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#1205070 - 06/22/09 02:22 PM a new way to corner the market?
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from http://www.ft.com/cms/s/0/92ca01fa-5d32-11de-9d42-00144feabdc0.html :

"All the share trades that are carried out every day on the New York and London share markets and around the world - prices, bid-offer spreads and trade sizes - are visible to every member of the investing public. Right?

Wrong. That is the strange truth behind the emergence of "dark pools" of liquidity - a relatively new venue for the buying and selling of shares. ...The average size of a trade on the New York Stock Exchange is 300 shares, while a typical large order in a dark pool can be as big as 55,000 shares.

Any large order coming into the order book of an exchange would be immediately visible to rival traders, jeopardising the trade, dark pool operators say. That also explains why prices are only visible to traders entering a dark pool...."

This seems straight out of the movie, "Wall Street" (cornering orange juice futures), and the Hunt brothers monopolizing silver market futures trading....
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#1212961 - 07/06/09 05:38 PM Re: a new way to corner the market? Phoenix
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related article of situation with estimated opportunity cost due to lost trades of 750 million euros http://www.bloomberg.com/apps/news?pid=20602005&sid=amhtw7Znbq3w :

"Turquoise, a European stock market trading system, ...
The trading platform was available for members to reconnect from 11:30 a.m. London time and continuous trading started again at midday. Turquoise shuttered the market at 8:26 a.m. because of a technical problem. The London-based alternative trading system runs a system which accepts both dark orders, where prices aren’t displayed, and public, or lit, orders.

'The cause of the technical issue experienced by members this morning has been isolated to a complex dark- order matching scenario,' Turquoise told members in a notice today. 'Dark-order entry into the Midpoint Book and Integrated Book will be suspended until the root cause has been resolved.'

Turquoise, a system created by banks as an alternative to stock exchanges, yesterday took a record 9.4 percent of trading in Switzerland’s benchmark Swiss Market Index and garnered 7.29 percent of transactions in U.K. FTSE 100 stocks...."
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#1223926 - 07/29/09 02:27 PM Re: a new way to corner the market? Phoenix
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like we need something else to worry about - now it's today's version of program trading, one of the key causes of the 1987 stock market crash: http://www.nytimes.com/2009/07/29/opinion/29wilmott.html?_r=1
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#1271266 - 10/22/09 01:17 PM Re: a new way to corner the market? Phoenix
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The SEC is proposing rules for "dark orders", per http://www.riskcenter.com/story.php?id=19110 :

"The SEC’s proposals address three specific concerns related to dark pools:

- The first proposal would require actionable Indications of Interest (IOIs) – which are similar to a typical buy or sell quote – to be treated like other quotes and subject to the same disclosure rules.
- The second proposal would lower the trading volume threshold applicable to alternative trading systems (ATS) for displaying best-priced orders. Currently, if an ATS displays orders to more than one person, it must display its best-priced orders to the public when its trading volume for a stock is 5 percent or more. Today’s proposal would lower that percentage to 0.25 percent for ATSs, including dark pools that use actionable IOIs.
- The third proposal that would create the same level of post-trade transparency for dark pools – and other ATSs – as for registered exchanges. Specifically the proposal would amend existing rules to require real-time disclosure of the identity of the dark pool that executed the trade.

In its proposals, the Commission is seeking public comment and data on certain issues relating to dark pools. Dark pools of liquidity are one of several issues that the Commission is currently considering as part of its broad review of equity market structure...."
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#1348627 - 02/24/10 08:35 PM Re: a new way to corner the market? Phoenix
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another good article, about insider trading and placement and political contributions:
http://www.edhec-risk.com/latest_news/featured_analysis/RISKArticle.2010-02-17.2408?newsletter=yes

"....With over $2 trillion of assets, the system is in crisis and pay to play has made it worse. For instance, it is alleged that public funds invested $90m in worthless collateralised debt obligations because of politics. An Ohio-based public sector fund, BWC, after investing $50m in a rare-coin fund run by a Republican donor, only barely managed to get its money back. A 2007 study by a US government department found that defined-benefit plans that did not disclose conflicts of interest suffered from a performance of less than 1 per cent per annum.

The motivation for all this is quite clear—the millions of dollars of fees harvested by placement agents and asset managers from the public funds. For instance, Carlisle received $31m from New York Common over the four years to 2008, a figure considerably in excess of the $20m it had to pay to settle with Cuomo.

The corrupt system also damages the honest. For instance, a former CIO of the New Mexico Education Retirement board claimed that he was pushed out for not making politically motivated investments...."
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#1387609 - 05/07/10 02:51 PM Re: a new way to corner the market? Phoenix
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a fat finger and unintended consequences, from http://www.washingtonpost.com/wp-dyn/con...ST2010050606287 :

"....The NYSE has "circuit breakers" in place to pause the trading of stocks during a panic. But investors can also trade stocks on 10 electronic platforms that have sprung up in the shadows of the NYSE in recent years and generally do not stop unrestrained selling.

....Lou Pastina, the NYSE's executive vice president of operations, said the system set up by the SEC exacerbated problems on Thursday. When the sell-off started, the NYSE paused the electronic trading of several stocks and moved to traditional auctions of stocks with a middleman. The goal was to stem the panic and find rational buyers.

While the stocks were paused on the NYSE, sellers moved to other electronic exchanges such as Nasdaq and Instinet. So many sell orders came in at once that some stock prices listed on those platforms fell to near zero. Shortly after, trading of those stocks started up again on the NYSE at the paused prices, leading to wide disparity in costs among exchanges.

....In 2007, the SEC put in place new rules for how stocks are traded, led by then-Chairman Christopher Cox. The goal was to give investors more control over how their trades were executed and to guarantee the best price when they buy stocks. ....
The new SEC rules toppled the dominance of the NYSE. Trading of its own listed stocks dropped from 85 percent to 21 percent, said James Angel, a professor at Georgetown University's McDonough School of Business.

As a result, a single entity can no longer put a stop to panicked selling. The markets Thursday were a preview of what happens when other trading venues take over, he said.
....
Market officials and regulators are now unwinding millions of the trades that occurred on the electronic exchanges Thursday. As a result, the markets could be in for "an ugly" morning, Pastina said.

Nasdaq took the extraordinary measure Thursday of canceling all trades of stocks that occurred from 2:40 to 3 p.m. at prices 60 percent below the price listed prior to that period. The list of stocks affected is on its Web site. ..."
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#1389561 - 05/12/10 02:01 PM Re: a new way to corner the market? Phoenix
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scary that the cause remains unknown, though no one trade seems to have precipitated - whole article worth studying: http://www.riskcenter.com/story.php?id=19960#_ftn3

One lesson is parallel to what we learned in preparing for Y2K: we're only as strong as the weakest link in the chain, and for securities trading, that chain is clearly global. Just a few interesting quotes from SEC Chairwoman Schapiro's thorough testimony:

"....on May 6, the use of market orders when stop loss orders were triggered may have led to automated selling that resulted in executions at aberrant prices.

Finally, the absurd result of valuable stocks being executed for a penny likely was attributable to the use of a practice called “stub quoting.” When a market order is submitted for a stock, if available liquidity has already been taken out, the market order will seek the next available liquidity, regardless of price. When a market maker’s liquidity has been exhausted, or if it is unwilling to provide liquidity, it may at that time submit what is called a stub quote – for example, an offer to buy a given stock at a penny. A stub quote is essentially a place holder quote because that quote would never – it is thought – be reached. ...

...Other characteristics often attributed to proprietary firms engaged in HFT are: (1) the use of extraordinarily high-speed and sophisticated computer programs for generating, routing, and executing orders; (2) use of co-location services and individual data feeds offered by exchanges and others to minimize network and other types of latencies; (3) very short time-frames for establishing and liquidating positions; (4) the submission of numerous orders that are cancelled shortly after submission; and (5) ending the trading day in as close to a flat position as possible (that is, not carrying significant, unhedged positions over-night). ...

...in the past, professional liquidity providers with the best and fastest access to the markets were charged with affirmative and negative obligations to promote market quality. One of the most significant negative obligations was a restriction on “reaching across the market” to take out quotations and thereby drive prices up or down. Many of the most active and sophisticated traders in today’s market structure are not subject to any obligations with respect to the nature of their trading. If active trading firms exploited their superior trading resources and significantly contributed to the severe price swings on May 6, we must consider whether regulatory action is needed to address the problem...."
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#1438033 - 09/02/10 01:58 PM Re: a new way to corner the market? Phoenix
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SEC continues its thorough investigation into the 5/6/10 "flash crash", this time focusing on "quote stuffing" and "sub-penny pricing": http://online.wsj.com/article/SB10001424052748703882304575465990082237642.html has some of the evidence:

...."quote stuffing," trading in which unusually large numbers of orders to buy or sell stocks are placed in a fraction of a second, only to be canceled almost immediately.....

....another practice in which large numbers of orders are placed. In these cases, what's unusual is that the orders are priced in increments as small as one-tenth of a cent and far away from the actual price at which a stock is trading, says a person familiar with the line of inquiry.

The SEC is seeking to learn whether such orders, known as "sub-penny pricing," are used to manipulate the market, this person says, which would be illegal. At issue is whether the practice could artificially torpedo stocks' prices or help make it appear that there is more trading volume in a stock than there really is...."
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#1450707 - 10/01/10 04:35 PM Re: a new way to corner the market? Phoenix
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fat finger flash crash? "....SEC and CFTC investigators believe that Waddell's selloff of E-mini contracts -- which bet on the future value of the S&P 500 -- sparked a cascade of trading activity that eventually overwhelmed some of the sophisticated computer algorithms that Wall Street firms use to execute trades. ..."

there are several articles - WSJ and Reuters - publishing this ahead of the official SEC/CFTC report. The report, not fully approved for release as of 10/1/10, may not contain any recommendations.
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#1452391 - 10/06/10 04:58 PM Re: a new way to corner the market? Phoenix
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2 good links about high-frequency trading. For those of us who were taught to analyze balance sheets and income statements, this practice just seems wrong, taking any rational economic analysis into a dangerous Twilight Zone in which any stated valuation of a publicly traded entity is unbelievable. The 2nd link comes from Googling "high frequency trading and denial of service attacks" - when it's just computers talking to each other, is there a risk of having national or international money flows just shut down?
http://www.bloomberg.com/news/2010-10-06...ew-cowboys.html

http://community.tradeking.com/forum/cat...um_posts?page=4
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#1547981 - 05/09/11 01:54 PM Re: a new way to corner the market? Phoenix
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and a year later, a decent article about what's been done:
http://www.bloomberg.com/news/2011-05-06...year-later.html

"One year ago, regulators were unable to arrest a market collapse that erased $862 billion from stock values in less than 20 minutes. Yesterday, they agreed that their work to prevent a recurrence has yet to be completed. ..."
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#1554193 - 05/20/11 01:14 PM Re: a new way to corner the market? Phoenix
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Unsurprising themes of recommendations related to dark liquidity trading (mentioned earlier in this thread):
Principles to Address Regulatory Concerns:
Topic 1: Transparency to Market Participants
Topic 2: Incentives for using Transparent Orders
Topic 3: Reporting to Regulators
Topic 4: Information Available to Market Participants about Dark Pools and Dark Orders
Topic 5: Regulation of the Development of Dark Pools and Dark Orders

from a 33 page report at http://www.iosco.org/library/pubdocs/pdf/IOSCOPD353.pdf that goes through research and logic
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#2009391 - 04/22/15 12:07 PM Re: a new way to corner the market? Phoenix
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#2011194 - 04/30/15 01:27 PM Re: a new way to corner the market? Phoenix
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a report that should raise some questions in the next related audit: http://www.newyorkfed.org/newsevents/news/banking/2015/SSG-algorithmic-trading-2015.pdf
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#2011278 - 04/30/15 04:14 PM Re: a new way to corner the market? Phoenix
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This has been great reading, thank you!

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