Computer Trading and Dark Pools 222
Bob the Super Hamste writes "CNN Money has an article on computerized trading; specifically, the non-public markets that are often used to execute orders. The company that the article discusses executes 1/8 of all stock trades in the U.S., or about 900 million trades a day. For comparison, the NYSE executes about 700 million trades. The article discusses 'dark pools,' or private markets where quotes aren't disclosed to the broader public markets. If the company is unable to fill an order from within its own dark pool, it will submit the order to the broader public market (13 public exchanges), as well as up to 20 other private dark pools. The quotes offered by the private dark pools, by law, have to be the same or a better quote than those offered on public exchanges. There have been recent questions about whether the quotes provided by dark pools have been the best for customers and there is a current investigation by FINRA into the methods used by market makers and dark pool operators to fill orders."
If the question is: (Score:5, Insightful)
If the question is, "are financial institutions doing the end run around public or private regulation for the purpose of screwing people, engaging in fraud, and dodging (necessary) liability?" the answer is always yes.
Re:If the question is: (Score:4, Insightful)
If the question is, "are financial institutions doing the end run around public or private regulation for the purpose of screwing people, engaging in fraud, and dodging (necessary) liability?" the answer is always yes.
If Mitt had been elected, this would be cheered on by the Whitehouse as good and normal capitalist activity and the FINRA would be disbanded.
Re:If the question is: (Score:3, Insightful)
That's because Mitt and the people who agree with him on economics are FUCKING MORONS.
If you got rid of FINRA, the entire stock market would be open for fraud by companies like Enron, and the whole market would be expected to become "Screw you, because I just did".
These guys want some drooling idiot version of anarcho-capitalism where if the bank rips you off from your life savings that's your problem.
That particular view of capitalism wants corruption, cheating, and outright theft to be rewarded, and is only advocated for people who would immediately start acting corrupt, cheating, and outright stealing.
All these idiots who are worshiping at the altar of unrestricted capitalism basically want to get rid of the rules which keep them honest.
Re:If the question is: (Score:2, Insightful)
The trades are reported, just like any other trade and will show up on the consolidated tape.
The dark pools are able to take advantage of some fine print in the regulations since the offers to buy and sell and not displayed. They can trade at price points between whole cents. They can also minimize the market impact of making a large trade. None of this will make much difference to a retail investor.
Unless you are building HFT system or making trades of more than a few 100k, you can ignore them.
Re:If the question is: (Score:5, Insightful)
If the question is, "are financial institutions doing the end run around public or private regulation for the purpose of screwing people, engaging in fraud, and dodging (necessary) liability?" the answer is always yes.
And apparently after the financial meltdown of 2008 and the new rules surrounding those who are deemed "too big to fail", if the question arises regarding who will be punished for such activity to the point of preventing it from happening again, the answer will always be good luck with that shit.
Re:Dark pool, eh?? (Score:5, Insightful)
This isn't really any voodoo here, and it is something stock brokerage companies have been doing for decades or even from the very beginning. If you have two customers where one customer is trying to unload some stock and another is trying to buy the same issue of stock.... why not simply exchange the stock certificates between the two customers without having to go through the big stock exchange?
The point is that these trading companies sometimes have thousands of trades going on all of the time, sometimes with customers having "put" or "stop" orders in place to buy or sell at certain prices. On the whole it really does make the markets much more efficient because the only time you go to the "big boards" is when you have a large number of your customers either all trying to sell or buy a particular stock issue.
This is certainly not something that will "destroy the economy", but rather that it will even help make the "economy" run even better by making sure that those who are either buying or selling shares can get the best possible price among the most number of people who may be interested in either buying or selling that stock. It also keeps stock brokerage costs down, thus lowering your fees for making an individual transaction. In other words, this makes it much easier for "ordinary people" to get involved with the stock market if you really care to do something like that. The New York Stock Exchange was explicitly set up with this kind of arrangement in mind, where people "with a seat" would carry on major transactions on behalf of trading companies, and ordinary people would contract out with those trading companies if you wanted to make occasional trades or buy in low volumes.
That there are problems with brokers and reasons to be concerned about how they are handling your money is something to be concerned about, the mere fact that "dark pools" exist isn't one of those things to panic over. If they didn't exist, all trades would need to happen on the major exchanges and would be a whole lot more expensive with much higher fees. The end result is that it would cause the world economy to collapse if they were outlawed or something else equally stupid. That brokerage houses should be expected to be honest to their customers is what this whole story is about, not the existence of these trading environments.
Re:If the question is: (Score:2, Insightful)
That's because Mitt and the people who agree with him on economics are FUCKING MORONS. ...
That particular view of capitalism wants corruption, cheating, and outright theft to be rewarded, and is only advocated for people who would immediately start acting corrupt, cheating, and outright stealing. All these idiots who are worshiping at the altar of unrestricted capitalism basically want to get rid of the rules which keep them honest.
Umm, I think you just answered your own question: Mitt, who built his fortune on various forms of cheating and theft, wants to get rid of the rules that might stop him from continuing to cheat and steal. And he definitely doesn't want to be honest.
Re:Fun with names (Score:5, Insightful)
This is why you're supposed to keep your pension funds, endowments, real property and other critical assets out of liquid markets. It is disappointing that doing this means they're not going to grow 8% a year, but juicy returns require big risks.
When the pension funds, endowments, etc were buying up various mortgage-backed securities, they were buying what they were told was AAA-grade investments. That's the same grade the rating agencies give US Treasury bonds (actually, for a little while it was a better grade than US Treasury bonds), and even now US Treasuries are pretty universally perceived as the safest investment on the planet. Another way of saying this: The big banks took turds, worked with the rating agencies to polish them up really nice, sold them as gold, and then successfully ducked responsibility when it turned out that they were still turds.
And yes, there were US federal regulatory agencies that at one time would have stopped this. They didn't, and it's a disgrace that they didn't, but that doesn't mean that we shouldn't have the agencies, it means that the people who didn't do their jobs at the agencies should be fired and replaced by people who will do their jobs, and the bankers who committed these kinds of fraud should be spending a while in PMITA prison so that they will be less tempted to do it again.
Re:If the question is: (Score:4, Insightful)
If the question is, "are financial institutions doing the end run around public or private regulation for the purpose of screwing people, engaging in fraud, and dodging (necessary) liability?" the answer is always yes.
If Mitt had been elected, this would be cheered on by the Whitehouse as good and normal capitalist activity and the FINRA would be disbanded.
Well, if Obama had been elected, he would have just ignored the law anyway [washingtonpost.com]. Just like he did with his own health care reforms.
And then taken the Fifth [nytimes.com]. Just like his IRS attack dog did.
Then the most transparent administration evah would secretly transfer all records to the CIA [cbsnews.com] so they could avoid FOIA requests.
I guess it's a good damn thing Obama didn't get elected. Imagine those corrupt tyrants reading all your emails.
That could never happen in the US of A. There aren't that many USELESS FUCKING IDIOTS more than willing to be fooled over and over again, now are there?
Re:If the question is: (Score:2, Insightful)
And people like you are under the impression that government involvement is any better than no government involvement. Enron Happened. Housing Market Happened. Multiple other scams have happened, all under the watchful eye of Government. Yet I don't see you blaming government for their lack of oversight. I wonder why that is.
And if you think big government is okay, then you're probably fine with big government spying on people, targeting people by the NSA, IRS etc, while shirking any responsibility by saying "I know nothing!" (/Sgt Schultz voice) or "I plead the fifth".
You see, how easy it is to poke fun at people who are idiots.
Nobody wants "corrupt, cheating, and outright stealing" except the robber barons, which include both (R) and (D) people alike (see Harry Reid, Diane Feinstein etc for example). Some people just prefer the (D) over the (R) brand, but are still idiots thinking they are any different in any meaningful way.
Let me ask you it this way, don't you try to avoid government red tape when you do business? Oh wait, you probably aren't in business, but on someone else's payroll.
Re:lower costs (Score:0, Insightful)
So, in effect you're saying "since government can be inefficient, we should scrap all rules which keep corporations from committing outright theft"? Yeah, that'll fix the problems.
You're an idiot.
Says the USELESS fool who apparently has faith in the same governement that sics the IRS on political opponents, the same government that ignores the law to delay implementation of health care reform, the same government has the NSA reading everyone's every email, the same out-of-control government that spends hundreds of millions of dollars a MONTH more than it takes in, the same government that conducts "extrajudicial killings" of US citizens?
And that's all in the past handful of months.
Yet you call ME an idiot?
Coming from you, that's a compliment.
Let's see, it's been what? 6 years since Booooosh!!!! was President. It's been 8 years since Democrats took over both the House and Senate.
So tell me, you brain-dead dumbfuck self-appointed delusional wanna-be, why does workforce particpation rate in the US continue the rapid decline that started about the same time DEMOCRATS took power in Washington? BOOOOOSH's fault? Yeah, right. Can't be Obumbles, Pelosi, Reid, et al. Oh noes! Not THEM, even after they've being in power for YEARS. It's gotta be teh Eeev-il Rethuglicans!!!!
You are one delusional fool.
Leave the poor investors and traders alone (Score:4, Insightful)
Because unregulated markets always work the best. Disregard the panics of 1819, 1825, 1837, 1847, 1857, 1866, 1873, 1874, 1884, 1890, 1893, 1907, and the Great Depression. Those were just anaomolies, as were the crashes which occurred as the market regulations were dismantled starting in the 1980s. The unregulated market is always the best.