Stock Trading Robots: are they legal?

T

tdev

Hi there,

I can see a lot of offerings of Forex robots but cannot really find anything for stocks. Well, may be except for MARL :)

I wonder if selling stock trading robots is a legal business. My guess is that Forex is not regulated and hence it is possible to provide financial advice (i.e. robot), while for stocks it is not really possible due to regulations.

Could anyone shed a light on the topic?

Thanks.
 
Quote from tdev:


I can see a lot of offerings of Forex robots but cannot really find anything for stocks. Well, may be except for MARL :)

I wonder if selling stock trading robots is a legal business. My guess is that Forex is not regulated and hence it is possible to provide financial advice (i.e. robot), while for stocks it is not really possible due to regulations.

Could anyone shed a light on the topic?

Thanks.
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Sorry for not answering your question directly, but are you not aware that nearly all (if not 100%) of "forex robots" that are sold to the public are flat-out frauds? There is absolutely no incentive to sell a profitable automated system publicly -- it just doesn't make sense for the creator of such a system to do anything other than trade it themselves.

http://www.wired.com/threatlevel/2012/04/stock-picking-robot/
 
Quote from Occam:

Sorry for not answering your question directly, but are you not aware that nearly all (if not 100%) of "forex robots" that are sold to
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Still, this does not answer the question why there is an asymmetry between stock market and forex in terms of supply of automatic trading strategies.

As far as I understand the creators of MARL were shut down not because of the fraud but because they provided [illegal] financial advice.
 
no, it was fraud:

Investors were led to believe that stock recommendations were based on a complex, “statistically driven analysis,” the SEC said.

But instead, the robot’s picks were part of a so-called “pump-and-dump” scheme, the SEC said.

The defendants received an estimated $1.8 million from stock promoters the SEC did not name, the SEC said. The robot would tout the promoter’s stocks. The promoters would then “dump” or sell their shares after “Marl” the robot instructed the twins’ customers to buy shares, the SEC said.

http://www.wired.com/threatlevel/2012/04/stock-picking-robot/
 
Quote from JamesL:

no, it was fraud:

Investors were led to believe that stock recommendations were based on a complex, “statistically driven analysis,” the SEC said.

But instead, the robot’s picks were part of a so-called “pump-and-dump” scheme, the SEC said.

The defendants received an estimated $1.8 million from stock promoters the SEC did not name, the SEC said. The robot would tout the promoter’s stocks. The promoters would then “dump” or sell their shares after “Marl” the robot instructed the twins’ customers to buy shares, the SEC said.

http://www.wired.com/threatlevel/2012/04/stock-picking-robot/
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more:

http://online.wsj.com/article/BT-CO-20120420-713691.html
 
And I use a cyborg that shows up to the CME Pits everyday and whenever he does a trade he opens his mouth and anyone trading against sees the fire. He closes his mouth, and leaves the pits to have lunch.

Wait a minute...cyborgs don't need lunch.
 
Quote from tdev:

Still, this does not answer the question why there is an asymmetry between stock market and forex in terms of supply of automatic trading strategies.

As far as I understand the creators of MARL were shut down not because of the fraud but because they provided [illegal] financial advice.
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I think it does when you consider how Forex is typically marketed:
1) Leverage is huge.
2) Account minimums are ridiculously low.
3) Availability of a platform which caters to auto-trading (Metatrader).

Think of your typically stock brokerages (Fidelity, etc). Those aren't really set up for someone to auto-trade and one well-known brokerage which has provisions for automated trading (Interactive Brokers) has pretty hefty minimums ($10k). Factor in the pattern day-trading rule on stocks ($25k) and you've really thrown some monkey wrenches in the game.

Also, while I'm sure there are exceptions, people who are looking to pay $99 for a stock robot probably aren't the ones with $500k to throw towards a system.
 
Quote from TheGoonior:
Also, while I'm sure there are exceptions, people who are looking to pay $99 for a stock robot probably aren't the ones with $500k to throw towards a system. [/B]
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Does this imply [in a way] that those who have $500K or the like always win? Most of them lose and lose a lot. Are the ones who lost thousands smarter than the ones who lost dozens?

I would 100% have accepted your point if there had been any stock trading robot market visible. It must be there, yet there is none. May be it has something with my inability to find robots for sell... but at the moment it all looks like a phenomena to me.
 
Quote from JamesL:
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JamesL,

In November, Newcastle Crown Court ordered Alexander Hunter to pay back nearly $1m after he admitted providing unregulated financial advice. He was given a suspended 12-month prison sentence.

Does it mean that an advice regarding buy/sell (also in a form of robot) is illegal in US/Europe unless you are a certified financial adviser or so?

http://www.bbc.co.uk/news/world-us-canada-17794272
 
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