Monday, October 11, 2010

[Video] 60 Minutes: HAL9000

Not a ton of new ground in this 60 Minutes piece if you have been following the HFT trend the past few years, but probably a good overview for the typical 60 Minutes viewer who is not exposed to the financial markets day in and day out.    Joe Saluzzi [Jun 18, 2009: Joe Saluzzi Comments on HAL9000]  gets a lot of face time here.  What was amazing is not one soul in the HFT community (ok, they found one) would grant an interview, even the exchanges like BATS or DirectEdge.   Once again the oft used excuse of "we provide liquidity" is why we should be happy our orders are front run - of course they provide liquidity, except when liquidity is really needed i.e. May 6th.

[13 minute video]

It may surprise you to learn that most of the stock trades in the U.S. are no longer being made by human beings, but by robot computers capable of buying and selling thousands of different securities in the time it takes you to blink an eye.

These supercomputers - which actually decide which stocks to buy and sell - are operating on highly secret instructions programmed into them by math wizards who may or may not know anything about the value of the companies that are being traded.

It's known as "high frequency trading," a phenomenon that's swept over much of Wall Street in the past few years and played a supporting role in the mini market crash last spring that saw the Dow Jones Industrial Average plunge 600 points in 15 minutes.

Most people outside of the industry know very little, if anything, about it. But the Securities and Exchange Commission and members of Congress have begun asking some tough questions about its usefulness, potential dangers, and suspicions that some people may be using computers to manipulate the market.

[Feb 12, 2010: [Video] Scott Patterson Tells Us the History of HAL9000 in "The Quants"]
[Dec 3, 2009: Geeks Trump Alpha Males as High Frequency Trading Takes Over]
[Sep 4, 2009: Meet Optiver, High Frequency Trading Friend in Oil]
[Aug 28, 2009: WSJ - Meet Getco, High Frequency Trade King]
[Oct 1, 2009: High Frequency Trading on 'The Daily Show']
 [Aug 6, 2008: Cramer - Quants and their Machines]

Disclaimer: The opinions listed on this blog are for educational purpose only. You should do your own research before making any decisions.
This blog, its affiliates, partners or authors are not responsible or liable for any misstatements and/or losses you might sustain from the content provided.

Copyright @2012