How to fix HFT and the Naked credit associated with it

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How to fix HFT and the Naked credit associated with it

Postby Indaswamp » Tue Mar 18, 2014 8:17 am

Simple...
All market participants must have margin available to clear all orders they have open at any instant in time on an unaggregated basis. Since you may only enter an order you intend to execute under black-letter law you must be required to have the margin capacity through either cash or secured and proved-available credit, to clear the trade. Period.

All orders must be exposed to actual execution risk by all market participants. Since you may only enter an order that you intend to execute the market must be able to act on each and every order you place into the market. This requires that each order, once placed, by valid for a reasonable minimum period of time so that it is exposed to a a reasonably-large percentage (for all purposes all) of the market. This means that the minimum human reaction time plus the round-trip time for all reasonable technologies in use must be the minimum order validity time; an order must either be valid for that time or it must execute. A reasonable definition of this time is 2 seconds.


End of HFT advantage through quote stuffing. End of Flash crashes. What HFT has done is increased the velocity of the market and basically allows for a normal years worth of human trades in about 2 weeks, skimming pennies and fractions of pennies through that quote stuffing over that time frame at blistering speeds. This is blatantly illegal conduct which the SEC just over looks.

http://market-ticker.org/akcs-www?post=228859
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Re: How to fix HFT and the Naked credit associated with it

Postby Indaswamp » Thu Mar 20, 2014 3:47 pm

High Frequency Trading: a brazen abuse of long standing security laws

Computer or “algo” driven trades can be executed in 300 microseconds. So 1,000 trades can be made in less than the 400 milliseconds it takes to blink the human eye. At their peak, algorithms shot some 323,000 stock-trading messages each second in the U.S. last year. This compares with less than 50,000 such trades for the busiest period in 2007, according to data compiled by the Financial Information Forum.

If you think this sounds like healthy market liquidity, think again. All this noise comes from the High Frequency guys trying to game each other or fool traders–a form of high-stakes chicken that also serves to suck in and then evaporate the savings of an unsuspecting public who tends to think that transaction volume and bids are evidence of legitimate investor interest. In reality more than 80% of HFT trades are cancelled before they can be executed; providing nothing more than a mirage of liquidity which instantly vanishes in moments of market distress: “Today, 90 to 95 percent of all quotes emanate from High Frequency machines…… This doesn’t imply share volumes just quotes traveling on the tape.” See: High Frequency Trading: Is it a dark force against ordinary human traders and investors? These practices are entirely indefensible in any broad rational or ethical assessment.
The Cajun 7 Course Meal; 1 lb. of boudin and a six pack of Abita beer.

Save the Marsh, Eat a Nutria!

Never fart in your waders, it'll give you WORTS.
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