High Frequency Trading, Stolen Code, Market Manipulation

[WhiskeyGirl]

How would anyone know Goldman or other banks don't manipulate the market unfairly?

Will the code or it's actions see the light of day in court?

"Is the U.S. Government An Arm of Goldman Sachs?"

It was almost unseemly: Goldman Sachs snaps its fingers, and the FBI almost immediately begins a surveillance of a suspect who had apparently The man, Alynnikov, was arrested a day later.

The prosecution wanted to the judge to deny bail, a la Bernie Madoff and Allen Stanford, because the stolen code "could be use to manipulate the market in unfair ways." The judge, to his credit chose to disagree. This was an alleged crime against GOLDMAN, not, presumably a crime against society. Therefore it was a "garden variety" economic crime, meaning that the normal niceties of "free on bail" were available.

How would anyone know if Goldman used the code to unfairly manipulate the market?

Godlman wants to "put away" a crininal that has certainly eroded its trading advantage, and worse, made a fool of it. Goldman  is even willing to ahve the prosecutor allege that the stolen advantage would be "unfair" in the wrong hands. In doing so, it acknowledged the possession and creation of an advantage that presumably would be unfair in the "right" hands. In seeking to condemn a THIEF, Goldman basically condemned ITSELF.

This, so-called high frequency trading,  is another indictment of another "new era" technological advance. It is an unfair advantage conferred by high-speed computers that is not available to the average person.  It was condemned by JP Morgan, ordinarily a capitalist institution. It could be prevented by the simple expedient of requiring that all bids remain in place for at least one second, the equivalent of the uptick rule in short-selling. Otherwise, Goldman (and its minions) would be able to exploit the rest of the markets...

Maybe the road to prosperity should include an old style tax on trading.  It seems like this idea has been ignored.  IIRC, the tax or fee was to encourage long term investment in the market.  

Will the market ever have real value?  Are the market more like a high speed roller coaster?  A thrill a minute until the ride is over? 

Is market volume really some kind of farce?  Until one get's caught with empty pockets?

I wonder if Barack plans to give every American access to this kind of high speed internet and computers?  Is this why we have to hurry/rush to the new tech grid?

Does this high-frequency trading ADD any value to these companies? 

http://seekingalpha.com/instablog/399221-graham-and-dodd-investor/12996-is-the-u-s-government-an-arm-of-goldman-sachs

I wonder how this software works?  Does it use less than a second to look at pending deals and do a quick buy sell?  Make money on trading before the old techonology kicks in?

Goldman get's a piece of everyone's action?  I wonder how many on Wall Street and else where in the globe do this?

This sounds like some kind of 'tax' on everyone elses trades.  Why doesn't the government put a tax on all these trades? A flat fee of some sort? 

How would the tax man ever audit the books?  Ensure the profits are properly recorded?  Maybe the scheme involves foreign accounts?

I wonder if those in the FBI are asking more questions about how all this works?

Following the money?

Sorta like the old late night commercials on TV advertising such secrets and advantages to the common man?

[WhiskeyGirl]

More news and views -

It’s being reported all over the news that a programmer and VP named Sergey Aleynikov stole top secret trading codes from his employer Goldman Sachs and posted them on a German website.

Anyone know where this website is?  Address?

The algorithms in this particular program according to Pulse2 are “a part of a high frequency trading platform software used to buy stock within a few milliseconds of company news being released and then selling a few moments later when other companies receive the news.” This would definitely give Goldman a leg up over their competitors and the public, the same public that bailed them out.

This reminds me of warnings about stock brokers.  It goes something like this - they take your stock (you want to sell) and play with it and make a little money before they sell for you.  In the end, you get a lower price.

Look at the major players involved in the whole fiasco if this turns out to be the case. Paulson who was the Treasury secretary under President Bush also served as the chairman of Goldman Sachs. He was involved in the large bailout plan put together by Timothy Geithner, a former Federal Reserve and alleged Goldman Sachs employee. Geithner, the new treasury secretary under President Obama, also picked a former Goldman Sachs lobbyist as treasury chief of staff. Now the plan is to give the Federal Reserve more power but no one seems to want congress to audit the Fed which was created by congress to find out what exactly is going on. So there is no excuse for independence as the Fed has recently claimed. The Federal Reserve is reported to hold many toxic assets. It all seems very strange to many, especially expert economists who have been watching closely.

Where is the audit of the Federal Reserve?

A bail hearing transcript containing prosecutor comments suggests that Goldman Sacks has over time used this program which could manipulate the market. The mainstream media has conveniently left that out. At the same time this was happening Goldman did not appear on the NYSE’s weekly report for most active trading, week ending June 26, 2009, though they say one had nothing to do with the other. Oil fell 10.5 percent from $71.06 to 64.05 before the July 4th holiday. The story broke shortly after. There is usually very light trading before a major Holiday and Goldman plays an important role in the commodities market.

Now Goldman want's in on getting fees for participating in a large insurance company.  No risk, just profit.  How exactly will that work?  Why should anyone pay Goldman?

According to the International Forecaster, Goldman by their own admission, is the (monopoly) actor in the NYSE’s Supplemental Liquidity 2 Provider program which was set to expire on April 30th. The NYSE posted a notice of a proposed rule change extending the program through October 1, 2009. The International Forecaster has also points out that when a company has an 87.5% trading accuracy record, something unnatural is occurring.

lots more here to read -
http://www.examiner.com/x-16500-Lake-County-Independent-Examiner~y2009m7d13-Goldman-Sachs-program-biggest-scam-of-the-century

Are the large bonuses an entitlement to certain people?  Has Goldman ever had a management shakeup?

[WhiskeyGirl]

Is secrecy one of the reasons banks and financial companies have been so keen on outsourcing their IT function to India and other places?  How would anyone hold folks in India accountable for fraud?  Theft?  Wrong doing?

How would authorities in the U.S. ever audit a company with its IT in India or other places?  Do they document to the same standards?  How would the legal request for files work?

Is outsourcing a manner to control accountability?  No files in the U.S., everything abroad, untouchable?

[WhiskeyGirl]

From the foreign blogs, google translatio -

Deeper into the business of automatic high-frequency trade increases this critical article by ftalphaville The Cold War in high frequency trading one. Dieser umschreibt den automatischen hochfequenz Handel als ein sehr lukratives Geschäft, aber nur für denjenigen der auch wirklich den schnellsten code und die schnellste Hardware besitzt. This describes the automatic hochfequenz trade as a very lucrative business, but only for those who also truly the fastest code and the fastest hardware....Mittlerweile soll in den USA 70% des durchschnittlichen täglichen Handelsvolumen auf diesen automatischen hochfrequenten Handel zurückzuführen sein. Meanwhile in the U.S. is 70% of average daily trading volume to this automatic due to the high-frequency trading. Was kaum verwundert werden die Ordergeschwindigkeiten schon im microsekunden Bereich gemessen. What hardly surprising speeds are the order of seconds in the micro range. Allerdings könnte die schiere Größe des hochfrequenten Handels selbst zum Verhängis werden. However, the sheer size of the high-frequency trading Verhängis himself to be. Denn noch profitieren Firmen wie Goldman Sachs Liquidität normalen Marktteilnehmern zur Verfühgung zu stellen bevor es andere tun und dadurch Arbitrage Gewinne realisieren. Because even benefit companies such as Goldman Sachs Liquidity normal disposal for market participants to make it before others do and thus realize arbitrage profits. Doch bald könnte der hochfrequente Handel selbst zu den Kunden dieser Liquidität werden und selbst dadurch unrentabel werden. But soon, the high-frequency trade itself to the customers of this liquidity, and thus even unprofitable.

So stellen einige schon die Frage ob durch den automatischen Handel Goldman Sachs bis zu 100 Millionen Dollar am Tag dadurch stehlen würde . To some the question of whether the automatic trading Goldman Sachs up to 100 million U.S. dollars a day would steal it. Goldman Sachs hat durch seinen besonderes Status als Mitglied des sogenannten Plunge Protection Teams eventuell Zugang zu Orderinformationen und könnte durch solch einen speziellen hochschnellen Code und Hardware eigene Orders noch vor anderen ausführen. Goldman Sachs, through its special status as a member of the so-called Plunge Protection Team might have access to order information and could be achieved by such a special high-speed hardware code and his own orders ahead of another run. Schon erstaunlich das eine einzige Investmentbank wie Goldman Sachs für 60% des automatischen Handels an der NYSE verantwortlich ist. Even the surprising one, such as investment bank Goldman Sachs for 60% of automated trading on the NYSE is responsible. Man könnte hier eventuell auch von einem Cornering sprechen. You could even speak of a cornering. Das ganze könnte sich zu einem neuen Mega Skandal in der Finanzkrise entwickeln und es soltle auf jednefall hinterfragt werden, ob eine einzelne Bank so viel Macht besitzen darf. The whole could become a new mega-scandal in the financial crisis and develop it soltle on jednefall questioned as to whether an individual bank as much power may be.

http://translate.google.com/translate?hl=en&langpair=de|en&u=http://www.spekulantenblog.de/category/wirtschaftskriminalitat/&prev=/translate_s%3Fhl%3Den%26q%3D%2522Sergey%2BAleynikov%2522%26sl%3Den%26tl%3Dde

I wonder how many of Goldman's competitors used high frequency trading?  Maybe the software or internet burped last year and left these folks on the wrong side of the trade and no way to pay?  Taxpayers to the rescue.

How many of Goldman's competitors have been put out of business?

[WhiskeyGirl]

Lots of good reading -

From a programer of Russian origin:

"high frequency trading is embroiled in an arms race. And arms races are negative sum games. And arms races are negative sum games. The arms in this case are not tanks and jets, but computer chips and throughput. The arms in this case are not tanks and jets, but computer chips and throughput.  But like any arms race, the result is a cycle of spending which leaves everyone in the same relative position, only poor."

read more outrage here -
http://74.125.47.132/translate_c?hl=en&langpair=de%7Cen&u=http://ftalphaville.ft.com/blog/2009/07/08/60761/the-cold-war-in-high-frequency-trading/&prev=/translate_s%3Fhl%3Den%26q%3D%2522Sergey%2BAleynikov%2522%26sl%3Den%26tl%3Dde&rurl=translate.google.com&usg=ALkJrhiRHKn3y8pgbT5cMO17vL_BQB1hfQ

[WhiskeyGirl]

This article brings to mind some good questions -

...The proprietary trading in securities, that is the shops on their own account and not on behalf of clients, was long one of the gold mines for the Wall Street firm.

Im vergangenen Jahr wandelte sich Goldman Sachs rechtlich von der Spezial-Investmentbank in eine reguläre Geschäftsbank um und unterzog sich so stärkerer Kontrolle durch die Bankenaufsicht. Last year Goldman Sachs changed legally by the specialty investment bank into a regular commercial bank, and then underwent more scrutiny by the Banking Supervision. In der Praxis betreibt das Finanzhaus aber weitgehend die bisherigen Geschäfte vom Handel über Firmenfinanzierung bis hin zur Beratung bei Übernahmen und Fusionen. (sam/sda) In practice, operates the financial house but largely the existing shops from trading on financial firms to advice on acquisitions and mergers. (Sam / sda)

http://translate.google.co.uk/translate?hl=en&sl=de&u=http://www.bernerzeitung.ch/wirtschaft/unternehmen-und-konjunktur/MillionenCode-von-Goldman-Sachs-gestohlen/story/25700712/print.html&ei=u2VcSuybDYTU8wTcwt3kDQ&sa=X&oi=translate&resnum=10&ct=result&prev=/search%3Fq%3DSergey%2BAleynikov%26hl%3Den%26lr%3Dlang_de

Why would anyone need customers when they have HFT "high frequency trading"? 

If they have little consumer exposure, why bail them (and others like them) out?  That seems to be a hugh waste of taxpayer money.

If they went from special 'investment bank' to regular bank, why are they dealing in securitizations?  Aren't these derivatives?  I may be showing my banking ignorance.

How is what they are doing today with toxic assets any different from what they did last year? 

Derivatives packaged under a new name?  Do they smell any sweeter?

[WhiskeyGirl]

What may have been impacted by this 'high frequency trading' and lightening fast market response?  Something for everyone to think about and post.

[WhiskeyGirl]

I remember the IPO fever a few years back.  Everyone wanted to be in on the first few MINUTES of trading.  The stock went up in seconds.  Few if any on Main Street got in before the prices skyrocketed.

I remember people writing into stock and investing columns.  They asked things like "How can I get in be one of the first?"  Lots of answers - so many buying, timing, or the first offering is "reserved" for special clients. 

I wonder how much of the trading in the first few seconds was due to early HFT's?  How many millions/billions were made by large investment firms?     

At the same time, there was a lot of late night infomercials suggesting one could make a fortune with better faster software and equipment.  Make millions.  There was also a lot of effort by the establishment to 'debunk' the profits.

Were IPO functionally 'reserved' for HFT's?  The special interests? 

At some point, IPO's fell out of favor.  Lots of hype, junk, and maybe Main Street was feeling ripped off. 

jmho

[Edward]

WhiskeyGirl wrote..
Quote:
I wonder how many of Goldman's competitors used high frequency trading?  Maybe the software or Internet burped last year and left these folks on the wrong side of the trade and no way to pay?  Taxpayers to the rescue.

How many of Goldman's competitors have been put out of business?


I have often wondered HOW the world of banks could get into trouble at the same time...
Well all accept nations such as, Saudi Arabia and another is India and do not forget China.
 There banking systems have been left untouched.. Massive reseves and income..
 For instance India money is worth more then US money. There banks pay up to 10 percent interest on savings in India.

So I would logically have to believe these other nations were on the winning side of that Trade..??
 We even had to take a loan from them to pay them possibly ??
It is Like we lost at a local mafia owned poker room and Lost, then had to give up our car pink slip and we still owe them big money or Guido is gonna come and break a leg ??


When you see what happened with fuel prices before Obama got into office ?? The economy was just zooming along
 Obama stepped into office and right off the bat he is out to cure the worlds financial crisis ?

What a set up on ALL of US.. Some of these Big Money People should be in Jail for this..

I think you hit the nail on the head WhiskeyGirl

[WhiskeyGirl]

WhiskeyGirl wrote..
Quote:
I wonder how many of Goldman's competitors used high frequency trading?  Maybe the software or Internet burped last year and left these folks on the wrong side of the trade and no way to pay?  Taxpayers to the rescue.

How many of Goldman's competitors have been put out of business?


I have often wondered HOW the world of banks could get into trouble at the same time...
Well all accept nations such as, Saudi Arabia and another is India and do not forget China.
 There banking systems have been left untouched.. Massive reseves and income..
 For instance India money is worth more then US money. There banks pay up to 10 percent interest on savings in India.

So I would logically have to believe these other nations were on the winning side of that Trade..??
 We even had to take a loan from them to pay them possibly ??
It is Like we lost at a local mafia owned poker room and Lost, then had to give up our car pink slip and we still owe them big money or Guido is gonna come and break a leg ??


When you see what happened with fuel prices before Obama got into office ?? The economy was just zooming along
 Obama stepped into office and right off the bat he is out to cure the worlds financial crisis ?

What a set up on ALL of US.. Some of these Big Money People should be in Jail for this..

I think you hit the nail on the head WhiskeyGirl

Where is the reform to encourage long term investment in the U.S.?  Many folks lost their retirement and savings.  The HFTs make money is fractions of a second.  Why not tax that money to encourage folks to invest long term? 

The day market is almost a 'front end' put on a nightly, hidden, secret, non trackable trading game.  You have to be a super rich person or corporation to play.  Probably have lots of off shore account to store your money and keep it safe from the tax man.  Caribbean banks come to mind.  So do SA banks. 

Drug money profits have to go somewhere, somehow.  Maybe this Dark Pool trading is a conduit?  I wonder how many millions remain untaxed?  Conflicts of interest that go unnoticed and unreported?

jmho