every sense of the word "market makers."


High Frequency Trading Arms Race Mocks "Free" Markets


Financial Warfare Using High Frequency Trading, Quote Stuffing and Naked Short Selling

The Financial Crisis and the Shock Doctrine

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