Locklin on science

The arguments against HFT

Posted in finance journalism, systematic trading by Scott Locklin on March 1, 2011

People are still whining about HFT. I’m still annoyed at whiners and doom sayers. This has been going on long enough, and enough hot hair has been expelled on this subject, a taxonomy of the contra-arguments is called for.

  1. It’s not faaaaaiiiiir because I can’t do it. This is the Chuck Schumer/Themis argument. The fact of the matter is: nothing about finance is fair, because not everyone can do everything in finance. Why can’t I borrow at the repo rate, and where’s my goddamned bailout money, Chuckie? No fair, yo! If people knew the enormous list of things which the individual investor couldn’t do, well, they’d be peeved about a lot of things. Why can’t I underwrite insurance? Why can’t I have access to Goldman’s data on dark liquidity pools? Why don’t I have 20 awesome Ph.D.’s of the capabilities of Lenny Baum working for me, like Jim Simons used to at Rentech? Why can’t I have all the data sources that a fund has, so I can do stuff like trade on SEC data? The answer is: that’s life. Some people has, some people has not. Amusingly, the individual investor can do things like trade on inside information and can generally get away with it better than SEC monitored funds do; nobody ever complains about that.
  2. Technology: it’s scaaaaaaary. HFT may turn into skynet and take over the world! This argument probably dates back to some australopithecus who was worried fire might cause cancer in rats. Sure, we could regulate trading such that some arbitrary time scale makes up a tick. Who makes that choice? Large market participants seem to like the idea of regulation. You know why? Because they’re the ones who are going to write the regulations. Don’t believe me? Go read something written by a government bureaucrat. What, did you actually think they work for the little guy? They don’t: not any more than Chuckie Schumer is a modern day Cincinnatus.
  3. I am a communist revolutionary, and I don’t want to pay for liquidity. Liquidity should be provided by government functionaries, appointed by proletarian revolutionaries. Also, trade should be banned, as well as money. Our modern economy will be denoted in locally-grown carbon-neutral seashells. Quite a lot of the arguments fit into this category. If you don’t believe in trade, well, I guess I don’t have a good come back. Have fun eating gruel.
  4. I am someone who will benefit from wider spreads caused by knocking out the legions of small HFT players. This is never the stated reason, but it’s almost always the actual reason. This is the actual reason most regulatory laws are passed in the modern age: because someone who bribed a congressman wanted ’em passed. See the link in #2 for more insights.
  5. They’re stealing from the small investor! No, they’re actually providing a cheap service to the small investor. Hundreds of HFT’s are competing for your liquidity dollar, making spreads lower than at any point in human history. You know who really steals from the small investor? Brokers, incompetent money managers, the government who taxes everyone to penury and prints worthless dollars, incompetent and self-serving boards of directors and management, and media crooks who dispense lousy hype, either through incompetence or corruption. Of course, unlike HFT firms, these sorts of rip-off artists have well paid media flunkies and Washington lobbyists, so nobody ever notices. Blaming HFT firms for whatever financial problems we presently experience is like blaming Apple computer for the problems with Alar because they use the word “apple.”

I tire of this artificial “controversy.” No, I don’t have skin in this game, other than being someone who benefits from the cheap spreads provided by hundreds of little HFT’s. I don’t work in this space, and have no immediate plans to do so. This “controversy” is a distraction; a sort of sleight of hand applied to mass media misinformation about a poorly understood subject. Of all the myriad of subjects people could get bent out of shape about our financial system, of all the potential dangers presently faced by America and the world financial system, this is the least worrisome. Why not agitate for the breakup of firms which are “too big to fail?” Why don’t people worry about the preposterous pyramid scheme we call the US government and Federal Reserve system? Why don’t people complain when their jobs are outsourced? Why aren’t shareholders agitating for more board accountability? Why is nobody noticing the fact that nothing has appreciably changed since 2007? No, no, we must punish one of the few honest and competent areas of the financial system: after all, they’re making money.


This “controversy” is offensively dumb. Yet, so few people understand anything about it beyond “they make money,” I figure I’m going to have to hear about it for years to come. Get back to me when someone comes up with a better argument against HFT which isn’t one of the above 5; until then, you’re a moron and I’m not listening to you.

Da plunge

Posted in finance journalism, microstructure, systematic trading by Scott Locklin on May 14, 2010

So, I don’t claim to know what’s going on here any more than anyone else does. Thus far, we have the Fat Finger theory. The fat finger theory at least makes a little bit of sense. When people dump enormous blocks of stock … things happen. Microstructure 101. I was going to try to work through the microstructure of how this could happen using a little of Hasbrauck’s book, but unfortunately, the SEC says it didn’t happen that way.

The usual band of numskulls is out blaming HFT in their typically nebulous manner. Nobody seems to want to go out on a limb and show us how such a thing could happen, other than, “things we don’t understand are the source of all evil!” It boggles my mind that people who don’t know a limit order from a fill or kill feel free to weigh in on this subject. Hey man, I know about iphones; it must be computers!

Other seemingly less likely possibilities include “cyber attack” or market manipulations. My favorite unlikely speculation is that Taleb did it. Probably the real answer is complicated.

Rather than pointing fingers around like a bunch of hysterics, or attempting to clean the Augean stables of figuring out exactly, precisely what happened, why don’t people think about what market rules would have prevented this? I mean, that’s what everyone seems to be agitating for: changing the rules. Rather than changing the rules to please self interested parties who want trading to go back to the days of ticker tape and the horse buggy whip, why not change the exchange rules to prevent this sort of thing and make everybody happy?

Right now, people are talking about circuit breakers, stop price logic and so on… The standard circuit breaker in the NYSE never engaged, as it was never hit (it’s linked to the DJIA). Stop price logic seems to be circuit breakers for individual instruments: stop trading for a few seconds, then go back to normal. This is apparently implemented in US futures exchanges. Since the futures did a little better than equities, we’re supposed to believe this would have solved the problem. Well, maybe, but maybe not. According to the WSJ, one of the proximate causes of the plunge was … well, an effective halt in trading in PG&E.

Assuming this is true, can someone explain to me why halting the trade for a few more seconds would be anything remotely resembling a good thing? As far as I can tell, that would be a silly thing which wouldn’t help anyone. While I can’t claim this is an original idea: it seems like doing what happens during other market dislocations would make more sense. You know, like when you start trading at the beginning and end of the day. Dudes with market orders would be fucked, but they were fucked anyway, and at least you’d restore some semblance of order.

Maybe dropping to a call auction model when something goes pear shaped is what they’re actually proposing, but it doesn’t look like that reading the funny papers. The Europeans do it this way. The Asians do it this way. Why not do it this way? You need liquidity? Drop to a call auction. I’m not really optimistic that anybody is thinking of this; a google on NYSE and vol interruption auctions yields the following link …which rather indicates the NYSE never heard of the idea.

Seems like the right thing to do to me. Beats stockbrokers jumping out the window.

Edit add:
Apparently this is how it works in the NYSE.
Don’t look like an auction to me.
CME debug:

And … the mystery seller is … Waddell & Reed! Who? Some financial advisor who got the world’s worst execution from Barclays. Who dumps 4 billion of anything on the market?

There you have it: as usual, the biggest fuck ups come from the “respectable” bozos in the investment business, rather than the eeeevil high frequency traders. I, for one, eagerly await the apologies from the numskulls who blamed HFT.

a bestiary of algorithmic trading strategies

Posted in finance, systematic trading by Scott Locklin on August 17, 2009

One of the things which confronted me when I got interested in quantitative finance is the varieties of different kinds of quant. Now I realize this is pretty simple. Quants come in three basic varieties.

  1. Structurers: people who price complex financial instruments.
  2. Risk managers people who manage portfolio risk
  3. Quant traders people who use statistics to make money by buying and selling

It took me quite a while to figure this out. I don’t know why people haven’t bothered to state this taxonomy of quant jobs. I suspect it’s because most quants are structurers. Of course, there is often bleed over between these varieties -but it’s a useful taxonomy for looking for work. I’ve done a little of all three at this point (very little, honestly), and have always liked quant trading problems more than the other two varieties. It’s the most ambitious, and the most likely to net you a career outside of a large organization (go me: Army of one!). It’s also the most mysterious, since successful quant traders don’t like to talk about what they do. Structurers and risk managers have to talk about what they do, almost by definition. Quant traders gain little from talking about their special sauce. The ones who have spilled the beans are guys like Ed Thorp -who only talk about old strategies, or guys like Larry Harris, who wrote the best book there is on trading, though he wrote it without any interesting equations in it. Of course, there are going to be quant jobs which don’t fit exactly into these categories; there is a lot of overlap between traders and risk managers, for example: I’m only presenting them as a useful framework to hang some thoughts on.

Since I’m not presently employed as a quant trader, I don’t mind talking about it a little bit. I hope to outline below a rough but mostly complete taxonomy of how this stuff works. Later on, I might outline some specifics of how these basic ideas are applied in practice.


To make money as a trader, assuming your motivation is to make a profit, you need to buy low and sell high. That’s really all there is to it. Losing sight of this is the source of much trading ruin. People often lose sight of this. They build spectacular technical analysis models based on … whatever wavelet/fractical special sauce they can dream up, and forget that they are supposed to be buying low and selling high. To do this, you need some kind of insight or information that other people in the market lack, or you need a structural edge which other market participants don’t have. The latter brings me to the first kind of trading strategy in my bestiary:

  1. Liquidity peddlers. Market makers earn the spread. What does this mean? They will display prices for buying and selling an instrument, the difference of which is the “spread.” In an ideal situation, this means they’ll buy from people who want to sell, then sell the same thing to someone else who wants to buy, earning the price difference. They’re taking a risk on that there will be no seller or buyer on the other leg of the trade, and that the price will move against their resulting position. If you’re not competing with other people who do this, you can make tidy, low volatility profits. If you have a captive audience, you’re not competing with others who do this, and so this is a pretty good trade. This is what most people think of as “liquidity provision” or “making markets.” How this gets done may be as simple as what I just outlined, or it can get very complex indeed.

    This is why liquidity is good

  2. Arbitrageurs earn a different kind of spread. These guys rely on a structural advantage of some kind. It may take the form of having very fast software. It may be because they are large market participants in geographically distant market locations. It may be because they happen to own a large boat with oil in it, and they drive the boat to the place they’re most likely to get a nicer spot price. Sometimes they arb things which are identical: FOREX futures for example. Sometimes they arb things which are supposed to be identical, like index futures versus index ETF’s. And again, sometimes it gets complicated.
  3. Statistical arbitrageurs are a sort of squishy area, similar to arbs, but distinct from them. They find “pieces” of securities which are theoretically equivalent. For example, they may notice a drift between prices of oil companies which should revert to a mean value. This mean reversion should happen if the drift doesn’t have anything to do with actual corporate differences, like one company’s wells catching on fire. What you’re doing here is buying and selling the idea of an oil company, or in other words, a sort of oil company market spread risk. You’re assuming these two companies are statistically the same, and so they’ll revert to some kind of mean when one of the prices move. Similarly, in the merger between two companies, there is a risk spread in the relative values of the stock prices of the companies, lest the merger doesn’t go through. If your statistics or inside information is good enough, you can buy this spread at a profit. In some sense, statistical arbitrageurs are a hybrid of liquidity peddlers and arbitrageurs. They earn their money in both ways.search-engine-arbitrage
  4. Fundamentals traders: these guys are trying to be the electrical version of Warren Buffet. They buy what they consider “bargain” stocks, and hold until they can realize some kind of profit, either from harvesting dividends, or from the price appreciation of the stock. This gets a lot of press as being very subjective, but it can be entirely quantitative. Indeed, I suspect Buffet, like most traders, at least uses a quant screen to make his picks. Many, many hedge funds are buying and selling stocks based on accounting data, market trends, and other such information which may or may not have been baked into the price at any given moment. Liquidity providers and statistical arbitrageurs prey on fundamentals traders (among other people). Since fundamentals traders want to control large blocks to harvest large returns, they have to pay for their liquidity. This is the style most people think of as “buying and selling stocks” -it looks a lot like investing. The ironic thing about it is, this is also the area where most money is lost in algorithmic trading. When you hear about quant funds crashing all at once like in 2007, this is what they’re talking about. It will be a bunch of funds going after the same opportunities in ops cash flow versus accruals, price/book ratio or sector momentum stocks … then something in the market goes not according to the model. Since these guys all use the same dumb quarterly rebalanced models, and the market value of the firms invested in is very large, lots of money gets lost. Arbs, liquidity peddlers? The amounts of money involved are much smaller. Arbs and liquidity peddlers can be one 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 small businessman; aka me, that’s who. Little guys like me who didn’t go to Yalevard and don’t have any bazillionaires on the rolodex can still make a living as arbs or liquidity peddlers. Oh, the media makes it sound like they’re going after bloated behemoths like Goldman. I wouldn’t be surprised if such companies were actually behind this fake “populist uproar.” Goldman are certainly a lot more likely to profit from changing legislation or exchange rules than I am; that is why they seem to be all for new regulation. I guess fundamentals traders can also be small firms, though they’re going to be much more easily wiped out than a large firm due to the volatility inherent in such strategies. But it is worth realizing that virtually all large algorithmic firms are fundamentals traders. This is true because fundamentals trading is the only kind with the large capacity required to cut lots of paychecks on a 2/20 deal with investors. I have to admit some bias here: some fundamentals algo trading annoys the hell out of me. A lot of what they do isn’t much more sophisticated than picking stocks by price/earnings ratios. IMO, there should be Yahoo finance style services for individual investors to pick stocks in the same way these guys do. I have considered building one and making money selling ads the way Yahoo does. Selling ads on a finance webpage is a much lower volatility business than seeking alpha in yet another low Sharpe fundamentals trading business. Probably ads more value as well.


    This is why it’s good to be a fundamentals trader: lots of company

    Less pertinent to profit making algorithmic trading strategies, but worth mentioning anyway:

  5. Hedgers: are not necessarily interested in making a profit by executing a trade. They’re more interested in trading as a form of insurance. The insurance generally locks in a profit, or minimizes losses someplace else in a business, but the hedging trade itself is not meant to be profitable. Much of the options, short interest and index futures market consists of people who are buying a form of market insurance. I partly mention this category out of historical interest: people sometimes blame the crash of 1987 on a hedging algorithm in common use in those days. Still, profitable trading strategies often contain hedges, and hedging is a large part of trading volume, so it is worth mentioning explicitly. Hedgers can also be a great source of profits. While this may sound very “tooth and claw” -you can also look at it as providing hedging services to people who want to be hedged.
  6. Noise traders: many trading algorithms don’t make any sense from the profit making or hedging point of view. The most obvious category here are idiots with computers who don’t know what they’re doing. Less obvious than this are index ETFs; all they want to do is track an index. This is harder than it sounds; in fact, it is NP hard. Another not-so-obvious category are central banks trying to manipulate their currency prices. While this is a rather grab-bag category, I have to put these guys somewhere. While I don’t know any central bankers, looking at Forex ticks, what they’re doing appears to be at least partially algorithmic. Noise traders are also a great source of profits. They are also a very large fraction of trading volume.

My categories are somewhat arbitrary, just as my aforementioned categories of quant are somewhat arbitrary. Again, these categories are to hang thoughts on. I’m pretty sure you can chop any quantitative trading system into one or more of these categories as a useful way of thinking about things. For example: let’s say I’m trading on the spread between an actual basket of stocks comprising an index, and an ETF or index future. I’d categorize that as statistical arbitrage. Sure, people have a special name for it: index arbitrage, but it’s really a kind of stab art, the same way as trading pairs is: you’re just trading a lot more pairs. But wait: it could get more complicated. Let’s say you want to build an index better than the actual and use the index to hedge risk: is that still stab art? Or is it more like fundamentals trading? Really, it is a bit of both. To build an index beating portfolio (usually a subindex), you need to do some fundamentals modeling. Is the Tu Jeng Hound of the Hedges plant or an animal? Maybe he is a little of both.

Which of these are high frequency? All of them. That is not an exaggeration, though I am mostly saying it to make clear that I’m not breaking things down by time scale. People like Warren Buffet may have a long investment horizon, but they also need to pay as little as possible for liquidity. Shopping the block is a non-trivial problem. Speed is important in all kinds of trades. Latency isn’t always that important, however. For example, while speed is probably important in your hypothetical index arb problem, I’m pretty sure latency is a secondary consideration. Latency of course is important in pure arbitrage and most kinds of liquidity provision.


What is a “predatory algorithm?” Generally speaking, this is an algorithm that makes your life inconvenient on any of these trades. Seriously: that’s what the phrase means. Anyone who tells you otherwise is selling something.

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.


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, 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.”


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.


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.


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.