Welcome to the Vitus Capital Blog!
Notes to myself, possibly of interest to others.
-- Bill Northlich

Wednesday, October 10, 2012

HFT. Trades lost in time, like tears in the rain. Time to die.

This morning [10/9], dozens of stocks, including Pandora and Nokia, experienced violent price swings due to one trading firm's activity within a "dark pool."

Dark pools are private stock markets that connect buyers and sellers electronically so no party's identity is revealed... Business Insider
The ultra-thin spreads we see today are not only a result of the decimalization of pricing, but also a symptom of the larger problem of lax enforcement of the rules, including the legalized front-running that many credible witnesses have observed.It appears that more and more flesh-and-blood investors have grown tired of the market shenanigans and have understandably left, moving to gold or other stores of value. And the current "fix-is-in" state of market making isn't going to encourage them to return. But it stands to reason that the false "liquidity" provided by HFT would be replaced by real liquidity of more market participation, if only regulators and prosecutors had the moral fortitude to enforce laws and regulations already on the books... Yahoo
See especially Themis Trading, "experts at navigating all light and dark market centers to help our clients obtain the best possible prices", started by Sal Arnuk and Joseph Saluzzi, vets of Instinet (one of the first HFT shops), and their blog.
Finally, read Patterson's Dark Pools asap.


  1. Interesting to read about the "dark pools"

    My question is could this be considered illegal? This seems strikingly "black market" - esque, and the hiding identity thing essentially places no real actual "person" at risk. Is there an initiative to crack down on this? Is this something to be crack-down-able on?

    Btw, love the Blade Runner refs in the title, perhaps ol' Ridley needs some Vitus info

  2. Mr. Anon.: Wonder who you might be? :-)

    There is a huge argument/controversy raging on the very questions you ask. Themis Trading, eg, is all for reigning in HFT. The usual suspects are yelling "communists!".

    This is a major deal. Won't be resolved soon.