“The Securities and Exchange Commission voted on Wednesday to bar brokers from granting high-frequency traders unfiltered access to an exchange, a move aimed at imposing safeguards meant to prevent bad trades from disrupting the markets,” Jessica Holzer and Kristina Peterson report for The Wall Street Journal. “‘Naked access’ lets high-speed traders and others buy and sell stocks on exchanges using a broker’s computer code without requiring them to filter through the broker’s systems or undergo any pretrade checks.”
“Such trading arrangements have exploded with the growth of high-frequency trading firms, which rely on trading speed to make their money and don’t want to be bogged down by a broker’s controls. In some cases, brokers rely on assurances from traders that they have their own controls in place. Roughly 30% of market activity is currently conducted through naked access, said John Jacobs, director of operations at Lime Brokerage,” Holzer and Peterson report. “Mutual funds and other investors that don’t rely on trading speed to make their profits will be largely unaffected by the new rules, said Alison Crosthwait, director of global trading strategy at Instinet.”
Holzer and Peterson report, “The new requirements come amid increased concern at the SEC that a large errant trade could spread havoc in the markets. Since the May 6 “flash crash,” the agency has implemented mechanisms to prevent price swings in stocks. It is also undergoing an examination of stock-market rules. The SEC estimates that maintaining the enhanced controls will cost the broker-dealer industry $100 million annually, an SEC official said. The cost will be spread unevenly among the 1,300 brokerages, some of which may have to put in place new systems.”
Full article here.
The May event involved a huge volume of AAPL being moved in a series of flash transactions. Welcome to the party.
At some point people got it in their heads that the market is purely about liquidity. That we need to be able to get in and out in micro-seconds.
What’s wrong with saying that if a stock is good enough to buy, it’s good enough to own. Why can’t we have a random freeze placed on shared, assigned by the trading system when you buy them (it might be an hour, it might be a week, it might be a year). When you buy the shares you just never know what lock-out period will be put on your particular shares. It would be totally random, and would force people to factor in the long-term view when making a trade.
About fucking time
Steve516 … the May event involved one H3LL of a lot more than “a huge volume of AAPL being moved in a series of flash transactions”! AAPL was certainly affected, but so were most other stocks – and some a lot worse than AAPL! Acenture lost about 99% of its value in a matter of minutes, how I would have loved to have made a killing there. Used to work for those Windows-using Republicans before they moved my job off-shore. Still, all trades were called back – un-made, cancelled, recalled – when the entire market lost over 60% of its value. My $20K purchase (of $2M worth of the company) might have been minor, but it would have made MY day.
My practice has been to order a Buy at a price, Good Till Cancel, and let it sit there until a) I buy or b) I cancel and switch to another stock. When I have bought, I calculate an acceptable sale price and place THAT order, Good Till Cancel, and let it sit there until a) it sells or b) I capture the dividend and can lower my asking price.
My typical turn-around is a couple of weeks.
I am NOT a “Day Trader”.
It looks, though, like I am being tarred by the same brush!
Yet more of Obama’s government takeover of the free market. Palin 2012.
@ DLMeyer, see, I have no problem with grabbing $2m shares from someone for $20k.
You were smart enough to buy at that price. Someone was stupid enough to sell.
I really can’t believe they called back the sales. As much as I think there should be mechanisms in place to moderate manipulation (eliminating shorting, creating lock-in periods), I’m still a capitalist through and through.
If someone was dumb enough to set up a computer automatically trade away their life savings for peanuts, so be it
@ disp ident
The point is that no person made a decision to sell those stocks. It was programmed in and the whole flash crash was created by a snowball effect.
Sure a few people could cash in by buying stocks at a low price. But the economy as a whole would have tanked and the consequences for everyone as a whole would have been dire.
We are still trying to recover from the last mess the financial sector created with the credit crunch mess. That was caused when short term financial gains were taken ahead of common sense.
Activities like shorting, high-speed trading, even hedge funds are counterproductive for the general health of the economy because it allows people to make money from stocks falling in value. The idea was that it will create more liquidity in the market but in reality it has created instability because those who run those programs get greedy and manipulate the market for their own gains.
I would prefer that these activities are scaled back or terminated. It has not created the liquidity that was expected. Instead it has just created a new way for brokers etc to manipulate the market.
The market did not fall 60%. Sheesh
The market is a scam. These traders/traitors, contribute NOTHING to the economy. They are common gamblers in fancy offices.
Speed traders are casino gamblers who eff with and try to game the system to make money- the exact opposite of people who want to invest for the long term.
As to the Teabagger political comment- FYI- most ‘tea party candidates lost. Most Blue Dogs (Conservative Dems) lost, most Liberal Democrats were reelected. You also failed to take the Senate. Hope you teabaggers enjoyed your tantrum- now you have to do something.
@ DogGone, but they consciously decided to create a sell order, and simply trusted that the price would be acceptable to them when it was executed.
I didn’t lose a single Apple share in the whole episode.
“Activities like shorting, high-speed trading, even hedge funds are counterproductive for the general health of the economy because it allows people to make money from stocks falling in value.”
I’ll second that motion.
Naked shorting is the real problem. Making money off of a transaction in stocks that you don’t even hold isn’t investing, or even trading.
The SEC isn’t mentioned in the Constitution and therefor is illegal & should not be meddling in our Free Market Economy.
Let the Invisible Hand of the Market weed out the fools who are soon parted from their money.
Naked access exposes the market to streaks of indecent performance
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ENOUGH with the “way back machine” spouting….
Computers aren’t mentioned in the Consitution either. Should the government not be allowed to buy them?
Fighter Jets? Nope…. not there either. Wall Street? Gone… Investment Houses? See ya… I could go on, but really the total NOT described in the US Constitution outweighs that which is.
ALL OF THE FOUNDERS envisioned the US Constitution as a living document, adaptable by the people, through there representatives, to the current times.
Read some of your history. Do some thinking on your own. Stop watching ONE news source, and read on your own. Read about the debates that the framers had. Jefferson and Adams were impressive in their debates, and in their writings.
The one thing in the Constitution, that Strict Constitutionalists forget, is that the Constitution ALLOWS for Change, and for adapting to the times. Get over it, or move to an island in Indonesia…
there… that ought to be worth a couple dozen more posts and page hits (none of which have to do with the SEC ruling)
ron is correct. but listen to these traders, they sing the same rabid right wing teatime tune we’ve been hearing incessantly repeated for months now, as if it were true:
oh no! we can’t be having no stinkin’ rules. Rules interfere with commerce! If we have to play fair, it might hurt jobs creation! There’s money to be made under the table, darn it. It’s evil government influence on industry to stop those trades! Hard-working flash traders shouldn’t have to be encumbered by legitimate controls that prevent them from rigging the system! The marketplace should be a completely unrestricted cesspool of shenanigans and rip-off artists! The good old days of the Wild West were healthy for everyone! Let’s restore the fiscal anarchy that dictated that boom/bust era, ’cause most voters never bothered to learn about how bad it really was in the late 1800s! Oh, and by the way, i my fly-by-night financial services firm has employees, so give me a low-cost government loan or i will be forced to fire them and decline contribution to your 2012 re-election campaign. Got that, Boehner?
That’s what this election was all about, right? Right wingers are dancing in the streets overjoyed with the absurd notion that in the next 2 years they will somehow magically restore small-business profitability and jobs by removing regulation. Good luck, folks. Big industry left the USA a decade ago to enjoy cheap Chinese labor. De-regulating multinational corporations and the money-changers on Wall S. is what bankrupted the USA, so now the push is on to do it again? TARP, a republican-engineered initiative, guaranteed that trading firms would remain liquid so that traders would live to see another day to screw more people – not to hire them.
Thank goodness the SEC – slow and cumbersome as it is – is not dancing to the tune of the nitwits in the republican & tea party leaderships who forgot about all this.
Mark my words, in the next 2 years, financial firms will continue to screw the American public, while both imcompetent and corrupt parties of Congress sit on their hands:
– now that the token bad-guy Madoff was caught, there will be no further effort to jail other similar financial thieves; the SEC will be stripped in the name of “deficit reduction” even while international military spending breaks new records
– neither the US House nor Senate will enhance the powers or budget of the SEC or other government agency to crack down on financial firms that created the credit crisis through irresponsible lending and even more irresponsible securitization fraud
– neither the US House nor Senate will reform filibuster rules
– neither the US House nor Senate will put forth a consititional amendment requiring a balanced federal budget
– neither the US House nor Senate will enact congressional term limits
– neither the US House nor Senate will enact reforms to the election process to keep out-of-state and multinational corporate interests from swaying state elections, nor ban gerrymandering of districts
– gridlock in congress will prevent any meaningful reform to the archaic tax laws, finance laws, and corporate laws in the nation
– health care reform passed last year will be unchanged
– the federal debt will increase
– the federal deficit will be reduced but still in the red
– Apple and other profitable US firms will continue to sit on cash rather than hiring people
– troubled firms in the US will go under, unable to gain access to reasonable credit
– foreclosures will remain high
– average unemployment will remain above 9.5% nationwide
there you go, MDN, you wanted it, you got it. now how about some more Mac news content please.
Golden Networking (http://goldennetworking.net) is organizing the High-Frequency Trading Experts Workshop 2010 (http://www.HFTExpertsWorkshop.com), “Practical Implementation of High-Frequency Trading Strategies,” on December 9th and 10th in New York City. It has been recommended for executives in finance and investments who work at Investment Banks, Hedge Funds, Pension Funds, Broker Dealers, Consultancy Groups, Prime Brokers, Solution Providers and Exchanges and wish to gain a thorough understanding and practical knowledge of high-frequency trading.