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Monday, April 18, 2011

"Alternative trading systems"

What is high frequency trading?
A lot of people think that the stock market trade is done by specialists, the guys we see in the movie.
They do not longer exist.
70% of the trade is done electronically.
But it is bigger than that.
It is done by Computers algorithmic software, systems set up by PHDs, computers scientists.
It comes to what is called "alternative trading systems" or "dark pool of liquidity".
Of course with no transparency, no information for the public.
The biggest player of course is Goldman Sachs, they own one of these and they also own an electronic exchange.
They make 100 million dollars a day.
THEY NEVER HAVE A LOOSING DAY.
How do they do it?
They spot trades before the other investors.
They put orders in milliseconds.
They send out sniffing orders, then they buy the stock before the investors and sell to them with profit.
And they do this over and over.
This is illegal, this is criminal and would be called insider trading, and you would be put in prison, not them.
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