If you've been reading Mark Cuban's blog, Blog Maverick, recently, you will hear him railing against the rigged Wall Street markets which were exposed in a shocking new book; Michael Lewis' Flash Boys a great read.
According to Cuban, "First, let me say what you read here is going to be wrong in several ways. HFT covers such a wide path of trading that different parties participate or are impacted in different ways. I wanted to put this out there as a starting point. Hopefully the comments will help further educate us all."
It is absolutely insane to think that the broker you are paying commissions to, will sell your order info to a third party so they can scalp your trade for half a penny. Mark, if you read this comment.....how about funding an online brokerage that is loyal to it's clients and does not sell it's clients order info to anyone!!
Jon Stewart is also stunned by the world of HFT (where "stock exchanges sell the right to advance information to high frequency traders [by locating their computers closest to the exchange]") and the mainstream media's immediate jump to defend it "as good for us", but as Michael Lewis explains "anyone whose livelihood is dependent on Wall Street [from CNBC, FOX and even the SEC] is invested in this... it sounds like a conspiracy."
In this excellent interview, The Daily Show doubter asks "we have set a standard for share buying (you can't but 1/100th of a share) so why not set a standard for frequency of trading?" Lewis stoic response sums up our world perfectly, "in a sane world, we would... but the money is too big," and adds that indeed that is what IEX is doing. The HFTs "function on volume and volatility" alone and "they know the prices before you do... which is illegal if it's a person, but as a computer, meh?"
For those interested in this topic, Michael Lewis' new book Flash Boys is a great read. The IEX exchange (www.iextrading.com) was mentioned in the Jon Stewart story above and was created to combat high frequency trading, Flash Boys tells the story. But when you go to The Daily Show's site at http://thedailyshow.cc.com, you'll find a five-part extended interview series with Lewis.
Here is part of the Stewart interview, and the CBS expose that aired before the Stewart and Cuban rants. Listen carefully as where he revels (at 5.49) IamAnInvestor.ORG, set up to warn investors about what is going on.