High-frequency traders, stock exchanges and large Wall Street banks are exploiting computer-based trading by finding out how the market may act âmillisecondsâ earlier than everyone else. But Michael Lewis says one company has figured out how curtail that speed advantage and â[slow] down high-frequency tradersâ ability to trade on their market.â Tonight on 60 Minutes: http://cbsn.ws/1piDez1 March 28, 2014, 2:15 PM|Steve Kroft reports on a new book from Michael Lewis, "Flash Boys," that reveals how some high speed traders work the stock market to their advantage. Watch Kroft's report on Sunday, March 30 at 7 p.m. ET/PT.
majority of ET still believe HFT is good and provide liquidity. i'm (along with Stock777) saying same thing as this Lewis guy for years, and i believe SEC can stop this nonsense in 1 day,but they choose not to. cause they owned by WS
So my understanding is that instead of sending out the order in 1 block (which would be sent to each individual exchanges separately and front-run), they'd split the orders up into separate (smaller) pieces with the first order going to the slowest exchange first and the last order going to the quickest last, thus arriving at the exchange at the same times. Thus keeping it off the routes' (BATS, EDGX, ARCA) radar to be front-run. Essentially preventing them from knowing there'd be slower orders (from further away) pushing it further. Do I have this correct? What they said on TV didn't make any sense.
imo-the most disappointing thing in this 60 min episode is that SEC wasn't mentioned. not even ONCE. the gvt agency,who suppose to be a watchdog ,protecting and regulating all this mess. nope..
if i understand things correctly-somehow they are been able to identify those flashers and basically ban them,by sending their orders thru very long loop, the other thing is that they been able to convince big guys(pension plans and such) to trade at their exchange(again-according to them). most likely there is some time restrictions on orders,that placed at their exchange. what's true and what's not, and what their rules are-i have no idea.
http://money.cnn.com/2014/03/30/investing/michael-lewis-flash-boys/index.html?hpt=hp_t3 March 30, 2014: 10:11 PM ET NEW YORK (CNNMoney) Is Wall Street a rigged game? Michael Lewis thinks so, and the financial writer's new book blasts the so-called high frequency traders he says are gaming the market. "Flash Boys: A Wall Street Revolt" explains how several insiders discover these firms are gaining an advantage over others: lightning-fast trades achieved through automation and advanced computer networks. "The United States stock market, the most iconic market in global capitalism, is rigged ... by a combination of the stock exchanges, the big Wall Street banks and high-frequency traders," he said in an interview with CBS' "60 Minutes." The victims, he said, are "everybody who has an investment in the stock market." "The insiders are able to move faster than you and play it against orders in ways you don't understand," Lewis said. The high-frequency trading industry has seen less scrutiny than other parts of the financial system, but regulators are turning their attention to it. The New York attorney general has pushed back on firms that feed high-frequency traders. They've also looked into -- and even shut down -- paid subscription services that feed financial results directly into the traders' computers. It's too early to be certain, but the Wall Street culture may be starting to shift. In mid-March, for example, Goldman Sachs Chief Operating Officer Gary Cohn said his bank supports reforms to reduce the "fragmentation and complexity" of trading -- essentially, to level the playing field. Lewis is a former Wall Street insider himself who wrote about his experiences in the best-selling book "Liars Poker," which he followed by others including "Moneyball." The movie rights to another, his 2010 hit "The Big Short," were recently purchased by Paramount Pictures and Brad Pitt's Plan B movie house. "Flash Boys" is set for release on Monday.
The main takeaway was that you really need to understand how the plumbing of the market infrastructure works because that is where you get robbed.
I think they meant orders are designed to arrive at each exchange at the same time, to prevent front-running from orders arriving at different times. The assumption being, if one institutional order arrives at exchange#1 first , more orders are already in the pipeline. And thus, can be traded ahead via lower latency networks. Latency arb.
The real question is, how do I, as an individual trader/investor, get to trade on IEX, the exchange that has built-in delays. Can I do it through Interactive Brokers? If so, how? If not, why not?