BTU Trading Machine!

Quote from Landis82:

And if you really think that you are in "competition" with the likes of Goldman Sachs ( or any other I-Bank trading desk using automated execution software ), you must not have ever seen a bug get squished on the windshield of a car traveling at 60 mph.
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Your statement incinuates that they are so big that they could crush an individual trader. And how would they do that? Unless you are incinuating that they have the power to push prices up or down (something that I, an individual investor, cannot do, because I don't have access to their powerful automated trading systems).

So, one minute you say they are are on the up-and-up, straight shooters, and in the next post you incinuate that they have this HUGE advantage over me, in the stock market.

Which is it? Are we playing on a level playing field or aren't we?

Cheers to you, also!
Ed
 
Quote from edbar:


Which is it? Are we playing on a level playing field or aren't we?
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I think that you need to do some research as to just what an I-Banks equity derivatives trading desk does, for it clients, and for its prop account.

They do everything from stock-index arbitrage for their clients and themselves . . . to program trading for their clients as an "agency" trade or as a "principal" thereby facilitating trade by making a market and taking the other side.

These are all basic operations of an equity derivative desk. Why is all this important? Because they get to see how institutions are reacting to the market place by being able to see their "order flow" and what sectors of the market they are putting money to work in, or pulling money out of. It is a HUGE ADVANTAGE over a small trader such as yourself sitting at a day-trading shop.

Ever checked out how much of the daily volume on the NYSE is the result of program trading?

It was 48.6% of the NYSE average daily volume of 3.45 million shares per day during the June 22-26th trading week. That comes out to 1.67 million program shares traded PER DAY. Some is done as strictly "agency" trades, and some is done as "principal". Feel free to do some of your own research and break these stats down even further.


By the way, I noticed that you incorrectly spelled the word insinuate on several occasions in your post. Are you from another Country? Is English a second language for you?

Just curious.
 
Quote from edbar:

With the recent news about Goldman running trading software that is raking tens of million$ a year in profits, I'm skeptical of them raising a target on a stock as it could just mean they are ready to dump their holdings, as they draw the buyers in.

Ed
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This might come as news to you, but the trading software that Goldman is using to rake in "tens of millions a year in profits" applies to being a Supplemental Liquidity Provider, frequently called "SLPs".

They are high-volume members incented to add liquidity on the NYSE by way of receiving a rebate of $0.0015 when the SLP posts liquidity in an assigned security that executes against incoming orders. This generates more quoting activity, leading to tighter spreads and greater liquidity at each price level.

Goldman is not the only "SLP".
Furthermore, a member organization cannot act as a "DMM"
( Designated Market Maker ) and SLP in the same security.

Obviously based on the rebate structure and the mutual exclusion, it would make much more sense to trade as a DMM as opposed to an SLP, not in the least since SLPs (at least according to currently available information) are very limited in terms of which securities they can actually trade for supplemental liquidity provision. Quoting Robert Airo, VP of relationship management and sales at NYSE Euronext, from late October 2008:

"We’re rolling [the SLP pilot program] out in the 500 most active names where we believe incenting SLPs by compensating them to provide liquidity will supplement all of the other initiatives that we’ve put in place to build the NYSE book."

The SLP program was developed in the days after the Lehman collapse when market volatility spiked and major questions about liquidity premia emerged, resulting in program roll out on October 29 of 2008.

You can learn more about it here:

http://zerohedge.blogspot.com/2009/05/observations-on-nyse-program-trading.html

Again, this type of automated liquidity providing ( by Goldman and others ) as SLP's has absolutely NOTHING to do with Goldman's equity research, as you have previously claimed. To continue to assert such a point is to be quite naive.
 
Check out the chart below that shows Program Trading as a percentage of Top 10 program trading PRINCIPAL Volume.

Notice the jump in volume by Goldman after the "SLP" program was announced in late October of last year . . . from 22% of the Top 10, to 55% of the Top 10 program trading houses.
 

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Quote from Landis82:

You can learn more about it here:

http://zerohedge.blogspot.com/2009/...am-trading.html
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Thanks for the information.

You hit the nail on the head in your previous post when you "insinuated" that they could crush the average investor.

The bottom line is "if they are going to use computers to trade the market, SO AM I", and if you want to trust them, be my guest.

Happy Trading. This subject is closed in my book.

Again, thanks for research links.

Ed


:)
 
Goldman's role as an "SLP" is further confirmed by the amount of PRINCIPAL Volume as a percentage of total program trading volume . . . where Goldman's "principal" program trading volume jumped from 58% to nearly 95% at one point.

See chart below.
 

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Quote from edbar:

Thanks for the information.

The bottom line is "if they are going to use computers to trade the market, SO AM I", and if you want to trust them, be my guest.
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Trust has nothing to do with this.
You continue to make that claim and implication, but it is meaningless.

And again, most investment banks have been participating in some sort of electronically automated program trading for the past 20 years, either as an "agency" or "principal".

In my opinion, your knowledge base is pretty lacking (and quite naive) when it comes to who is participating in the market place, and how they participate.

"Trust" has nothing to do with it.
 
Quote from Landis82:

Trust has nothing to do with this.
And again, most investment banks have been participating in some sort of electronically automated program trading for the past 20 years, either as an "agency" or "principal".
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Do you believe that 2 traders in a prop-house trading side by side (and happen to be trading the same stock) are not competing with each other?

This is an important question because your answer is very relevant to this discussion?

Please answer that question. Just a yes or no will suffice!
 
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