After trading this extremely difficult market for the past year, talking to several traders, and reviewing/studying everything i could find on flash orders the past few weeks, the following is my (one trader's) conclusion/opinion: Flash orders were originally designed to help add liquidity to the markets and aid in more efficient markets. However, as is usually the case, a group of unethical firms/traders, market makers, HFT's, and hedge funds have found a way to exploit it to their advantage and profit huge in a very unfair and unethical (if not illegal) means. It is my opinion that some of these firms, their own propriety market makers, their automated market makers, and customers use this flash order information to manipulate and scalp a certain percentage of volume through several NYSE and NASDAQ listed stocks. I could describe it in a little more detail but much of it has already been explained in several related articles over the past few weeks. The conclusion is that some of these firms, algo's, programs, automated market makers, and HTF's are designed to unfairly SCALP and MANIPULATE MANY MARKET PARTICIPANT OUT OF THEIR TRADING PROFITS. (if anybody want further clarification on how they do this, send me message and I'll forward my detailed conclusion on this to you). As honest, hard working, fair traders, who add needed and earnest liquidity to the markets at our own risk, we have all paid the price over the past year or so as these firms and their HFT's and algo's have reaped huge gains. This would be fine if it were on a fair playing field. However, as we are now finding out, it was all a big cheat/scam the entire time from the manipulated use of "Flash Orders". Think about it for a second... Just imagine, as a trader, that you knew in advance that a big order was getting reading to come in against a position you were holding. What would you do? You would GET OUT OF THE WAY!! Now imagine that you are a market maker and basicically controlling the majority both sides of the level II bid and offers and you had access to all the order information coming in advance.. the world is now your oyster!!!! What I find most alarming is that some of the big firms that have many proprietary market makers, HTF traders (or customers), or automated market makers are the same ones who most likely pushed the ECN's/Exchanges to gather this "flash order" information for them. We saw that the they made close to $21 billion over the past few years. We have all been left confused and thinking "what the heck is going on, it is almost impossible trade these days." Well, i think we were all uniformed and kept in the blind as well. I guess that's the risk we as traders have to take when we put our own capital at risk. We are all professionals that know there are always con-artist, crooks, and cheats involved in the equities markets. But what's truly most bothersome to me is everyday "mom and pop" investors who have no idea what's going on. My dad goes in and buys 1000 shares of Home Depot through his broker at Edward Jones (or some other reputable firm) and instead of paying $27.25 he pays $27.28. He never knows the difference. His mutual funds in his retirement account buys and sells stock for him, but is always buying and selling a few cents away from where he is supposed to pay. He NEVER knows. But the big dogs out there who are manipulating it out of our parents, friends, and families are reaping in to the tune of $21 Billion Dollars!!!!!!! Good God, where's the integrity!!??? You have these wiz kid computer geeks and programmers who know nothing about the markets, are adding absolutely nothing to the markets in the ability to provide a fair place to transact equities, who are basically designing systems to cheat the market. Sure the liquidity has increased over the past few years, and this is their main defense. They justify their cheating buy saying it adds liquidity to the markets. However, the whole time it was a hoax. They were designed to cheat/extract a few cents on millions of transactions a day on the uninformed trusting public who have their nest eggs invested and at stake. That's where she surge in volume and liquidity came from, bottom line.
First, let me start by saying that FLASH order will cease their existence in a few weeks, so the main point of discussion is lost. Second, I have an opposite view that flash orders were in fact good for a regular customer and mutual funds. It's the solely the black PR of NYSE that killed then. Finally, may be your dad pays 1-2 cent's more now, but it's a way better then paying 1/8 of a dollar to the NYSE specialist. I can explain my points in details if you want to, provided you have a basic knowledge of the market structure and you are not just making just baseless claims that are unfortunately so common here (no offense)
Pac Is it still happening? Did it happen, say last week? Up until a month ago, the switches on the NYSE had a switch time of 150 and they may have been on permiscious mode so that they passed information about order flow straight to anyone on the same local network. The faster, collocated servers servers of other enities had time to look at the flow, probe to see where the limit orders were, go get a beer, work on their tan, make small share prints up/down hit the large order limit, and make small share prints up/down to the previous level so one blinks and then is looking at a whip tail. But I thought they the upgraded and plugged the leak. Not so?????
Rookies whining. If you were winning you wouldn't be complaining about how "manipulated" things are. Shit changes - adapt or lose.
I want you to post your P&L up here for everyone to see big guy. Come on, put your money where your mouth is and show us your P&L. 100% guarantee you don't, wimp
Notice KrazyKarl went and hid under a Rock. He's probably not even a trader, just some middle man at some chop shop that doesn't even trade. I've been on this site for a short time but have noticed some old posters who sit around on here and try to pump their own chop chops, or something weird- i think they call it "shilling". Anyway, for the real traders, see the below video's, listen closely to the 3 min mark on the first one: http://www.youtube.com/watch?v=iTkCNsnDgws http://www.youtube.com/watch?v=rC11Vw3HKJE
As far as I know, you are wrong. The major criminal here is not those traders, wherever they work (hedge fund, mutual fund, GS or prop firm), the major criminal here is the exchanges including Nazdaq. It is the exchanges that route the orders to a few selected traders (GS included) seconds before they make the orders public. The major crooks are the exchanges! If YOU open a bank account, the bank gives ME your PIN before giving it to YOU, it allows ME to withdraw money from YOUR account. Now, who is the major criminal? We have all these brokers like Scottrade, TDAmeritrade, Etrade who route customers' orders to their own market makers for a fee. Do you blame the brokers or the market makers? If someone steals your TV and gives it to me, do you blame the thief or me? Simply put, you get screwed by Nazdaq, not GS.
The issue will (hopefully) be solved in a month or two. A big 2 thumbs up to the russian GS programmer that made the "practice" public.