Rigged U.S. Stock Market.... 60 Minutes Exposes Insider High-Speed Traders Who Jump The Line on You?

[tomm2thumbs]

A must-see for those who missed 60 Minutes this past week. Michael Lewis gives an interview to "60 Minutes" alleging that the stock market is rigged by a cabal of high frequency traders, stock exchanges, and Wall Street firms. He notes that a curious trader from the Royal Bank of Canada, Brad Katsuyama, wondered why trades appeared to be predicted by others, and did a large measure of investigation to find out why. He figured it out and wanted to combat potential abuses perpetrated against the investing community.

Lewis notes in his interview that high frequency traders are able to front run orders, which means they are able to buy in front of you and sell them back to you when you want to buy, or even after you have begun the process to buy. And that it is somehow considered to be legal in the rules that are currently established for the exchanges. It is likened to someone who wants to buy tickets to a concert online... you click to purchase 4 seats at 20 dollars each, and in the fraction of the second it takes to place your order, someone else learns of the desire for your purchase and jumps in ahead of you to purchase a portion of the seats and then place them back on the market for 25 dollars instead, giving you a higher price and themselves a tidy profit. Thus, the cut-in-front-of-the-line aspect of the trading scenario.

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Brad Katsuyama, who discovered the reason his Canadian customers seemed to be getting shaved of profits by the system, was then encouraged by others to set up a stock exchange, IEX, to thwart this apparent rigging of the U.S. stock markets against common investors. Many would view this exchange as a type of Credit Union of trading. If you watch the clip, you will likely get a sense that this guy is genuine in his desire to create a fair system for all vs. insider profits for those with proprietary access and speed to outrun other investors.

If this doesn't shake-up the current system, I don't imagine much will.




< back up clip -- basically same as above >

[mdbl]

1. I thought this was common knowledge

I was told years ago about robotic trading which makes decisions in fractions of a second. I laughed when I heard the feigned shock in the news lately.

[tomm2thumbs]

2. I always thought high speed traders had a general benefit, but

the fact that they can apparently find out about your order and jump ahead in line with that knowledge to sell back to you is what I think is the shocking part to many people.

[hobbit709]

3. The game has always been rigged in favor of the big boys.

the ones jumping out of windows in 1929 were not the big boys.

[tomm2thumbs]

4. Interesting article on the BATS exchange IPO after algorithm issue

http://www.zerohedge.com/news/2014-04-01/hft-rigged-market-how-rogue-algo-destroyed-bats-ipo

Considering the rancorous debate currently going on between Michael Lewis (we will have more to say about it shortly), DirectEdge CEO William O'Brien and IEX employee and latest HFT whistleblower, Brad Katsuyma, on CNBC, we decided that this would be an opportune moment to remind readers how BATS, which currently owns DirectEdge, IPOed, or rather how it failed to IPO, when it crashed and burned in its attempt to go public on March 23, 2012, when a rogue algo destabilized the order book and promptly sent the indicative price from around $16 to 0... in less than a second - perheps the perfect testament to just what HFT really does.... and just so readers have an objective perspective of how "unrigged" the market truly is.

[groundloop]

5. IMO what really sucks is many of us depend on the stock market for our retirement

For many of us (perhaps most) we depend on 401Ks and IRAs (and therefore the stock market) or else through directly purchasing stocks for our retirement. That has always scared the hell out of me since I view the stock markets as nothing more than a form of legal gambling. I could do everything I'm told I'm supposed to do (get an education, work hard, make my employer rich, invest to save for a retirement) and still end up dead assed broke through no fault of my own thanks to shady crooks like Bernie Madoff or some of these other stock market shysters we're finding out about.

[mdbl]

7. Which is why pensions and SS are necessary

But you can't seem to get the idiot voters to understand that. They keep voting in fascists intent on taking it all for themselves. We now have watered down pension laws and moron repugs trying to screw up social security - all because of a misled population.

[father founding]

6. what isn't

What isn't rigged in the USA ?

[markpkessinger]

8. "It's a racket. Those stock market guys are crooked." -- Al Capone