I came to the same conclusions long ago, but this piece puts it nicely. http://www.hardrightedge.com/realmoney1.htm
This article doesn't even mention that we are going through arguably the biggest financial crisis of our times. Without this context, his argument seems meaningless to me. And if you can't compete in the market you are given, hit the road. Stop whining about it and also don't blame the changing market structure because it will always be changing. Adapt or die.
"The fast solution to this structural crisis is heresy in the trading community, but it might be the best choice in getting this destructive force under control. A modest stamp tax would kill runaway algorithms, because transaction costs would be prohibitive. It would also dampen volatility" ___________________________________ F him and his stupid stamp tax. Any extra tax on traders will cause the "daytrading" industry to crumble. Horrible idea.
Alan Farley says: "The fast solution to this structural crisis is heresy in the trading community, but it might be the best choice in getting this destructive force under control. A modest stamp tax would kill runaway algorithms, because transaction costs would be prohibitive. It would also dampen volatility" Crisis, destructive force? I suppose Charles U. Farley thinks a transaction tax will make the market go up, up, up.
The machines are stealing from the market, in much the same way market makers used to steal. They do it in microseconds, and unless you understand what is going on it's invisible. The boxes also destroy natural trading flows and don't care about value at all. They will trade a stock down to 1 cent if they can make a market down there. Humans won't do that.
IT'S THE MACHINES ! IT'S THE MACHINES ! Pure nonsense, it's humans who programmed the machines in an environment where we have the biggest crisis since we invented the computer and where a whole world has access to a new kind of information (faster, more detailled) flow through the internet. Seems more an article of someone who is frustrated that he can't keep up anymore with a changing market than anything substantial.
This Alan Farley guy needs to be tarred and feathered. "Ohh that evil Reg NMS, how dare it introduce marketplace competition, a couple of exchanges unanimously ruling the roost is the better way! And decimalization? Ack! Spreads in fractions meant smoother markets, time enough for my old hands to react." To support his argument, he shows a VIX chart in comparison to the dates of the removal of the uptick rule and Reg NMS launch. Someone needs to remind this guy that correlation does NOT equal causation. And his "stamp tax" proposal is a brilliant idea, just the cure the ailing markets need. The man might as well be asking for a return to the horse-drawn wagon..
No wonder he hates this market action. He is a Swing Trader. They cant handle the overnight volatility the last 2 months so might as well blame those dang computeres that are making our lives so much easier in every other aspect of life.