martedì 27 settembre 2011

Traders più veloci dei neutrini!

Mentre i governi europei, trainati dalla Francia e dalla Germania, insistono per l'introduzione di una qualche forma di Tobin Tax continua il dibattito sul trading ad alta frequenza. Negli ultimi due mesi l'alta volatilità ha certamente favorito l'HFT. Secondo il WSJ in agosto

High-frequency traders have roughly tripled their stock trades this month, estimates Tabb Group, a markets-research firm in New York. That has boosted their share of overall U.S. stock trading volume to about 65%, up from about 53% during the months before the August turmoil, according to the research firm.

That increase has come amid unusually heavy trading; on Aug. 8, as the Dow Jones Industrial Average sank 635 points, New York Stock Exchange composite volume saw its fourth-biggest trading day on record.

On that same day, high-frequency traders made record profits of about $60 million in U.S. stock markets alone, Tabb estimates. That doesn't sound like a huge amount in the context of global markets, but that daily profit-while likely not sustainable, analysts and traders say-would translate into an annual gain of about $15 billion.

Tabb estimates profits for other days that week ranged from about $40 million to $56 million. By comparison, it estimates that high-frequency traders made $7.2 billion in U.S. stock markets in 2009, the highest on record; the firm previously projected total profit of the high-frequency trading industry of less than $5 billion this year.

La polemica sul trading ad alta frequenza e sugli aspetti manipolativi di alcune strategie impiegate è molto accesa.

Nella sua ultima lettera settimanale John Mauldin cita un post recente di Nanex relativo ad alcune trades che sembrano essere state effettuate viaggiando nel tempo (nel futuro, ovviamente...):

Heads up, you Junior Rocket Man Kids (remember those days?). Physicists are doingamazing things. My son Trey and I got a private tour this summer of CERN, the great physics lab in Geneva. Very cool. But Wall Street is also legendary for the number of physicists it hires to work on high-frequency trading programs. Evidently, they have figured out how to get trades done 190 milliseconds in the future. Is the race on to see who can cross the one-day mark? What is the speed of light when compared to the speed of money?

"Nanex: On September 15, 2011, beginning at 12:48:54.600, there was a time warp in the trading of Yahoo! (YHOO) stock. HFT has reached speeds faster than the speed-of-light,allowing time travel into the future. Up to 190 milliseconds into the future, or 0.19 fantaseconds is the record so far. It all happened in just over one second of trading, the evidence buried under an avalanche of about 19,000 quotes and 3,000 individual trade executions. The facts of the matter are indisputable. Based on official UQDF/UTDF exchange timestamps, there is unmistakable proof that YHOO trades were executed on quotes that didn't exist until 190 milliseconds later!" (

Going forward in time is cool, and the same day I got the above notice I read that the physicists at CERN and in Italy have found subatomic particles that move slightly faster than the speed of light, making it possible to travel back in time (only a few nanoseconds, but it's a start):

"But now it seems that researchers working in one of the world's largest physics laboratories, under a mountain in central Italy, have recorded particles travelling at a speed that is supposedly forbidden by Einstein's theory of special relativity.

"Scientists at the Gran Sasso facility will unveil evidence on Friday that raises the troubling possibility of a way to send information back in time, blurring the line between past and present and wreaking havoc with the fundamental principle of cause and effect.

"Researchers on the Opera (Oscillation Project with Emulsion-tRacking Apparatus) experiment recorded the arrival times of ghostly subatomic particles called neutrinos sent from Cern on a 730km journey through the Earth to the Gran Sasso lab."

( )

Now, just in case you buy this (and if you did, contact me about a bridge I have), let meattempt to disappoint. First, as my curmudgeon PhD from MIT and VC friend Bart Stuck writes, "I think they both had time-stamp errors." I can't vouch for the Swiss and Italians, but I would bet the keys to the kingdom that there is a computer glitch at the NYSE. High-frequency trading (HFT) is distorting the markets. It is enriching a few pockets (and that of the exchange), and I simply do not see how it is in the interest of the public to allow it.

I also know that fighting HFT is spitting into the wind, as faster tech comes along every few months. If you force the HFT funds to put their servers across the street (losing the time advantage of not being co-located with the exchange servers - milliseconds count!), it will only be a few years until technology has given the edge back to them. In ten years, when artificial intelligence and connection speeds are far more advanced, how will human traders compete?

Hire yet another AI to fight back? Wire yourself into the system (already being done, by the way, in rudimentary ways)?

The only way to effectively end HFT is for the exchanges to stop giving incentives for such trading. I can see the profits for the traders and the exchanges. I just don't see the benefit to the rest of us. The SEC should step in and settle some hash over missed time stamps. If a small broker-dealer has a wrong time stamp, they are all over us, and you can bet there are fines.

Something is wrong here. If one trade can go "back to the future" then how many more? Really?

E' necessario fare qualcosa per garantire che i mercati siano un ecosistema sano nel quale agenti con prospettive e scale temporali di investimento diverse possono coesistere senza distorsioni ed eccessive "asimmetrie tecnologiche". La Tobin Tax proposta da Merkel e Sarkozy non è però il modo corretto di affrontare i problemi: questa almeno è l'opinione di Jason Zweig nel video qui sotto (e anche in questo articolo sul WSJ di qualche settimana fa)

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