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posted by n1 on Sunday May 14 2017, @11:08PM   Printer-friendly
from the SEC dept.

If the government really wanted to protect us from ourselves they would limit gambling, which costs poor people a lot and is known to result in unfavorable odds, and they would discontinue the lottery. Instead because the lottery and gambling make the government and big institutions money they are legal. Restricting pattern day trading is, likewise, an attempt to give those with money more leverage over those without money. This law directly discriminates against those without money and it was passed by those with money. The government has essentially passed two sets of laws, one for the rich and one for the poor.

These laws were undemocratically passed by the rich for the rich under the false pretense of protecting the poor. Such is a hallmark of an aristocracy. No nation should have a different set of laws for the rich than for the poor.

The entire Wikipedia article, especially all the criticisms, are worth reading.

FINRA (formerly National Association of Securities Dealers, Inc. or NASD) rule applies to any customer who buys and sells a particular security in the same trading day (day trades), and does this four or more times in any five consecutive business day period; the rule applies to margin accounts, but not to cash accounts. A pattern day trader is subject to special rules. The main rule is that in order to engage in pattern day trading you must maintain an equity balance of at least $25,000 in a margin account.

[...] The SEC believes that people whose account equity is less than $25,000 may represent less-sophisticated traders, who may be less able to handle the losses that may be associated with day trades.


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  • (Score: 1) by khallow on Monday May 15 2017, @09:15AM (7 children)

    by khallow (3766) Subscriber Badge on Monday May 15 2017, @09:15AM (#509876) Journal
    While googling around for other things, I came across this study [vanderbilt.edu]:

    However, a new paper by Jesse Blocher, assistant professor of finance at Vanderbilt University’s Owen Graduate School of Management, finds little evidence of HFTs creating phantom liquidity. Lead author Blocher and his collaborators based the study on their analysis of a 5.78-terabyte dataset of all message activity (not just completed trades) on S&P 500 stocks for the 2012 calendar year in the NASDAQ limit-order book.

    “Phantom liquidity only can really be a problem if those who cannot get good execution find the price moving against them when they try to trade,” Blocher and his co-authors wrote in the study, published in the summer 2016 issue of Journal of Trading. “We do not find that in our data.”

    To determine the effects of HFTs cancellations, the researchers identified what they termed “cancel clusters,” brief periods that arise from HFTs cancelling multiple trade orders within a small timeframe. Their investigation yielded three main findings:

    • Cancel clusters are not a dominant feature of the trading day. The average cancel cluster lasts for just 5.68 seconds and they occupy 6.7 percent of the trading day.
    • The least common event taking place during a cancel cluster is that trade executions occur, suggesting that HFTs are not systematically luring investors into placing unwanted trades. In fact, the most common behavior after a cancel cluster is that the bid or ask prices revert to their pre-cancellation levels.
    • Most trading execution takes place outside of cancel clusters, and it is only once trade executions take place that stock prices move.

    They instead found that the key spurts of order cancellation appeared to be for different reasons:

    So why are HFTs engaged in this practice of placing, then cancelling, large batches of orders? Blocher and his colleagues argue that “cancel clusters are a lower-cost means of price discovery.” In other words, HFT computer algorithms run a kind of rapid series of tests to determine the “right” price of an asset, rather than use the method to try to trap (and profit from) unsuspecting investors.

  • (Score: 0) by Anonymous Coward on Monday May 15 2017, @09:32AM (6 children)

    by Anonymous Coward on Monday May 15 2017, @09:32AM (#509891)

    Is phantom liquidity and market insta-crashes [zerohedge.com] factored into your "lower-cost means of price discovery"?

    • (Score: 1) by khallow on Monday May 15 2017, @09:47AM (5 children)

      by khallow (3766) Subscriber Badge on Monday May 15 2017, @09:47AM (#509901) Journal
      Yes, as is the possibility that HFT behavior is different now than it was then. Any other questions you might have?
      • (Score: 0) by Anonymous Coward on Monday May 15 2017, @09:52AM (4 children)

        by Anonymous Coward on Monday May 15 2017, @09:52AM (#509904)

        Yes, khallow, I have a few more questions for you:

        1. How did you become so comfortable with blatant lying?
        2. How much money did your HFT scams bring in for you this week?

        • (Score: 1) by khallow on Monday May 15 2017, @10:00AM (3 children)

          by khallow (3766) Subscriber Badge on Monday May 15 2017, @10:00AM (#509910) Journal
          The problem is that you aren't listening. We have this HFT hubbub every so often. And it always turns out the same. There is a profound ignorance of HFT, both what it is and the limitations of it. Even when presented with a study that shows near past HFT doesn't do a lot of this alleged spoofing.
          • (Score: 0) by Anonymous Coward on Monday May 15 2017, @10:11AM (2 children)

            by Anonymous Coward on Monday May 15 2017, @10:11AM (#509918)

            khallow sez, "Why is my hand in your pocket? I'm cheapening price discovery! Don't worry about why I have more of your money now than before I stuck my hand in your pants - that's just your ignorance talking! That 97% of market volume being nothing but robots was totally shown to be just normal idiots ordering millions of instant-cancelled trades! I'm sure that phantom liquidity (from normal human daytraders, yessiree!) won't ever cause more flash-crashes like they have consistently in the past - after all, past performance is not indicative of future results!"

            • (Score: 1) by khallow on Monday May 15 2017, @11:58AM (1 child)

              by khallow (3766) Subscriber Badge on Monday May 15 2017, @11:58AM (#509955) Journal
              I get that you are very emotional over this issue. You still need evidence like anyone else.
              • (Score: 0) by Anonymous Coward on Monday May 15 2017, @04:53PM

                by Anonymous Coward on Monday May 15 2017, @04:53PM (#510106)

                I bet you say that to all the girls.

                "Stop raping you? Wow, I get that you're emotional, but you need evidence. That's not my penis violating your bodily orifice, it's a perfectly legitimate action on my part that you willingly participated in by walking near to the entrance to the dark alley near your home. The 97% of the other girls that escape me unscathed just show that everything is working just fine - in fact, I'm surprised at the success rate, myself!"