60 Replies to “Poll: Do you trust High Frequency Trading to improve stock market pricing??”
it only profits hedge funds and the exchanges. as can be seen with the Knight Capital dilemma and the NASDAQ meltdown when Facebook listed, it increases the level of risk of investing in the stock market
High frequency electronic trading is now a centrepiece feature of the way the big end of town trades markets. Do I like it? No, I don’t and as a private investor I can’t compete with these systems so I am effectively excluded from those markets. More importantly, the way these programs works means volatility is now greater and manilulation of markets is easier to achieve. The risk of legitimate investors being wiped out is increased and worse if a major player is wiped out the long suffering taxpayer will in all probability be asked to cough again.
It should be treated as a form of skimming fraud. It will force large numbers of retail investors out of the share market. Even large investors such as superannuation fund are likely have their investments “skimmed”. As usual the “small guy” will pay the greatest price.
It’s a joke, why it is even allowed astounds me. The market should be a level playing field where all investors
compete on level terms. The current system is akin to playing with loaded dice. Get your act together ASIC and ban this
discriminating practice.
Manipulation & Fraud in Australia is now legal.
Reason Cause everyone does it…………….. newspapers love cause it sells newspapers. The big boys love it because they can fleece the small players. Isn’t life wonderful in Australia ?
HFT appears to be just another thread in the tapestry of unbridled and largely unregulated corruption and greed in global banking and markets. The fact that HFT transactions make up more than 75% of trades suggests that the majority of traditional traders/investers have abandoned the stock market, probably for good.
It could ultimately mean the end of the stock market system as we have known it.’
Without the stock market how are companies going to raise money to survive and develop
The ability of the electronic trading to manipulate the complete market system makes it vulnerable to criminal takeover and control.
Certainly the stock market boards including the ASX have allowed this situation to develop and it is their responsibility to return the stock market system to a fair and equitable system for all
It is possible that the electronic traders have deliberately lowered the value of the Australian Board for their own benefit if they have then it will mean the end of our financial system as well.
This just ensures that the 1987 disaster is repeated … but at hyper-speed!
I am already out of the sharemarket for this reason. The ASX got the system wrong. They should charge high fees for more trades. Those who invest should pay no fees because they are helping the economy prosper.
High frequency trading is making a mockery of minute-by-minute pricing during trading hours. The only price which seems to be reasonably reliable is the closing price when all the “hokey-pokey” has died down. Even then, I still am wary of what bids/offers are genuine. I have just read a report about the US where a lot of the “genuine” trades are between related entities. Whatever happened to a genuine market place. If a cattle auctioneer resorted to these practices, he would either end up in gaol or lynched! No wonder volumes are low, nobody wants to play in a rigged game.
Each transaction should have the same cost from the ASX – no dirty deals for your mates
The stench of HFT makes me want to cease any share market activity. If I want to be ripped off, I can just get mugged to my face rather than electronically.
It has made the stock market a bastion of manipulative corruption which undermines investor trust and hence sentiment.
Australia will pay dearly for this stark absence of regulation in many ways. A national disgrace that our government regulators watch on so impotently. Greedy kids in the kitchen yet again. Hope the the ‘whizz’ kids get their fingers get caught in the blender.
Apart from providing HFT operators an unfair advantage of smaller price increments which are not available to retail traders/investors, they also have priority access to the order stream. For example they get a tremendous advantage when shorting a stock by simply trapping incoming buy orders at an incrementally lower price than the visible sell orders which effectively quarantines the sell queue from the buyers. The usual sellers have only one option to sell their stocks and that is by lowering their asking price to compete and this very effectively drives down the price to the benefit of the short sellers.
Secondly there is now an ‘invisible’ market operated by HFT. The planned buy/sell orders are not visible on market depth but are sitting in their systems and invisible to everyone else. So when one is trying to make an assessment of market depth as part of the buy/sell and risk assessment process, we clearly have no idea of what the real situation is any longer, we only see part of the picture.
The stock market was supposed to provide a well regulated interface to bring together companies and investors for their mutual benefit and this sadly is no longer the case, the ASX is more akin to a casino these days….
The ASX argues that with the introduction of HFT on the London & NY stock exchanges they have had no option but to follow suit !
The acronym HFT stands for “High Frequency Trickery,” a game that is the preserve of a few, at the expense of many.(the majority) HFT distorts markets, destroys market integrity, (illiquid stocks are particularly at risk from this activity) and is the antithesis of a sound market place that trades on basic financial fundamentals and transparency.
The ASX/Chi-X enjoy significant royalty payments from this activity and will not desist until legislation outlaws this type of market manipulation. Whats more, the ASX can no longer argue that HFT (like short Selling) provides market liquidity, aids price discovery and costs very little to investors generally. This is simply a “smoke screen” argument in an attempt to protect a sales/profit generating initiative and to further protect their declining “sales/profits.” If, as the ASX argues, they should remain internationally competitive when it comes to HFT, ASIC could trial limiting HFT to the ASX30 stocks for a period of time, (12 months) and ban HFT in all other stocks listed on the ASX. Maybe, just maybe, the ASX/Chi-X might see a resurgence in trading volumes from the wider investing community with the consequent improvement in their sales and profits, and ultimately see the error of their ways and dispense with HFT by their own volition.!
The ASX has a lot to answer for in recent times when it comes to loss of investor confidence in the Australian share market. The introduction of “Direct Market Access,” the “Slice & Dice” of orders (down to one share trades) “Non-Disclosure” of trades, allowing “Short Selling” in highly illiquid stocks, their reluctance to remove highly illiquid stocks from their Approved Short Sale Products List all bear clear testimony to the fact that ASIC needs to get ahead of the curve and start outlawing certain of these confidence destroying ASX initiatives.
I
…and yet it would be so easy to stop.
Most legitimate trades would be over about $10,000, so a tax impost of around, say, $1 (0.01%) per trade wouldn’t damage my bottom line too much, but it would render HFT virtually unworkable. A small price to pay imho…
I have lost all faith in the ASX since the introduction of HFT and suspect that HFT is the reason for the ASX underperformance over the last few years.
My trading volumes have reduced significantly over the last few years and I now prefer to trade on exchanges that do not allow HFT. ASX be Warned !!!
which exchanges are those that dont have HFT?
would be suprised there are any around..
and yet it would be so easy to stop.
Most legitimate trades would be over about $10,000, so a tax impost of around, say, $1 (0.01%) per trade wouldn’t damage my bottom line too much, but it would render HFT virtually unworkable. A small price to pay imho…
true,but who will fix this?
A small Transaction Tax is an easy way to help put this to an end. Real liquidity will remain. HFT will be unprofitable. But the problem of Front-Running (mentioned here as well) needs a legal challange.
If what’s printed of late about how HFT works is correct, it looks like we’re being robbed by an Establishment Sanctioned, Private Tax (theft). Looking after crony mates?
With the near weekly expose’s of different financial shennenigans around the planet, & this as well, What’s left to trust?
Obviously their compass is set to ‘fleece at all costs’. And surely that’s shortsighted for them. Participants who are left will vote with their feet – evidenced by lower volumes? Maybe they get enough from skimming our Super Fund? Maybe the small end of town isn’t worth caring about? Then again the ASX is said to have put in a submission to ASIC so that parcels larger than $25k can (will they) go through the ‘dark pool’ (cross trades) & avoid HFT skimming – which is a start, but may still be a tilted table. What about if you’re playing with a smaller amount? Off to the shearing shed for you? Connundrums for me……..
First rule of business is – Without Trust There Can Be No Transaction! & transactions are thinning…………..
“fleece at all costs” I can’t believe you have added this. “Business” as we know it has grown with all it’s short comings over many years. This is just another problem to be addressed by our societies fathers. If you do not like what is going on become one of these fathers and teach them (and us) how to act quickly to correct these faults.
Some businesses actually think of repeat business, competition keeps their prices keen, & they even give back to community. They don’t parasitically gorge themselves till they kill their host or drive them away. They Regard Trust & Reliability as Vital Imperatives. Do Bankers? Or is that just manufactured trust to inoculate us ‘Muppets’ from seeing just what’s really going on?
‘Societies fathers’ whoever they’re meant to be? are just another cog in an evergrowing unwieldly machine – no responsibility claimed there. There’s supposed to be a democracy here? These elected officials do need to observe before acting, but I think there is enough evidence that something is wrong & some form of action is required. Not using straw men, Not acting – Tangible Action! Whether it be moderate, regulate, eradicate or educate? I don’t pretend to know, I’m starting to wonder if Societies Fathers do either. I do know that trust is being eroded by the day & it needs to be restored – that much is real!
I see hft as a disguise for imposed invisible high spreads bid/ask.
I’m not full bottle on law in these areas, but surely this practice could be challanged with an action (maybe a possible class action) under the “Trade Practices Act” as being discriminative and restrictive of fair trade.
Hopefully a law firm experienced in this area could run a potentially lucrative action against the ASX and the the individual Co’s they have given selective access to their system while deliberately restricting any possible access to general traders, who are selectively disadvantaged financially by such arrangements.
The whole situation IS A GENERAL DISGRACE!
Get some spine PLEASE Aussie regulators!
Futures were set up to provides farmers certainty about the value of their future crops. Speculators provided the liquidity for those markets. The concept has not changed: The more speculators, the more liquidity. Additionally, more speculators make it less likely that any one of them can manipulate the market. Fear of more speculators is just what lets the average person uses in their thinking to let common fear rule over common sense.
they are swindlers. sheisters. con artists. frauds,
the little honest family man on the street, trying to put bread on the table for a hungry family will end up living in a tent eating only bread. if he is lucky!
ban the practice!!!!!
It’s insider trading in its purest form–intercept and analyze the bids of the retail traders and react to them in ways that nobody else can (unless they have $100 million of network hardware). Take it to its conclusion: say you were required to report your bids to JP Morgan, and they wouldn’t be placed on the exchange for 24 hours. JPM would have the opportunity to know everyone’s position, then trade accordingly, before your bids hit the market.
OK, now speed it up by a factor of 10 million, and you have HFT. It’s theft, period.
Hi Colin,
Looks like you’ve hit a nerve here. 🙂
I voted no. I was very surprised to see many others did too. I actually would’ve guessed there would be more yes votes.
Thanks for sparking up some discussion.
Chucky!
PS. What comments do you have (or readers) on the VectorVest system? Interested to hear about it. Thanks again.
HFT can create chaos. Look back about 2 weeks ago commented in the US market. Is there and good news last week!!!!! News in the market arena said that there is no reason to shoot up for the three days consecutively just because the news of some merely general news on the positive view. But the fact is that the market is going through a drastic correction and hopefully not a depression. A lot of us is not looking at the real picture, Europe market and United States is heavily in dept. China production is highly gear and graduate stock pile in over production. Look at it carefully, China is slowing down. No question China is in surplus but holding US & Euro babies(debt). With the current Hedge Funds is really creating a so called “Liquidity” in the market. Do you really think the market is really that liquid? Eventually the final outcome reality of the factual news and chaos in those countries hits the Front Page. Such news is eventually fed into various statistical parameters in HFT. Good example, Knight Capital dilemma!!! What they said was technical error. This will create such a drop in the market that you will see a lot more superman from the tallest building!!!! I really couldn’t imagine. I do feel the chill down my spine. Do be cautious!!!!!
There is a saying, “Try to understand your enemy views in order to win the war”.
The closer you get to the market the more chaotic it becomes
Why expect the regulators to protect the general public or the mug traders?.The regulators are bought sold and owned by the big corporations that manipulate the markets.Einstein said that insanity was doing the same things and expecting a different result.I voted with my feet and no longer trade. I have not lost one cent to the market for the past year but I have made money on investments.( a very small amount that is much more now that I am not taking losses to the HFT) Our politicians take orders from the corporations don’t expect any favours.
Australia was one of the first countries to adopt computer based order matching doing away with open outcry in the late 80s.
I thought that was wonderful as all orders were strictly queued even the smallest bidder got a fair go and could not simply be ignored by the big players who liked to deal with only other big players on the floor of the ASX.
This system obviously was too fair so the biggies have dreamt up ways to circumvent this with orders that last nono seconds creating a false view in the market as these orders are placed for tiny amounts of shares and immediately withdrawn – essentially pinging other vampire squid computers which then have a game with each other and in which smaller investors and traders get tangled in their tentacles. If small players did that on a small stock they’d be accused of misleading the market!
If a small investor presses the wrong button and makes a loss he bears it – if the really big guys do it they just cancel the trades!
The final step in this degradation of confidence in markets will be when small guys question why the big Super Funds that run their money even invest in shares at all, but that is a few years off but probably inevitable – only then will real businesses scream as capital dries up. (Mind you it will only affect small companies so willthe big guys care – doubt it!)
Do I keep investing?! I CERTAINLY DO NOT BOTHER TRADING.
The ASX is closing its eyes as the biggies pay the ASX to loacte their computers closer and closer to the ASX mainframe – is that a fair system Mr ASX? What do you have to say about it Mr Bowen and the ACCC and ASIC?!
I remember a few years back when I was trading the SPI on the sycom session and placing 50 lot orders on the bid/ask depth and then moving it and sweeping the the full depth of the bid/ask (the volume traded at night was usually thin back then) my broker called me the next day to warn me because his boss said I was placing PHANTOM bid/offers. I laughed back at him with anger and said how did he come to that conclusion when I had traded a couple hundred contracts that night, I told him to tell his boss to go and take a long running jump. What makes me laugh now is with HFT the majority of the bid/ask is just PHANTOM orders, the price moves a great distance without even one contract traded (they are just sniffing out real orders) yet this is allowed as they are treated as liquidity providers. The markets are just one big circus these days, they have wiped out many small traders with their coordinated flash crashes and ridiculous QE interventions, they are raping our super funds and when that will be no longer the elephants will turn onto one another. The alarm bells should of rung when the SFE removed the broker/institution codes linked to the orders volume, which was done upon the request from the big institutions/(banks), they had more discretion back then, now, they don’t even try and cover their footsteps any more, they have no shame…
EG. look at ax_wbc on may 29th 2012 – spiked $2.00 in short time without any explanatory comments from the ASX that i’m aware of. Also CFD buy/sell large orders appear and disappear just as quickly resulting in corrupt distortions.
DJM -Look at all markets and what is apparent – manipulation, Reduced returns, more risk, kill the little investor and destroy any real returns for super funds. Net result is a poor economy with no future for any business except big government interfering with the economy and not letting the economy fix itself.
HFT leads to a “poor economy with no future” ? Please…
Fun question – I didn’t answer because I honestly haven’t figured it out. In this low volume market it makes following the trading day much easier: review the press and watch the open, forget about it, then look in after 3:00 p.m. to see what the algos are up to and whether to trade. My working rebuttable presumption is that HFT effects are smoothed out over time, and the markets ultimately reflect fundamentals – if markets prove out to be completely dominated by mindless inter-machine ping pong I may change my mind.
all this does is confirm what i thought, to what i know. i’ve basically liquidated 4 yrs ago.(some RRSP’s i cant touch)
Y2K, then911,then the crash of 2008.i saw it coming down, and i knew someone had to get creative to keep it afloat.
Now i owe nothing to no person or entity,i only keep enough cash for basic transactions at the bank.all my spare money goes to physical PM’s.Because i started early i’m not hurt’n,not smiling either…but content.
I get to sit back in my ezy-chair and watch it all unfold.
Could someone explain hft so I could make a more educated comment. Also in respect to shorting I believe it should be banned, my understanding is you are gambling on a stock to fall that you may not own????
You shouldn’t comment on things you don’t know anything about.
Shorting stocks provides liquidity to markets.
If you know a company is on the verge of collapse why shouldn’t you short it and ride it down?
How is this anymore gambling than hoping or wishing a stock to go up – after all accountants cook books too!
Exactly right Peter…shorting stocks provides liquidity???…tell me how AF…..all accountants cook books.. amazing generalization…most do what the law allows so maybe your really saying law makers allow companies to report in a manner which reflects what they want???
This is a poll not a comment. And I think you are confusing shorting stocks with HFT.
Here is the Wiki on HFT and earlier coverage on this blog:
Shorting is not as simple. If you buy a computer from a retailer when he is out of stock and has to order it from a supplier, that is effectively a short. If a broker sells you stock when the market is illiquid or because you have a big order and then goes and buys the stock from someone he knows is a seller, that is also a short. You need to distinguish between speculative shorts and shorter-term activities by brokers which improve liquidity.
Paul Wright suggests that the ASX should get ahead of the game. Surely this a joke. The ASX isn’t even aware or doesn’t act as if they acknowledge that they have any responsibility for the market, let alone to actually do their job and regulate it! Heaven forbid. Expecting public servants to accept responsibility and take any course of action that will actually benefit small traders … In ya dreams!! They are beholden to the parties they are supposed to regulate. They don’t even know which way is up. I am very glad I retired from trading three years ago.
There are so many different types of HFT trading, and polls like this don’t help to do much except spread the fear.
Colin, your posts in the past have often been very educational, so I’m not too sure why you’d put up such a sensationalist poll
Sure there are malicious algos, but there’s also plenty doing legimitate trading. Lumping them all in one category isnt the best way to approach it.
The aim of the poll is to gauge readers perceptions of HFT. I draw a distinction between HFT and algorithmic trading which is used by brokers to disseminate large orders. There is no accompanying opinion as to whether HFT is good or bad so I do not believe it is sensationalist. My concern is that HFT has been responsible for several trading anomalies and is destroying investors trust in the market. I would like to see government and the opposition support an inquiry into HFT.
algos that disseminate large orders are still done with high frequency, and are often manipulative eg as they accumulate shares they also sell some to hold the price down
or ETF arb – buying the unerlyings and selling the etf (or vice versa) actually helps to keep the price of the etf in line.
you may personally draw a distinction here between some of the horrible hft algos out there and some that are useful, but the poll hasn’t..
as for your last point. sure they can be a government inquiry, but I would suggest they’d have absolutely no clue what they’re trying to investigate
I’m not at all trying to excuse the manipulative algos that are out there, but I think, as said above, that lumping them all into the same category isn’t particularly helpful
I am trying to gauge sentiment towards HFT. It appears largely negative. Distinguishing between good and bad HFT practices should be the role of an inquiry — not a poll.
If there is an inquiry, I am assuming the person appointed to head the inquiry is suitably competent.
Its a wonderful system which the price for every thing is manipulated at the whim of the market…..any event that causes fear cause the market to change(up or down) making profits for the knowledgeable, losses for the ordinary folk Commodities which farmers provide are sold on a forward market ….controlled by money..not supply & demand…manipulation…controlled by software quicker than the blink of a eye..no wonder there is such volatility and no certainity
Dear Colin,
Your concerns in regard to HFT have been vindicated today by an article in this mornings AFR (14 Aug 2012 – back page). ASIC’s Deputy Chairman Belinda Gibson is “worried” by recent events concerning HFT and appears to be in the process of introducing certain regulatory measures to deal with some aspects of HFT of most concern. (not enough no doubt) One only hopes Ms Gibson stays ever watchful so far as the Australian market is concerned, and does not let HFT develop in the manner in which it has in the US, where it seems almost impossible to put the “genie back in the bottle.”
Market integrity is well and truly at stake here and time is of the essence.
R Shepherd
It should be legislated agaimst, and made illegal
I am leaving the market due to its effect, as many have already done
Isn’t it the same as has been around (at least since I was trading back say 12 years ago but ) presumably since the start of computer trading with broker trading in small stocks. The market could be moved a LOT by many orders placed with high frequency and you could watch the porders going on and off. In those days I could judge the range, place an order and when they removed their orders(as it appeared they did on and off) sometimes you would get filled a long way from the market. Then the brokers involved would phone and ask to reverse ther trade if not in their favour and the market not in the direction they expected..however if moved in their favour I would not receive a phone call. Sometimes they would get Comsec to reverse the trades(I think from watching the trades go thru) as Comsec customers didnt get the paperwork in those days til end of the day for their buys and sells. I just think HFT is the same but on larger stocks..is this the correct impression? BTW I did agree to trade reversals to start with but then it was never in my favour ..so I started wondering and getting supicious. In the end Comsec put limits on how far out of the market you could place a trade which stopped getting filled on the dips in the trades…is this what HFT trading is put for larger stocks…like they are trying to move to make a quick (day trading ) buck on larger stocks ..as well as (of course provide (in my view)unnecessary and distracting liquidity. It was also a way of moving large orders without spooking the stock price I susupect? Sorry never figured it wout completely. (trading stopped being transparent when you could no longer watch the buy and sell orders from the banks etc thru the windows of the stock exchange … you could see who was placing what order and for how much..they need to bring this transparency back to the market to make it “fair and trustrworthy”. Also the ASX before it floated was owned by the brokers I think?? so I gathered if an trade went horribly in a small traders favour ..they cancelled the trade (didnt happen the other way. This happened to me with a large firm on the AMP float (similar to Facebook flat I suspect in that the price tanked)..and the ASX just cancelled my trade after it moved too much in favour trade.so I didnt gain on the option I had bought. The bank did phone me and told me the ASx had agreed to cancel my trade as it was too much in my favour (after AMP tanked it was but I didnt think it was that much in my favour at the open of the trade ? especially as the market seemed to consider AMP would go up?) I didnt think it was that much in my favour if it had of moved the other direction, I had checked (roughly) the maths before purchase,and it wasn’t as some options are, a lot in the issuers favour either?..but as the bank said..I was only a comsec client , so unlikely to be able to do anything about it or know what to do(they were correct in that assumption) ..and besides I didnt have the paperwork as yet(as they pointed out) and they would get Comsec not to issue it..which they did? ..so what’s fair? , I had to stop trading (still invest in some shares)..but trading appears to me to be just to get money from small clients to give to the large trading firms from my experence.I thought the US seemed fairer to smaller traders in making the bigger firms honour their contracts..and I guess that’s where they get in trouble in the US?.. but I didn’t want to live at night and sleep in the day so I left the market..no trust left for the trading system or ASX. So I think HFT is just the ability of these larger firms to manipulate the price of larger stocks as they did smaller stocks before…and to dump large trades without it becoming obvious that some larger clients or firms were buying up or selling out? .. maybe I’m all wrong as I haven’t looked in the past few years. I know about making a market..but at least in smaller stocks and when large moves happen like in 1987..the market makers don’t actually provice liquidity ..they just withdraw (or at least that is what i thought happened)..and at other times there are enough buyers and sellers without market makers…but perhpas I am wrong as I am not an expert. So I am against HFT if that is what it is..like just to supposedly make a market, but in reality to jump in to make the tiny amounts from the buy-sell spread where there is a difference..provided the market does NOT move in an unexpected direction..and by placing the numerous order5s they actually can usually move the market in the direction they need. It is not ,in my opinion , needed at all to make a market function..and does move the market in directions up and down (volatility) or the swings. On larger stocks there are sufficient trades without them (expect perhaps at times of market crashes or stock crashes..when they aren;t their anyway?
For smaller stocks, I doubt they would provide a market and I hadn’t noticed them in there anyway in the more illiquid stocks? I guess the points I am making is 1. I don’t think HFT is needed or of benefit ot anyone but the firms doing it, 2. I don’t trust the market for anyone who is not big enough to take them on 3. Its not a level playing field or a fair one
4. I guess if they skimp non programers and dont allow sufficient testing that’s what happens..but if it was in Oz back over a decde ago, I suspect unfavourale trades(in the large trading firms view) would all have been reversed..in the US it is fairer for the smaller client and you seem to be able to get to keep your trades ,even if it was a mistake?
Thank you for your insights into the history of HFT. I would like to see a government-appointed inquiry thoroughly investigate HFT.
Wasn’t there an alternative exchange opened earlier this year? Can any one provide details?
And I’m sure Dark Pool trading really helps improve stock market pricing … more discrimination against retail investors !
HFT is a disaster for the markets, the biggest problem is that it removes liquidity from the markets, it should be banned.
True liquidity is what is required in the market for traders to have the confidence to move easily in and out of positions.
HFT allows markets to be easily manipulated and does not create liquidity
Many investor and traders have lost confidence and are seeing this manipulation far too often,
Thousands of traders placing thousands of trades creates a liquid market, one computer
placing the same number of trades creates il-liquidity
I have stopped trading, but the other day I wished to buy 4000 SLR and duly placed my on-line order with Suncorp Share trading to buy at best offer. My order was of course duly filled but it was interesting that referring to the “course of sales” many trades before mine were filled at a lower price whist many later than mine were also filled at a lower price. How does this come about that my trade was able to be isolated from other surrounding offers particularly as this was a liquid market with trades taking place within seconds or minutes. Is this an example of “front running”
Difficult to answer without seeing the Bids and Asks.
it only profits hedge funds and the exchanges. as can be seen with the Knight Capital dilemma and the NASDAQ meltdown when Facebook listed, it increases the level of risk of investing in the stock market
High frequency electronic trading is now a centrepiece feature of the way the big end of town trades markets. Do I like it? No, I don’t and as a private investor I can’t compete with these systems so I am effectively excluded from those markets. More importantly, the way these programs works means volatility is now greater and manilulation of markets is easier to achieve. The risk of legitimate investors being wiped out is increased and worse if a major player is wiped out the long suffering taxpayer will in all probability be asked to cough again.
It should be treated as a form of skimming fraud. It will force large numbers of retail investors out of the share market. Even large investors such as superannuation fund are likely have their investments “skimmed”. As usual the “small guy” will pay the greatest price.
It’s a joke, why it is even allowed astounds me. The market should be a level playing field where all investors
compete on level terms. The current system is akin to playing with loaded dice. Get your act together ASIC and ban this
discriminating practice.
Manipulation & Fraud in Australia is now legal.
Reason Cause everyone does it…………….. newspapers love cause it sells newspapers. The big boys love it because they can fleece the small players. Isn’t life wonderful in Australia ?
HFT appears to be just another thread in the tapestry of unbridled and largely unregulated corruption and greed in global banking and markets. The fact that HFT transactions make up more than 75% of trades suggests that the majority of traditional traders/investers have abandoned the stock market, probably for good.
It could ultimately mean the end of the stock market system as we have known it.’
Without the stock market how are companies going to raise money to survive and develop
The ability of the electronic trading to manipulate the complete market system makes it vulnerable to criminal takeover and control.
Certainly the stock market boards including the ASX have allowed this situation to develop and it is their responsibility to return the stock market system to a fair and equitable system for all
It is possible that the electronic traders have deliberately lowered the value of the Australian Board for their own benefit if they have then it will mean the end of our financial system as well.
This just ensures that the 1987 disaster is repeated … but at hyper-speed!
I am already out of the sharemarket for this reason. The ASX got the system wrong. They should charge high fees for more trades. Those who invest should pay no fees because they are helping the economy prosper.
High frequency trading is making a mockery of minute-by-minute pricing during trading hours. The only price which seems to be reasonably reliable is the closing price when all the “hokey-pokey” has died down. Even then, I still am wary of what bids/offers are genuine. I have just read a report about the US where a lot of the “genuine” trades are between related entities. Whatever happened to a genuine market place. If a cattle auctioneer resorted to these practices, he would either end up in gaol or lynched! No wonder volumes are low, nobody wants to play in a rigged game.
Each transaction should have the same cost from the ASX – no dirty deals for your mates
The stench of HFT makes me want to cease any share market activity. If I want to be ripped off, I can just get mugged to my face rather than electronically.
It has made the stock market a bastion of manipulative corruption which undermines investor trust and hence sentiment.
Australia will pay dearly for this stark absence of regulation in many ways. A national disgrace that our government regulators watch on so impotently. Greedy kids in the kitchen yet again. Hope the the ‘whizz’ kids get their fingers get caught in the blender.
Apart from providing HFT operators an unfair advantage of smaller price increments which are not available to retail traders/investors, they also have priority access to the order stream. For example they get a tremendous advantage when shorting a stock by simply trapping incoming buy orders at an incrementally lower price than the visible sell orders which effectively quarantines the sell queue from the buyers. The usual sellers have only one option to sell their stocks and that is by lowering their asking price to compete and this very effectively drives down the price to the benefit of the short sellers.
Secondly there is now an ‘invisible’ market operated by HFT. The planned buy/sell orders are not visible on market depth but are sitting in their systems and invisible to everyone else. So when one is trying to make an assessment of market depth as part of the buy/sell and risk assessment process, we clearly have no idea of what the real situation is any longer, we only see part of the picture.
The stock market was supposed to provide a well regulated interface to bring together companies and investors for their mutual benefit and this sadly is no longer the case, the ASX is more akin to a casino these days….
The ASX argues that with the introduction of HFT on the London & NY stock exchanges they have had no option but to follow suit !
The acronym HFT stands for “High Frequency Trickery,” a game that is the preserve of a few, at the expense of many.(the majority) HFT distorts markets, destroys market integrity, (illiquid stocks are particularly at risk from this activity) and is the antithesis of a sound market place that trades on basic financial fundamentals and transparency.
The ASX/Chi-X enjoy significant royalty payments from this activity and will not desist until legislation outlaws this type of market manipulation. Whats more, the ASX can no longer argue that HFT (like short Selling) provides market liquidity, aids price discovery and costs very little to investors generally. This is simply a “smoke screen” argument in an attempt to protect a sales/profit generating initiative and to further protect their declining “sales/profits.” If, as the ASX argues, they should remain internationally competitive when it comes to HFT, ASIC could trial limiting HFT to the ASX30 stocks for a period of time, (12 months) and ban HFT in all other stocks listed on the ASX. Maybe, just maybe, the ASX/Chi-X might see a resurgence in trading volumes from the wider investing community with the consequent improvement in their sales and profits, and ultimately see the error of their ways and dispense with HFT by their own volition.!
The ASX has a lot to answer for in recent times when it comes to loss of investor confidence in the Australian share market. The introduction of “Direct Market Access,” the “Slice & Dice” of orders (down to one share trades) “Non-Disclosure” of trades, allowing “Short Selling” in highly illiquid stocks, their reluctance to remove highly illiquid stocks from their Approved Short Sale Products List all bear clear testimony to the fact that ASIC needs to get ahead of the curve and start outlawing certain of these confidence destroying ASX initiatives.
I
…and yet it would be so easy to stop.
Most legitimate trades would be over about $10,000, so a tax impost of around, say, $1 (0.01%) per trade wouldn’t damage my bottom line too much, but it would render HFT virtually unworkable. A small price to pay imho…
I have lost all faith in the ASX since the introduction of HFT and suspect that HFT is the reason for the ASX underperformance over the last few years.
My trading volumes have reduced significantly over the last few years and I now prefer to trade on exchanges that do not allow HFT. ASX be Warned !!!
which exchanges are those that dont have HFT?
would be suprised there are any around..
and yet it would be so easy to stop.
Most legitimate trades would be over about $10,000, so a tax impost of around, say, $1 (0.01%) per trade wouldn’t damage my bottom line too much, but it would render HFT virtually unworkable. A small price to pay imho…
true,but who will fix this?
A small Transaction Tax is an easy way to help put this to an end. Real liquidity will remain. HFT will be unprofitable. But the problem of Front-Running (mentioned here as well) needs a legal challange.
If what’s printed of late about how HFT works is correct, it looks like we’re being robbed by an Establishment Sanctioned, Private Tax (theft). Looking after crony mates?
With the near weekly expose’s of different financial shennenigans around the planet, & this as well, What’s left to trust?
Obviously their compass is set to ‘fleece at all costs’. And surely that’s shortsighted for them. Participants who are left will vote with their feet – evidenced by lower volumes? Maybe they get enough from skimming our Super Fund? Maybe the small end of town isn’t worth caring about? Then again the ASX is said to have put in a submission to ASIC so that parcels larger than $25k can (will they) go through the ‘dark pool’ (cross trades) & avoid HFT skimming – which is a start, but may still be a tilted table. What about if you’re playing with a smaller amount? Off to the shearing shed for you? Connundrums for me……..
First rule of business is – Without Trust There Can Be No Transaction! & transactions are thinning…………..
“fleece at all costs” I can’t believe you have added this. “Business” as we know it has grown with all it’s short comings over many years. This is just another problem to be addressed by our societies fathers. If you do not like what is going on become one of these fathers and teach them (and us) how to act quickly to correct these faults.
Some businesses actually think of repeat business, competition keeps their prices keen, & they even give back to community. They don’t parasitically gorge themselves till they kill their host or drive them away. They Regard Trust & Reliability as Vital Imperatives. Do Bankers? Or is that just manufactured trust to inoculate us ‘Muppets’ from seeing just what’s really going on?
‘Societies fathers’ whoever they’re meant to be? are just another cog in an evergrowing unwieldly machine – no responsibility claimed there. There’s supposed to be a democracy here? These elected officials do need to observe before acting, but I think there is enough evidence that something is wrong & some form of action is required. Not using straw men, Not acting – Tangible Action! Whether it be moderate, regulate, eradicate or educate? I don’t pretend to know, I’m starting to wonder if Societies Fathers do either. I do know that trust is being eroded by the day & it needs to be restored – that much is real!
I see hft as a disguise for imposed invisible high spreads bid/ask.
I’m not full bottle on law in these areas, but surely this practice could be challanged with an action (maybe a possible class action) under the “Trade Practices Act” as being discriminative and restrictive of fair trade.
Hopefully a law firm experienced in this area could run a potentially lucrative action against the ASX and the the individual Co’s they have given selective access to their system while deliberately restricting any possible access to general traders, who are selectively disadvantaged financially by such arrangements.
The whole situation IS A GENERAL DISGRACE!
Get some spine PLEASE Aussie regulators!
Futures were set up to provides farmers certainty about the value of their future crops. Speculators provided the liquidity for those markets. The concept has not changed: The more speculators, the more liquidity. Additionally, more speculators make it less likely that any one of them can manipulate the market. Fear of more speculators is just what lets the average person uses in their thinking to let common fear rule over common sense.
they are swindlers. sheisters. con artists. frauds,
the little honest family man on the street, trying to put bread on the table for a hungry family will end up living in a tent eating only bread. if he is lucky!
ban the practice!!!!!
It’s insider trading in its purest form–intercept and analyze the bids of the retail traders and react to them in ways that nobody else can (unless they have $100 million of network hardware). Take it to its conclusion: say you were required to report your bids to JP Morgan, and they wouldn’t be placed on the exchange for 24 hours. JPM would have the opportunity to know everyone’s position, then trade accordingly, before your bids hit the market.
OK, now speed it up by a factor of 10 million, and you have HFT. It’s theft, period.
Hi Colin,
Looks like you’ve hit a nerve here. 🙂
I voted no. I was very surprised to see many others did too. I actually would’ve guessed there would be more yes votes.
Thanks for sparking up some discussion.
Chucky!
PS. What comments do you have (or readers) on the VectorVest system? Interested to hear about it. Thanks again.
HFT can create chaos. Look back about 2 weeks ago commented in the US market. Is there and good news last week!!!!! News in the market arena said that there is no reason to shoot up for the three days consecutively just because the news of some merely general news on the positive view. But the fact is that the market is going through a drastic correction and hopefully not a depression. A lot of us is not looking at the real picture, Europe market and United States is heavily in dept. China production is highly gear and graduate stock pile in over production. Look at it carefully, China is slowing down. No question China is in surplus but holding US & Euro babies(debt). With the current Hedge Funds is really creating a so called “Liquidity” in the market. Do you really think the market is really that liquid? Eventually the final outcome reality of the factual news and chaos in those countries hits the Front Page. Such news is eventually fed into various statistical parameters in HFT. Good example, Knight Capital dilemma!!! What they said was technical error. This will create such a drop in the market that you will see a lot more superman from the tallest building!!!! I really couldn’t imagine. I do feel the chill down my spine. Do be cautious!!!!!
There is a saying, “Try to understand your enemy views in order to win the war”.
The closer you get to the market the more chaotic it becomes
Why expect the regulators to protect the general public or the mug traders?.The regulators are bought sold and owned by the big corporations that manipulate the markets.Einstein said that insanity was doing the same things and expecting a different result.I voted with my feet and no longer trade. I have not lost one cent to the market for the past year but I have made money on investments.( a very small amount that is much more now that I am not taking losses to the HFT) Our politicians take orders from the corporations don’t expect any favours.
Australia was one of the first countries to adopt computer based order matching doing away with open outcry in the late 80s.
I thought that was wonderful as all orders were strictly queued even the smallest bidder got a fair go and could not simply be ignored by the big players who liked to deal with only other big players on the floor of the ASX.
This system obviously was too fair so the biggies have dreamt up ways to circumvent this with orders that last nono seconds creating a false view in the market as these orders are placed for tiny amounts of shares and immediately withdrawn – essentially pinging other vampire squid computers which then have a game with each other and in which smaller investors and traders get tangled in their tentacles. If small players did that on a small stock they’d be accused of misleading the market!
If a small investor presses the wrong button and makes a loss he bears it – if the really big guys do it they just cancel the trades!
The final step in this degradation of confidence in markets will be when small guys question why the big Super Funds that run their money even invest in shares at all, but that is a few years off but probably inevitable – only then will real businesses scream as capital dries up. (Mind you it will only affect small companies so willthe big guys care – doubt it!)
Do I keep investing?! I CERTAINLY DO NOT BOTHER TRADING.
The ASX is closing its eyes as the biggies pay the ASX to loacte their computers closer and closer to the ASX mainframe – is that a fair system Mr ASX? What do you have to say about it Mr Bowen and the ACCC and ASIC?!
I remember a few years back when I was trading the SPI on the sycom session and placing 50 lot orders on the bid/ask depth and then moving it and sweeping the the full depth of the bid/ask (the volume traded at night was usually thin back then) my broker called me the next day to warn me because his boss said I was placing PHANTOM bid/offers. I laughed back at him with anger and said how did he come to that conclusion when I had traded a couple hundred contracts that night, I told him to tell his boss to go and take a long running jump. What makes me laugh now is with HFT the majority of the bid/ask is just PHANTOM orders, the price moves a great distance without even one contract traded (they are just sniffing out real orders) yet this is allowed as they are treated as liquidity providers. The markets are just one big circus these days, they have wiped out many small traders with their coordinated flash crashes and ridiculous QE interventions, they are raping our super funds and when that will be no longer the elephants will turn onto one another. The alarm bells should of rung when the SFE removed the broker/institution codes linked to the orders volume, which was done upon the request from the big institutions/(banks), they had more discretion back then, now, they don’t even try and cover their footsteps any more, they have no shame…
EG. look at ax_wbc on may 29th 2012 – spiked $2.00 in short time without any explanatory comments from the ASX that i’m aware of. Also CFD buy/sell large orders appear and disappear just as quickly resulting in corrupt distortions.
DJM -Look at all markets and what is apparent – manipulation, Reduced returns, more risk, kill the little investor and destroy any real returns for super funds. Net result is a poor economy with no future for any business except big government interfering with the economy and not letting the economy fix itself.
HFT leads to a “poor economy with no future” ? Please…
Fun question – I didn’t answer because I honestly haven’t figured it out. In this low volume market it makes following the trading day much easier: review the press and watch the open, forget about it, then look in after 3:00 p.m. to see what the algos are up to and whether to trade. My working rebuttable presumption is that HFT effects are smoothed out over time, and the markets ultimately reflect fundamentals – if markets prove out to be completely dominated by mindless inter-machine ping pong I may change my mind.
all this does is confirm what i thought, to what i know. i’ve basically liquidated 4 yrs ago.(some RRSP’s i cant touch)
Y2K, then911,then the crash of 2008.i saw it coming down, and i knew someone had to get creative to keep it afloat.
Now i owe nothing to no person or entity,i only keep enough cash for basic transactions at the bank.all my spare money goes to physical PM’s.Because i started early i’m not hurt’n,not smiling either…but content.
I get to sit back in my ezy-chair and watch it all unfold.
Could someone explain hft so I could make a more educated comment. Also in respect to shorting I believe it should be banned, my understanding is you are gambling on a stock to fall that you may not own????
You shouldn’t comment on things you don’t know anything about.
Shorting stocks provides liquidity to markets.
If you know a company is on the verge of collapse why shouldn’t you short it and ride it down?
How is this anymore gambling than hoping or wishing a stock to go up – after all accountants cook books too!
Exactly right Peter…shorting stocks provides liquidity???…tell me how AF…..all accountants cook books.. amazing generalization…most do what the law allows so maybe your really saying law makers allow companies to report in a manner which reflects what they want???
This is a poll not a comment. And I think you are confusing shorting stocks with HFT.
Here is the Wiki on HFT and earlier coverage on this blog:
Shorting is not as simple. If you buy a computer from a retailer when he is out of stock and has to order it from a supplier, that is effectively a short. If a broker sells you stock when the market is illiquid or because you have a big order and then goes and buys the stock from someone he knows is a seller, that is also a short. You need to distinguish between speculative shorts and shorter-term activities by brokers which improve liquidity.
Paul Wright suggests that the ASX should get ahead of the game. Surely this a joke. The ASX isn’t even aware or doesn’t act as if they acknowledge that they have any responsibility for the market, let alone to actually do their job and regulate it! Heaven forbid. Expecting public servants to accept responsibility and take any course of action that will actually benefit small traders … In ya dreams!! They are beholden to the parties they are supposed to regulate. They don’t even know which way is up. I am very glad I retired from trading three years ago.
There are so many different types of HFT trading, and polls like this don’t help to do much except spread the fear.
Colin, your posts in the past have often been very educational, so I’m not too sure why you’d put up such a sensationalist poll
Sure there are malicious algos, but there’s also plenty doing legimitate trading. Lumping them all in one category isnt the best way to approach it.
The aim of the poll is to gauge readers perceptions of HFT. I draw a distinction between HFT and algorithmic trading which is used by brokers to disseminate large orders. There is no accompanying opinion as to whether HFT is good or bad so I do not believe it is sensationalist. My concern is that HFT has been responsible for several trading anomalies and is destroying investors trust in the market. I would like to see government and the opposition support an inquiry into HFT.
algos that disseminate large orders are still done with high frequency, and are often manipulative eg as they accumulate shares they also sell some to hold the price down
or ETF arb – buying the unerlyings and selling the etf (or vice versa) actually helps to keep the price of the etf in line.
you may personally draw a distinction here between some of the horrible hft algos out there and some that are useful, but the poll hasn’t..
as for your last point. sure they can be a government inquiry, but I would suggest they’d have absolutely no clue what they’re trying to investigate
I’m not at all trying to excuse the manipulative algos that are out there, but I think, as said above, that lumping them all into the same category isn’t particularly helpful
I am trying to gauge sentiment towards HFT. It appears largely negative. Distinguishing between good and bad HFT practices should be the role of an inquiry — not a poll.
If there is an inquiry, I am assuming the person appointed to head the inquiry is suitably competent.
Its a wonderful system which the price for every thing is manipulated at the whim of the market…..any event that causes fear cause the market to change(up or down) making profits for the knowledgeable, losses for the ordinary folk Commodities which farmers provide are sold on a forward market ….controlled by money..not supply & demand…manipulation…controlled by software quicker than the blink of a eye..no wonder there is such volatility and no certainity
Dear Colin,
Your concerns in regard to HFT have been vindicated today by an article in this mornings AFR (14 Aug 2012 – back page). ASIC’s Deputy Chairman Belinda Gibson is “worried” by recent events concerning HFT and appears to be in the process of introducing certain regulatory measures to deal with some aspects of HFT of most concern. (not enough no doubt) One only hopes Ms Gibson stays ever watchful so far as the Australian market is concerned, and does not let HFT develop in the manner in which it has in the US, where it seems almost impossible to put the “genie back in the bottle.”
Market integrity is well and truly at stake here and time is of the essence.
R Shepherd
It should be legislated agaimst, and made illegal
I am leaving the market due to its effect, as many have already done
Isn’t it the same as has been around (at least since I was trading back say 12 years ago but ) presumably since the start of computer trading with broker trading in small stocks. The market could be moved a LOT by many orders placed with high frequency and you could watch the porders going on and off. In those days I could judge the range, place an order and when they removed their orders(as it appeared they did on and off) sometimes you would get filled a long way from the market. Then the brokers involved would phone and ask to reverse ther trade if not in their favour and the market not in the direction they expected..however if moved in their favour I would not receive a phone call. Sometimes they would get Comsec to reverse the trades(I think from watching the trades go thru) as Comsec customers didnt get the paperwork in those days til end of the day for their buys and sells. I just think HFT is the same but on larger stocks..is this the correct impression? BTW I did agree to trade reversals to start with but then it was never in my favour ..so I started wondering and getting supicious. In the end Comsec put limits on how far out of the market you could place a trade which stopped getting filled on the dips in the trades…is this what HFT trading is put for larger stocks…like they are trying to move to make a quick (day trading ) buck on larger stocks ..as well as (of course provide (in my view)unnecessary and distracting liquidity. It was also a way of moving large orders without spooking the stock price I susupect? Sorry never figured it wout completely. (trading stopped being transparent when you could no longer watch the buy and sell orders from the banks etc thru the windows of the stock exchange … you could see who was placing what order and for how much..they need to bring this transparency back to the market to make it “fair and trustrworthy”. Also the ASX before it floated was owned by the brokers I think?? so I gathered if an trade went horribly in a small traders favour ..they cancelled the trade (didnt happen the other way. This happened to me with a large firm on the AMP float (similar to Facebook flat I suspect in that the price tanked)..and the ASX just cancelled my trade after it moved too much in favour trade.so I didnt gain on the option I had bought. The bank did phone me and told me the ASx had agreed to cancel my trade as it was too much in my favour (after AMP tanked it was but I didnt think it was that much in my favour at the open of the trade ? especially as the market seemed to consider AMP would go up?) I didnt think it was that much in my favour if it had of moved the other direction, I had checked (roughly) the maths before purchase,and it wasn’t as some options are, a lot in the issuers favour either?..but as the bank said..I was only a comsec client , so unlikely to be able to do anything about it or know what to do(they were correct in that assumption) ..and besides I didnt have the paperwork as yet(as they pointed out) and they would get Comsec not to issue it..which they did? ..so what’s fair? , I had to stop trading (still invest in some shares)..but trading appears to me to be just to get money from small clients to give to the large trading firms from my experence.I thought the US seemed fairer to smaller traders in making the bigger firms honour their contracts..and I guess that’s where they get in trouble in the US?.. but I didn’t want to live at night and sleep in the day so I left the market..no trust left for the trading system or ASX. So I think HFT is just the ability of these larger firms to manipulate the price of larger stocks as they did smaller stocks before…and to dump large trades without it becoming obvious that some larger clients or firms were buying up or selling out? .. maybe I’m all wrong as I haven’t looked in the past few years. I know about making a market..but at least in smaller stocks and when large moves happen like in 1987..the market makers don’t actually provice liquidity ..they just withdraw (or at least that is what i thought happened)..and at other times there are enough buyers and sellers without market makers…but perhpas I am wrong as I am not an expert. So I am against HFT if that is what it is..like just to supposedly make a market, but in reality to jump in to make the tiny amounts from the buy-sell spread where there is a difference..provided the market does NOT move in an unexpected direction..and by placing the numerous order5s they actually can usually move the market in the direction they need. It is not ,in my opinion , needed at all to make a market function..and does move the market in directions up and down (volatility) or the swings. On larger stocks there are sufficient trades without them (expect perhaps at times of market crashes or stock crashes..when they aren;t their anyway?
For smaller stocks, I doubt they would provide a market and I hadn’t noticed them in there anyway in the more illiquid stocks? I guess the points I am making is 1. I don’t think HFT is needed or of benefit ot anyone but the firms doing it, 2. I don’t trust the market for anyone who is not big enough to take them on 3. Its not a level playing field or a fair one
4. I guess if they skimp non programers and dont allow sufficient testing that’s what happens..but if it was in Oz back over a decde ago, I suspect unfavourale trades(in the large trading firms view) would all have been reversed..in the US it is fairer for the smaller client and you seem to be able to get to keep your trades ,even if it was a mistake?
Thank you for your insights into the history of HFT. I would like to see a government-appointed inquiry thoroughly investigate HFT.
Wasn’t there an alternative exchange opened earlier this year? Can any one provide details?
Chi-X Australia
And I’m sure Dark Pool trading really helps improve stock market pricing … more discrimination against retail investors !
HFT is a disaster for the markets, the biggest problem is that it removes liquidity from the markets, it should be banned.
True liquidity is what is required in the market for traders to have the confidence to move easily in and out of positions.
HFT allows markets to be easily manipulated and does not create liquidity
Many investor and traders have lost confidence and are seeing this manipulation far too often,
Thousands of traders placing thousands of trades creates a liquid market, one computer
placing the same number of trades creates il-liquidity
I have stopped trading, but the other day I wished to buy 4000 SLR and duly placed my on-line order with Suncorp Share trading to buy at best offer. My order was of course duly filled but it was interesting that referring to the “course of sales” many trades before mine were filled at a lower price whist many later than mine were also filled at a lower price. How does this come about that my trade was able to be isolated from other surrounding offers particularly as this was a liquid market with trades taking place within seconds or minutes. Is this an example of “front running”
Difficult to answer without seeing the Bids and Asks.