Operating nuclear power stations or super computers plugged into
the exchange trading systems incurs the same risk of self inflicted disaster
when there is no where to run or hide
One Of The Biggest High Frequenecy Traders Warns Of Potential
Market "Catastrophe"
Here is part of an article in www.zerohedge.com that told of stupid men
and women in charge and courting a catastrophe that they have no control over and
did not know enough of. The high risks are obvious and well documented, but
they stubbornly stick to a dangerous practice like they were bought and
controlled by the high frequency traders to do what they want, freely, and
risking a total system collapse.
This is like men and women flirting with
the sexiness of operating nuclear power stations, knowing the risks and the
inability to provide a failsafe system but ‘die die’ still want to have nuclear
power stations. Should a country like Singapore go the nuclear road, would it
be due to stupid men, clever men or too clever men’s recklessness or
desperation?
Read this article to understand and know
who are responsible to expose the ignorants to such high risk with little regards
to protecting them from it. Look at how irresponsible men and women can be, how
reckless they can be by turning the other way, not wanting to see the elephant
in the room just to achieve their private interests.
….Below is part of an article in Back in
April 2009, we wrote what may be the first seminal article predicting the
failure of capital markets as a result of widespread predatory high frequency
trading and fragmented market structure when we laid out "The Incredibly Shrinking Market Liquidity, Or The
Upcoming Black Swan Of Black Swans." Several years later, and
countless flash crashes, we have been proven right, however one thing is
missing: "the
catastrophe" that
finally wakes up people to the dangers of all the individual things we have
warned about over the years.
Today, we are one step closer to that day,
when none other than the head of one of the biggest high-frequency trading
companies, Mark Gorton of Tower Research,warned
that there are several faultlines in the structure of increasingly electronic,
automated financial markets that could lead to a “catastrophe” in the long run,according to the FT.
To be sure, Mark Gorton, has a clear
conflict of interest: being one of the largest HFT members himself, with his
company dominating program trading on the NYSE with his Latour Trading
subsiiary, the founder and head of Tower Research Capital argued
that exchanges have become far more efficient with the advent of more
computerised markets, but "cautioned that increasing complexity brought
new dangers that needed to be mitigated."
In other words, don't blame the HFTs, blame
the markets, which is to be expected from a person who will be out of a job if
HFT is banned.
He further adds that "The recent
evolution of markets from manual to electronic trading has had huge benefits
and investors save money every day due to the lower cost of trading. But
electronic trading brings with it a number of new risks, and we need to
continue to strengthen the resiliency of electronic markets,"Mr
Gorton told the Financial Times.
What keeps Gorton up at night? The short
answer: the lack of safeguards at exchanges to prevent HFT firms like his from
dragging the whole thing down:
The high-frequency
trader is particularly concerned over the lack of risk controls at exchanges,
which he said constituted a “large hole in the middle of the system that needs
to be filled”....
Nonetheless,
exchange-level risk controls remain “limited at best” and should assume there
will inevitably be glitches, bugs and errant trading algorithms that could
cause problems in the wider market, according to Mr Gorton.
Glitches from algorithms, he forgot to add,
such as the one Tower uses each and every day to scalp and frontrun billions of
trades in order flow.
However, his warning,
conflicted as it is, is spot on: the market will crash again, it is only a
matter of time, simply because the HFTs have captured market regulators so
well, nobody has any idea what is going on any more: “We
need a regulatory framework that assumes that any single system(can alsoread
nuclear energy) in the market will fail and insures that we have multiple
redundant levels of checks that can catch failures in other parts of the
system,”he said.
What is Gorton's suggestion?
Mr Gorton highlighted in
particular the lack of a centralised position-tracking mechanism for the US
stock market, the need to refine and synchronise
market circuit-breakers between highly correlated markets, such
as cash equities and futures, and the absence of clarity over what it takes for
trades to be declared invalid.
In other words, focus on the symptoms,
shutting down markets when things go haywire, not the underlying cause, which
as we have said since 2009 is simple: broken markets, designed to benefit just
one group of traders….
Who would it benefit if Singapore goes
nuclear?