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US Securities and Exchange Commission Chair Mary Jo White told a US House of Representatives panel that she flatly rejected claims that retail investors are being fleeced by high-frequency traders who can use their speed to jump ahead with buy and sell orders that fetch better prices. "The markets are not rigged," says White. "The U.S. markets are the strongest and most reliable in the world." White's comments to the House Financial Services Committee mark the first time she has directly responded to allegations in Michael Lewis' new book "Flash Boys: A Wall Street Revolt" that high-speed traders are engaged in a form of front-running, in which the firms are able to quickly identify an investor's desire to buy a stock, rush to buy it first and then sell it back at a higher price. The SEC has been reviewing equity market structure issues, particularly following the May 6, 2010 flash crash incident when the Dow Jones Industrial Average sharply plunged before quickly rebounding. Although staff at SEC are considering whether to launch some pilot studies to test different regulatory proposals, there are no immediate plans to issue rules to crack down on high-speed trading or trading in unlit markets. "I want to be very clear that the market metrics suggest that the retail investor is very well-served by the current market structure."
(Score: 4, Interesting) by Sir Garlon on Wednesday April 30 2014, @01:53PM
That is not how front-running works. From the second link in TFS:
So as a matter of fact, the HFT folks do not need to detect a pattern in your trading. They just detect the fact that you've submitted an order, manipulate the price so you get fewer shares for your money, and skim the profit -- all in the fraction of a second it takes your trade to complete.
You're playing in a game where you don't even understand what the other players are doing, calling other people morons while you do it. It also looks like you're railing against the author of a book you haven't read, or even read a short article about.
If I were Goldman Sachs, I would love the fact that people like you are investing.
[Sir Garlon] is the marvellest knight that is now living, for he destroyeth many good knights, for he goeth invisible.
(Score: 2) by VLM on Wednesday April 30 2014, @02:58PM
Its all an argument of definitions.
If I do this: "arrived at different times at different exchanges" I'm not a retail investor, I'm a hedge fund speculator.
If as a retail investor I "buy 100 WiscEng limit $103 NYSE" I can't be front runned. Once an isolated individual trade executes in the past, how do you front run trade #2 that doesn't exist and never will in the future? No matter how quickly you find out about my trade having hit the market, its already in the past, and being isolated, there's no way to use my buying pattern to rip me off in the future because no pattern exists.
"Front running" doesn't mean you're pissed off that someone has better faster arbs that you so the .gov should guarantee your profit stream into the future or you'll call them a name you don't understand. "Front running" actually exists as a crime which boils down to non-personalized insider trading by delaying the execution of a valid order (more or less, there's a reason legalese is longer and more precise).