Locklin on science

The three stooges of the high frequency apocalypse

Posted in finance journalism, systematic trading by Scott Locklin on August 2, 2009

What happens when you buy something? Well, someone sells it to you. If you want it for cheap, you sit around and look at different markets (ebay, amazon, craigslist) until someone displays a price you find acceptable. If you want that “something” right now, you drive to a store and buy it. You’ll almost certainly pay a little more at the store, because they need to make enough money to pay employees to prevent barbarians from stealing everything, and to keep the lights on and other such things for your convenience. You can also generally return what you bought to the store much easier than to ebay or amazon. You’re paying for the immediacy (buy it now!) and liquidity (buy as many as you want!) provided by the store. This is a service which costs money. Joe Saluzzi wants all stores to follow the same shag-carpet era rules his little Two Guys operation does. Paul Wilmott apparently wants to make stores illegal, because stores might “distort the economy.” Chuck Schumer is peeved those guys with a shop in his state didn’t fork over the correct amount of campaign contributions.

xray-stooges

The stooges diagnose what is wrong with Wall Street: obviously it’s the Quants fault somehow!

I’m not really talking about buying tchotchkes on the internets versus Target or Costco. What I’m talking about is the latest brewing financial moral panic against “high frequency” traders. High frequency traders are people who sell liquidity and immediacy. If you want to buy or sell at a given moment, you will often do business with these guys. Otherwise, you can place a limit order, or wait around for a price you find more acceptable later. High frequency guys provide the service of buying and selling when you want to buy and sell, and they take a risk that the market will move against their book. You pay them to take this risk. In the dark ages before decimalization, this was a pretty simple business to be in, and as far as I know, nobody complained about it. The spread between bid and ask would be at least a “piece of eight,” aka an eighth of a dollar (or a sixteenth later on). Now a days, the spread can be as small as a penny. As such, the people who provide liquidity to the markets have to be a lot more nimble and clever to earn their penny. All that this “high frequency” business really does, is make decimalization possible. Back when the market was measured in 1/8ths, people displayed more depth on the order books, because they had a smaller risk in displaying the prices. Now, people display smaller amounts on the order book at any given instant, because there is money to be made and lost in small price moves. So, you can either buy in cents, and deal with some form of high frequency guy/liquidity provider trying to make money on pennies, or you can go back to 1/8ths of a dollar and pay bigger spreads.

There are a lot of ways in which liquidity can be provided to a customer. It can be direct, as with the example of market specialists above. Liquidity providers may be arbitraging across markets. Liquidity providers may be taking advantage of “statistical arbitrage” -a term which no longer really means anything, but which I’ll borrow to mean “people who earn a mean reverting spread over some reasonable period of time.” For all I know, there are liquidity providers who earn the spread by sticking pins into Timothy Geithner voodoo dolls. “High frequency” is taking a big publicity hit right now, because these guys are making money. Well, of course they’re making money. They’re getting paid to take liquidity risks at a time when there is much less liquidity across all markets. Generally, if I have a large warehouse full of something, and my competitors warehouses burn down, and demand remains more or less the same, I am going to make more money.

I’m pretty sure all this news buzz around the evils of “High Frequency” started with Joe Saluzzi, who appears to be a sort of liquidity provider himself. His fund, Themis, apparently manually gets the best price for his customers. At least, that’s what it looks like on their website. A noble profession, though very likely a dying one. It seems the “high frequency” guys are picking his pocket, because computers are better at finding liquidity than human beings are. Joe blathers on about a lot of things, and I don’t feel like picking apart all the points in his various white papers on the subject. Joe appears to have a lot of time to go on television and indignantly blather about the evils of “high frequency” trading, despite the fact that his company appears to do exactly what “high frequency” traders do. The only difference between Joe and his tormentors seems to be that firm does it manually and in slow motion. I can’t let his nonsense about “false trading signals” pass uncommented though. Since when is anyone entitled to “true trading signals?” Gee, Joe, I’m sorry your crappy old signals don’t work any more; maybe you should invest in developing some new ones? Joe would probably be better off staying home, learning C++ and figuring out how to deal with these high frequency fannullones on a mano de mano basis, you know, sort of like all the other shops like his are doing. It probably won’t get him the attentions of pretty girls as much as being on TV does, but it’s going to be more productive in the long run. I can’t help but like Joe Saluzzi; he seems like a regular guy; un tipo forte, and he appears to be mostly looking after his own self interest. Joe just wants to continue providing liquidity with stone knives and bearskins. I have no doubt that buggy whip manufacturers in the time of the model-T were big advocates of speed limits as well, for the “public good.”

moe-howard-7saluzzi

Moe, the coolest stooge, conveniently looks a bit like Joe

Paul Wilmott is someone who should know better than his latest New York Times drivel. I can understand why Paul is sore about the high frequency guys. Presently, high frequency guys are making money and hiring people. Wilmott’s line of business is selling educational and recruiting services for quants. Unfortunately, Paul doesn’t know anything about high frequency or any form of algorithmic trading, can’t sell educational services catering to this type of trading desk, and probably doesn’t place many people with algorithmic trading desks of any trade frequency. Paul’s business is providing education and recruiting services for structurers and hedgers. As such, he probably feels left out of the high frequency party. He shouldn’t be upset; he had a pretty good run when everyone in the world was hiring structurers to hedge risk with those complicated derivative securities which were the last moral Wall Street panic.. Wilmott has a decent book on the subject, and by all accounts, a good operation for placing his students. No doubt, if he is patient, he will be in the money again. Whatever Paul’s issues with the continued profitability of liquidity providers, he has no excuse for making statements like this:

“Leaving aside the question of whether or not liquidity is necessarily a great idea (perhaps not being able to get out of a trade might make people think twice before entering it), or whether there is such a thing as a price that must be discovered (just watch the price of unpopular goods fall in your local supermarket — that’s plenty fast enough for me), l want to address the question of whether high-frequency algorithm trading will distort the underlying markets and perhaps the economy.”

curly
wilmott

Wilmott, like Curly is the most likable of the lot. Perhaps he also eats hallucinogenic millipedes?

While I am not a famous cavolo like Paul Wilmott, I happen to think liquidity and price discovery is a good idea. The reason these are a good idea, is without liquidity and price discovery, you get people cornering markets and making off with real value at the expense of everyone else, like Jay Gould did in the panic of 1869. Sure, we could go back to call markets and market makers running off with their 1/8ths or whatever Paul sees as more desirable than the present state of affairs. Why would we want to do that? Just to deprive the high frequency guys of a living? Someone will profit from going back to a call system, and lots will make bank on fat spreads. Because Wilmott understands them better? I bet he doesn’t understand call markets any better than the present state of affairs. As for high frequency trading “distorting underlying markets” -the fact of the matter is, high frequency trading is a small business. The scariest numbers I have heard are about 10 billion a year. This is a tiny drop in the bucket compared to the tens of trillions that change hands on the markets these guys provide liquidity for. I bet the guys who provide lunch for Wall Street make more money than the liquidity providers do. Sure, there are pathological ways a bunch of algorithmic liquidity peddlers could go wrong. If they magically turned from mean reversion traders to trend followers, they could have a very negative effect on things. But then, they wouldn’t be liquidity peddlers, and they wouldn’t be high frequency traders either! You know what this would look like? This would look like a whole bunch of testa di cazzos borrowing cheap money and bidding up the market. This is a dynamic that everyone should be well familiar with by now from looking at .com bubbles, oil bubbles and housing bubbles, and it has nothing to do with transactions that last a few milliseconds. Wilmott should know better than to say something this dumb, but I guess being published in the NYT means you have to say something -even if you’re saying something stupid.

surgery-stooges

Joe, Paul and Chuckie fixing the markets: they’re here to help!

Wilmott then goes on to tell the story of 1987′s Black Monday. He tells the story of how the portfolio insurance guys software got into a feedback situation which caused the market to crash. The first thing you need to know about the portfolio insurance strategy is, even though it was often run by computers, it is not a high frequency strategy. It is the opposite of a high frequency strategy. It is taking a short position on market futures, and keeping that position open as a hedge against your portfolio falling. If you were to take a short position, then sell it the way a high frequency trader does by definition -the feedback effect is impossible. Sure, if every high frequency trader gunned the market at exactly the same time in exactly the same way, with all their cash reserves, it could cause the market to move. Then everyone else would pile in on the position and buy the over sold market, it would mean revert, and the high frequency dudes would lose an enormous amount of money. The second thing you need to know about Wilmott’s fairy tale, is the 1987 crash was arguably not due to program trading. The fact of the matter is, the crash originated in Hong Kong at a time and in a place when people were still calculating greeks on abacuses. Proximate causes were all news-related: America was shelling Iran: duh. I’ll split the difference with Wilmott and say program trading made the crash worse, but program trading no more caused the crash than 9/17/01′s crash was caused by program trading.

As for Chuck Schumer, -he’s such a dirtbag I can’t even bring myself to attempt to comment objectively. If GETCO or Citadel had him on the payroll, no doubt he would be less protective of the “consumer” who Chuckie just saddled with a couple trillion dollars in debt. As Bob Dole once put it, “the most dangerous place in Washington to be is between Chuck Schumer and a microphone.” I suppose after Chuckie’s hatchet job on Indymac (yo, remember that? back in the halcyon days of summer 2008?) and you know, his general scumbaggery -I guess he wanted to go for the hat trick and destroy one of the few businesses still functioning properly in America. Thanks a lot Chuckie.

larry_stooges
shumer

The resemblance is uncanny, and nobody likes Larry either.

So, people, lest you be spooked into “fare i gattini” by opportunistic bastardos attempting to get you to pick up the pitchforks and torches and go burn down GETCO or Ken Griffin’s art collection, try to think about what these politicians and commentator cretinos are really selling you. Making money is not always a sign of moral turpitude; some people actually earn their dough by providing things that other people want. There are plenty of looting scumbags in our society who richly deserve vilification. High frequency guys? Innocent until someone comes up with a good reason why they’re guilty of anything but selling people stuff they want. It’s too bad there is no great champion of high frequency traders out there to stand up and say, “non mi scazzare i coglioni,” but in the meanwhile, leave my high frequency paisanos alone. They got a job to do.

With apologies to the Italian language: once you start cussin’ in Italian, it’s difficult to stop.

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42 Responses

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  1. Sean said, on August 2, 2009 at 3:23 pm

    Best blog post I’ve read in months! And then I discovered the rest of your writing – fantastic. BTW you should send this to WSJ or NYT and see if they print it. They could use some clear-headed editorial for a change!

    • Scott Locklin said, on August 3, 2009 at 3:00 am

      Thank you sir. Honestly, I despair of legacy news media ever making a even a passing acquaintance with the truth. They’d probably complain I use large words, obscure references and demand that I apologize to old Joe for being insensitive to the age old oppression of Italian people. Then they’d also be sore at me for, you know, actually explaining how stuff works.

      • B Russell said, on May 10, 2011 at 5:34 am

        Italians are black nobility, bar none. Some make millions or billions and live in shacks. Capeech pizzano.

  2. Chad said, on August 2, 2009 at 4:05 pm

    As much as I enjoy Tyler Durden, retail is starting to come around.

    I really like this blog. Thank you.

    • Scott Locklin said, on August 3, 2009 at 3:02 am

      It would be nice if things started looking up. I’d rather we didn’t fall into a double depression the way we did in the 30s, arguably due to guys like Chuck Schumer attempting to be relevant.

      • B Russell said, on May 10, 2011 at 5:32 am

        The curves are there, the cycles as well. Well, the Chinese are liquidating 2/3 of US investments, the REEs will not be exported. Every needs the REEs and the US will need over 5 years to reactivate some mines. It is all in China, Mongolia, and Afghanistan. Afghanistan was not about some planes hitting twin towers but the trillion dollars of REEs which are needed in every industry in the world. In battle I worry more about a 76 year old chinese wyushu dm’mk.dm’chch, dm’mk sensei that ten Seal Team member 6s. It is the Jians that dictate.

  3. [...] In defense of HFT.  (Scott Locklin) [...]

    • B Russell said, on May 10, 2011 at 5:27 am

      Yes it matters. Rich mans panic 1097. Creation of FRB. JDR Anti Trust Standard Oil. An interesting question? Who did JDR make president of Standard Oil in 1956?

  4. David Lockwood said, on August 3, 2009 at 7:51 am

    Brilliant. Simply brilliant. I’m glad we’re seeing more balance to people like Felix Salmon – who’s never seen a market he hasn’t feared.

  5. Luciano said, on August 3, 2009 at 1:45 pm

    Nice post. And now you can add Paul Krugman to the list of stooges.

    • Scott Locklin said, on August 3, 2009 at 10:16 pm

      Krugman… as I recall he won a Nobel prize for his exemplary work with Enron. How is Enron doing these days?

      • B Russell said, on May 10, 2011 at 5:25 am

        Nobel price. Snobel price. Nobels first casualty was his brother. At the LTCM people had Nobels and doctorates, and look how well they did. Enron is history but W got his $10 m. Kenny Boy died.

  6. Jason Ontko said, on August 3, 2009 at 5:31 pm

    Your decimal or fraction argument for high frequency trading is clearly a false dichotomy. We did not have high frequency trading until well after decimalization.

    Also liquidity providing is now 70% of market transactions. Perhaps this is harmless or maybe even desirable but I think some cautious doubt is warranted.

    Enjoy reading your thoughts though, they are very precis.

    • Scott Locklin said, on August 3, 2009 at 7:33 pm

      We didn’t have high frequency until decimalization? GETCO was doing their thing in ’99 -that’s all they do. I also don’t believe the 70% figure I hear bandied about. I mean, who calculated that, and how? As I see it, the most it will ever be is 50%. Otherwise, who is paying ‘em?

      I guess it’s OK to be cautious, but the people most at risk are the ones in the HFT game. They have a strong incentive to get it right, otherwise they lose all their money. They also have a clearer picture of what is going on.

      • Jason Ontko said, on August 4, 2009 at 2:56 pm

        GETCO existed back in 1999 but it was not conducting what HFT in the way it is conducted now. I don’t know for sure what exactly they did but it most likely was automated Black Sholes option stock arbitrage but I know they were not trying to pick up 1c spreads through HFT. In fact here is a quote of a interview between Steve Forbes and Duncan Niedeauer CEO of NYSE Euronext where HFT was discussed “I think everything gets a lot of regulatory attention today. So any new thing can assume it’s going to be put under the regulatory microscope. And this is a new business. If we go back, if you and I were sitting here five or six years ago, people were just beginning to understand what electronic trading was all about. The technology had just gotten far enough at that time, Steve, That people could start to think about new business models that that technology was going to enable.” http://www.forbes.com/2009/07/31/niederauer-technology-exchange-intelligent-investing-naked-shorts.html Clearly the CEO of NYSE Euronext thinks HFT is a rather new phenomenon that did not come it existence into full form until at least 2003. Decimalization maybe be correlated to advancements in market making technology but HFT is not the same as digitized order flow. The Special Liquidity Providers program on NYSE which serves HFT traders did not come into existence until well after decimalization. I stand by my false dichotomy statement.

        Zero Hedge is where I got the 70% number and I do not consider it a reliable source, so you can dispute the number. (can’t find the link) The New York Times, a slightly more reputable source but still not definitive source did say “Although precise figures are elusive, stock exchanges say that a handful of high-frequency traders now account for a more than half of all trades.” http://www.nytimes.com/2009/07/24/business/24trading.html. Furthermore its possible to have more than 50% of trades being conducted by HFT if some of trades are between HFT traders. What ever the exact number or methodology, its big. Since some of the liquidity providers are too-big-to-fail, this should concern everyone. Lehman’s collapse affected everyone in the market, so the soundness of such a large new trading strategy should concern us all even though the risk is being borne by others.

        Lehman also had a large incentive to get its business right and yet they failed. Some times people and firms fail to achieve something despite having a large incentive not to fail.

        • Scott Locklin said, on August 4, 2009 at 5:54 pm

          I have a book on my shelf with a 2001 copyright called, “an introduction to high frequency finance.” If you want to know what’s in it, it looks a lot like the source listing for Goldie Stix’s scalping machine. It even uses a functional programming language like they did -though I’m sure that’s a coincidence.

          I think the 70% figure originates in Moe’s white papers -as far as I can tell, someone’s ass.

          If HFT’s are trading with each other, you need to ask yourself: where is the money coming from? I guess they could effectively be splitting penny spreads -hell, they probably are, but, like, who cares if they are? This isn’t some great danger to the consumer: this is businesses competing with each other. I have no doubt there is more HFT than there used to be, if only because there are less traditional market makers, and more people who are clever with computers. If you’re buying and selling in milliseconds, what’s your VAR going to look like? The spread? Or the volume? Most people would say it’s the spread. If it’s the volume, there is more wrong with the markets than forking payola to Chuckie Schumer is going to solve.

          • Jason Ontko said, on August 4, 2009 at 8:46 pm

            Here is the Zero Hedge page that the 70% (more specifically 73%) number came form which came from an article in Advanced Trader. http://zerohedge.blogspot.com/2009/07/goldmans-4-billion-high-frequency.html
            It may have come from an ass but it was not mine.

            And VAR is to risk measurement as Jessica Alba is to good cinema. That is quite specious. Candy for the eyes not the mind.

            • Scott Locklin said, on August 4, 2009 at 10:24 pm

              VAR is a useful concept. When I wager a nickel, I know my ultimate value at risk isn’t more than a nickel. One of the arguments against HFT is that there is some hidden VAR which accounts for their profits, a la “too big to fail.” That argument is specious.

              The original source is something called “The TABB group,” and I don’t feel like giving them my information to look at how they pulled it out of their butts.

          • B Russell said, on May 10, 2011 at 5:20 am

            As for the shit coming from your or anyone else’s ass, I can make money out of it, Lots .. The amount of revenue which can be generated from animal’s asses is several bill a year. So it smells bad, tastes bad, but robots have no olefactory sensors.

      • John Flanagan said, on August 19, 2009 at 1:50 am

        With regard to HFT shops trading significantly with each other, when I worked at one HF shop (which did, on a daily basis, between 2% and 5% of the US Equity volume, i.e. a METRIC SHITLOAD of volume), we got a VERY unofficial call from our clearing firm, who told us, “Uh, you are trading with this other HF firm that we won’t name but we’re sure you can guess. You trading with each other. A lot.” This other firm also did a metric shitload of volume. But apparently we were happy to be trading with each other, for whatever mysterious FE reasons. If they were somehow getting the advantage of those trades, there was still plenty of advantage left to go around, because we weren’t hurtin’.

        • Scott Locklin said, on August 19, 2009 at 2:00 am

          Well, I suppose anything is possible. You mighta been making dough off them while they arbed another market: or… who knows! While I talk about pennies above I’m sure the actual edge is more like a basis point.

      • BillAtHRST said, on August 31, 2009 at 7:25 pm

        The 70% number comes, I believe, from Tabb, and it has the following caveats:
        - it is clearly labeled an “estimate”;
        - it also is worded that “HFT firms, which represent approx 2% of the 20,000 or so trading firms…account for 73% of US equity trading volume”.

        Also, “providing liquidity” is not necessarily the same as “making a market” — before decimalization there was an incentive (a big honkin’ spread) for market makers to maintain an orderly market. There were also market forces that provided incentives for market-makers to give back some of that big honkin’ spread (price improvement), so things didn’t get too out of whack.

        So, paying (real) market makers a ‘steenth might not have been such a bad thing, compared to what we have currently, where pretty much everybody is a speculator.

        • Scott Locklin said, on August 31, 2009 at 7:43 pm

          I appreciate your comment, and yes, a MM and a liquidity provider ain’t always the same thing -for that matter, they’re not speculators either.

          Though you are evidently “against” liquidity providers, you have failed to articulate anything wrong with the present situation which giving Goldman 1/16 would correct. I’m not seeing where there is “price improvement” when you’re always paying your 1/16. There is going to be more price improvement when you have a lot of dudes trying to earn their penny spread. Otherwise you’re just forking over more of your dough when you don’t have to.

  7. Siddharth Sharma said, on August 3, 2009 at 6:31 pm

    Hey, whats with all the front running accusations though.

    I think mean reversion type HF is a great idea iff the playing field is level and and there is no chance of any kind of statistical front running. In case some people have the information before others, it amounts to mere rent extraction.

    • Scott Locklin said, on August 3, 2009 at 8:26 pm

      What makes front running illegal and unfair is insider broker information and self dealing. Aka, my customer tells me to sell 100,000 shares, so I short 10,000 of the same thing for my own book. You go to jail for that. If I’m sitting next to Larry the GOOG specialist, and notice he starts sweating bullets, it’s OK for me send out orders in front of his. It’s not nice, but it’s legal. If I have a computer program that can smell big blocks: I don’t see what the problem is in making them pay for immediacy. That’s part of the game, and always will be. If someone’s dumping a lot of a stock, that is information which needs to get baked into the market price. Sometimes it’s just noise, because the block dumper wants to buy something with his stock, but sometimes it ain’t.

  8. breadfan said, on August 5, 2009 at 4:13 pm

    Thank you for publishing something thoughtful on the topic. This post, and the one at Marginal Revolution, are the only intelligent public discussions of the topic I have seen yet. The rest is uninformed hyperbole.

  9. BJB said, on August 5, 2009 at 4:58 pm

    What’s good for Wall Street is not necessarily what is good for our country. Get that one through your head first. I find it hilarious that people swallow the bullsh*t GS puts out about acting as a liquidity provider. Yeah sure they will suck up your order during the good times, and even when they can ride it on the down leg, but if sh*t really hit the fan, GS and the other “so-called” liquidity providers would be out of the market so fast you would not even know what hit you.

    Isn’t that what happened in 2008 folks? Counter-party risk spiked so high nobody wanted to provide liquidity to anyone, not even to well capitalized company with massive revenues.

    If they cannot make massive amounts of money from it, they would not do it. Does anyone really beleive different?

    Good lord.

    BJB

    • Scott Locklin said, on August 5, 2009 at 6:39 pm

      So, you’d prefer liquidity provision as a public service by the government? Complaining that somebody gets to make a buck is not helpful. Of course somebody gets to make a buck. Otherwise, they would not be inclined to do it. Do you think it would be any different with old fashioned, “I get 1/8 a share” liquidity providers in a call market?

      • BJB said, on August 6, 2009 at 2:33 pm

        I would prefer a market where everyone sees prices at the same time with policies designed to create a fair marketplace and deter front-runners. Goldman and other HFT gamers are not making the market better for the rest of us, that we can all be sure of.

        In fact, they may be increasing the risks rather than said benefits. As it stands, with the amount of money they have at risk daily, weekly, monthly, and with 2008 as a great starting point, it is easy to see that if things get extreme, GS would be wiped out and with it, the marketplace.

        • Scott Locklin said, on August 6, 2009 at 8:37 pm

          If it’s easy to see, I’d certainly like to see it. That would end a lot of this debate.

          What you’re asking for in a market is completely impossible. It was impossible when your order was routed through two layers of clerks and brokers to go to some sweaty clown in a loud suit shouting in a trading pit. It’s impossible now -though it is a hell of a lot closer to fair now than it was then. At least I can wire up a FIX pipe to a broker which gives me level-2 quotes for a nominal fee. What was my option in the bad old days of 1/8ths?

          Want to ban flash orders? Personally, I think if you want to do so, they should be banned by the exchanges, not the SEC. Whatever the things those orders accomplish will be accomplished in another way, Goldman and GETCO will still have advantages over you and me, and life will remain unfair. What boggles me is nobody is asking themselves qui bono in this matter. I suspect the people who will benefit from regulation are going to be the rich and powerful -or at least the politically connected; this isn’t some crusade by and for the little guy.

  10. [...] or two or five man operations with only a little money in the bank. That’s why guys like me get upset when media fiends go after “high frequency.” You know who they’re going after? The [...]

  11. Anon said, on August 20, 2009 at 4:20 am

    Note that some of the HFT volume would come from big orders from institutional clients. Orders which would have previously been handled by Saluzzi manually. A lot of HFT is on how to reduce market impact when executing block orders. So, it would not be surprising to me if almost all big institutions/hedge funds now execute their block orders via HFT and the high %age volume would explain that and wouldn’t be an issue.

    I think Zero Hedge alleged that a big fraction of GS HFT is prop trading (i.e; not because of client orders). I don’t know if he is correct but if there is something suspicious then it may well be worth looking into the prop portion of the HFT volume. In any case GS mentioned that the profits from their equity HFT division was 1% of their quarterly profits so there shouldn’t be anything wrong here as far as one can make out.

    • Scott Locklin said, on August 20, 2009 at 4:49 am

      That’s more or less my argument in a nutshell. If HFT is making so much money, who is making it? GS is much more likely to be annoyed at not getting a good price on blocks in their low frequency funds because someone else is scalping them than they are to be making zillions of dollars scalping other people.

  12. NH said, on August 26, 2009 at 12:22 pm

    Thanks for explaining how high frequency traders earn money. Trading and market making are topics that are difficult for people not in the finance industry to understand and you do a great job of elucidating the business model and the service offered.

  13. High Frequency Trading #2 « nigecus said, on October 30, 2009 at 11:05 am

    [...] Das Liquiditätsproblem Irgendwie hätte ich hier („article in NYTimes about high frequency trading“) nachgucken sollen, bevor ich das („High Frequency Trading … noch ein Kommentar dazu …“) geschrieben habe. Reflex: The three stooges of the high frequency apocalypse [...]

    • B Russell said, on May 10, 2011 at 5:10 am

      How are Chef Vorzizstander Joseph Ackerman and Heinz Joseph Lamberti these days???

  14. [...] already know about Joe Saluzzi -the fellow who thinks it’s his civil right to profitably trade using a squawk box and ticker [...]

  15. B Russell said, on May 10, 2011 at 5:06 am

    Let us not forget GS (1929), JDR/JPM (1929/1934), MS, JPM, BAC have not repayed their TARP in full. I would seriously recommend Irene Aldridges book, and EP Chans book. I write very fast C code, which executes at nano second level on my BIRD UNION Server ( 8 Magnys with Tesla GPU ), 32 trillion i28-bit algos/second, with a variant of In-Q-Tels infrapacket analyser. Decoded guerilla, iceberg, sniper, and autobahn algos. Built 100 ZB DW w 2 minute latency for client. Built 750,000,000 800-MB message oriented middleware project, plus monitor control program for all centrexes. C, Java, Matlab, S, R, SAS, MQSeries, FIX, FpMl, WAS, UDB, AI algos. All tech comes from the DOD and the mCTL tells us where the need is. Earlier in my stupidity, I provided CAD, CAM, CAI, and AI for a total waste of money product for 2.114 b each. Worked on other high tech. When one designs a system of very high tensor operation, 12 eggs at M25, plus safing, arming, and bus dispensation, one has to be good. I studied the CDCs, Cybers, Craigs, Roadrunners, Blue Genes, Jugene’s, Tihanes. Easily clear 2m euros per week taxes paid. What happens when America becomes the old man like Britain, and the GMA pushes the Amcor. China is liquidating its holdings in USA. UBL was dead 8 years ago, his skull is in Deer Island, like Geronomo’s. What happens if a 9.5-9.7 hits SF, increased M-class and S-class solar prominences. My design project, BREASTS (Best Returns Examining Analyzing Supersecurities Targeting System) does very well. Built a very nice AI front end with multiple personalties (Nussbaum, Dodd, Livermore, Loeb, Wycoff, ONeill, Minsky/Pappas, Chen, etc etc). BREASTS runs on ASS (advanced smart phones), Bird Union Servers, Power 7 (P795 clusters), Z196M80 Sysplexes, Z196-based GDPS, and Jugene pflop computers. Built an unusual version of Alan Greenspan’s briefcase. Have very sophisiticated SMART system for resource allocations (LA, Ce, Pr, ND, Pm, Eu, GD, TB, DY, Ho, Er, Tm, Yb, Lu, Li, Y, Co, GE, In, Te). Developed Reverse engineered google search algorithm. Made over 400K on May 05,2011 and am very well prepared for WHEN Money Dies. I do no work for anyone, I have no physical address. How many quants are prepared for Open Madrid 2011, the 9.5-9.7 in SF. Applying correlational techniques for ionospheric precursors of earthquake activity has tremendous benefits. $200 barrel OIL does not bother me, as my baby Benz runs on water, very efficiently. University is limited, as all learn the same shit from the same university, whose curriculum is controlled by David R. I only learned how to target MIRVs with Jovial J73. Stuxnet and Stars will have some very serious future problems, as all the gate array controllers in iPods, iPads, Android, RIMM, 7 Phone will have serious viral programs. As for the Gulf of Tears, a DF21 coming high at M12 with very erratical maneuvers, with EO, IR sensor and a Sqval coming low at M0.5 with very erratical terminal maneuvers, will scrap a dual hulled supertanker or CVN boats. Some stealth uses Yalladuns em product to achieve complete stealth. Yalladum generated 9 B watts from a device the size of a small bear refrigerator from a device incorporating some of Mr T’s Wrdenclyffe patents. Pebble bed reactors were developed in 1942. Ask James Carter, not just a peanut farmer, but a nuke reactor specialist. No PAC-3, THAADS, HEL, Miracles, ABL can stop them. The Topol M is a much worse situation. 8 eggs plus two peckers delivered with 60 feet at Niagara Falls, Denver, Dallas , and the Firesale site, will leave America in ruins. The Sirenas are just a capable and can be launched from their own waters. The Triumphs are phenomenal, 10 extremely highly maneuvrable targets
    in less than 120 seconds. Conformal tanks on the AS-18s. Let us remember that all cruise missiles fired in Libya, Sudan, Bosnia, Iraq did not all hit their targets and were purchases by China and reverse engineered. Too Big Too Fail was correctly predicted by Dr Doom in the Doom, Gloom and Boom blogs. He did an excellent article on the ecnomic ramifications of Pandemics such as the Level 4 H1N1. When he said the best situation to AIG was nothing, he was right on but no one listened. The four horseman of the apokolpoopsies are GS, JPM, C, MS and the PUD (Pump and Dump). Once should read the Rockefeller Syndrome and Tarbells book, which will give you an idea of the true leader of the USA (his jackals kill the good). JDR was bad enough, Nelson was much worse (with tricky dicky amd Henry K, who lost most of his relationships in the camps.
    Remember the rich man’s panic of 1907. Read the history of the FRB and google all the associations. Read Executive Intelligence Sep 97 for another revelation. I also recommend the reading and understanding of Hoyle. Gotta know when too hold em and fold em. I3s power engineering unit produced a millionwatt generator with a form factor of three iPads, for under 2K. 1 watt in 1 million watts out. The ZPMs do work, 9-11-2001 was the test. If = v=m*a, and e= mc2, then what are the impications of e= delta t^3.. DE Shaw is one of the best, like Seymour Cray. Fukishima Ge1s were shit and the MOX kept em going a little longer, the SLCM hit the underlying ledge. Fracking and exploration cause problems, especially with the huge bore jobs under the earth, especially in the USA. After the 9-11 incident, when one client’s headquarters collapsed, and my lungs were full of the nanometric thermite and other contaminants from the scalar, I left the US never to return.

  16. B Russell said, on May 10, 2011 at 5:09 am

    My favorite stooges episode was the aliens with the heliocopter-submarine-air-plane rocket ship and the aliens. Such talent. The Game Of Death is very interesting. Rogues indeed.

  17. […] a (brilliant) PhD physicist I regularly follow the blog of explaining some criticisms of HFT in 2009, and again in 2011. Famous investor Dennis Gartman gets behind HFT as well. My views probably […]

  18. […] was an old school block shopping trader. If you remember my previous pieces on  HFT nay sayers: Joe Saluzzi was also a block shopper. Old fashioned block shoppers have obsolete jobs. Their jobs are to find […]


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