Hand over your strategies and secret computer code.

Bob111 · Sep 1, 2011

Quote from carolnetzer27:

Isn't high volitility and whipsaws up and down good for "trading"?
I'm counting on the stocks trading in a range and not going up too much or down too much.

i know, i know... it's good....until the time when YOU have to exit . i'm not playing that buy and hold forever game...

and that 's exactly what happens during that flash crash. cause there is no real liquidity and never was any. HFT have all the benefits, but no obligations of providing orderly market..and that's we have a wild wild west today. at least on stocks.

SteveNYC · Sep 1, 2011

Quote from carolnetzer27:

Isn't high volitility and whipsaws up and down good for "trading"?
I'm counting on the stocks trading in a range and not going up too much or down too much.

Depends on the type of volatility.

When 10 price levels vanish suddenly in one second and there is a huge hole between the bid and ask, that's unstable volatility. i.e. a problem.

The 500 or even 1000 point intraday volatility in the DJIA is not a problem. It's usually orderly.

FLASH CRASH = CRASH in a FLASH = CRASH in one second/30 seconds/60 seconds = unstable = pandemonium = panic

Basically, the algos are flooding and attacking the market.

carolnetzer27 · Sep 1, 2011

Quote from SteveNYC:

Depends on the type of volatility.

When 10 price levels vanish suddenly in one second and there is a huge hole between the bid and ask, that's unstable volatility. i.e. a problem.

The 500 or even 1000 point intraday volatility in the DJIA is not a problem. It's usually orderly.

FLASH CRASH = CRASH in a FLASH = CRASH in one second/30 seconds/60 seconds = unstable = pandemonium = panic

Basically, the algos are flooding and attacking the market.

So if I am already in a Short position and the market crashes, as in a Flash Crash, then that is OK. But if I was trying to go into a Short position during the Flash Crash I could get an awful fill. I think I got it. Thank you.

SteveNYC · Sep 1, 2011

Quote from carolnetzer27:

So if I am already in a Short position and the market crashes, as in a Flash Crash, then that is OK. But if I was trying to go into a Short position during the Flash Crash I could get an awful fill. I think I got it. Thank you.

You are thinking theoretically.

The problem is you don't know which bids and asks are genuine/real.

If you are in a short position and you have a flash crash, you could have a paper profit in one second and then have the paper profit wiped out in the next second.

If you are trying to get short during the flash crash, you have no idea where you will get filled since you are dealing with a lot of fake bids and scared bids.

Bottom line is pandemonium/chaos. It's extreme instability. Nobody is safe.

You are welcome in advance.

carolnetzer27 · Sep 1, 2011

Quote from SteveNYC:

You are thinking theoretically.

The problem is you don't know which bids and asks are genuine/real.

If you are in a short position and you have a flash crash, you could have a paper profit in one second and then have the paper profit wiped out in the next second.

If you are trying to get short during the flash crash, you have no idea where you will get filled since you are dealing with a lot of fake bids and scared bids.

Bottom line is pandemonium/chaos. It's extreme instability. Nobody is safe.

You are welcome in advance.

Your more detailed explanation does solidify it more for me. I imagine that would/could cause short term ,or traders who open and close the same positions on the same day, a real problem.

Thank you for taking the time to explain it more clearly for me.

redgreen · Sep 1, 2011

IMO..It's all political because the direction was DOWN...if the "flash crash" was up, end of story...just another excuse to give the average American something to get upset about to distract them or whatever and for the media and politicians to reap the rewards...nothing new

Mr_You · Sep 1, 2011

I'm all for them cleaning up illegal trading activity because its ILLEGAL. I think too many firms have been taking advantage of the lack of enforcement against illegal activities.

traderpro · Sep 2, 2011

Quote from PocketChange:

WASHINGTON/NEW YORK (Reuters) - U.S. securities regulators have taken the unprecedented step of asking high-frequency trading firms to hand over the details of their trading strategies, and in some cases, their secret computer codes.

The requests for proprietary code and algorithm parameters by the Financial Industry Regulatory Authority (FINRA), a Wall Street brokerage regulator, are part of investigations into suspicious market activity, said Tom Gira, executive vice president of FINRA's market regulation unit.

``It's not a fishing expedition or educational exercise. It's because there's something that's troubling us in the marketplace,'' he said in an interview.

The Securities and Exchange Commission, meanwhile, has also begun making requests for proprietary algorithmic trading data as part of its authority to examine financial firms for compliance with U.S. regulations, according to agency officials and outside lawyers.

The requests by SEC examiners are not necessarily related to any suspicions of specific wrong-doing, although the decision to ask for it can be triggered by a tip, complaint or referral. (Reporting by Sarah N. Lynch and Jonathan Spicer; Editing by Tim Dobbyn)

im sure they have a big list of firms and traders. Too many traders of this new era loved to exploit rather than learn how the markets work.

PocketChange · Sep 2, 2011

Problem as I see it is the revolving door at the regulatory agency. Make the investigation go away and shred all evidence, retire collect your pension and become a advisor to GS for 7 figures.

Now how valuable will these auditors be to GS and others with the knowledge and source code they will have obtained?

Quote from traderpro:

im sure they have a big list of firms and traders. Too many traders of this new era loved to exploit rather than learn how the markets work.