Front Running

Front Running ex Wiki 
It is fraud, which is why Wall Street kept very quiet about it and about the billions they were making out of it. Then #Michael Lewis told the truth. Whoops.

 

Broken Markets
Confirms Michael Lewis's thesis in http://www.amazon.co.uk/Flash-Boys-Michael-Lewis/dp/0241003636/ref=sr_1_1

 

The Value of a Millisecond: Finding the Optimal Speed of a Trading Infrastructure
by Larry Tabb

Yours for $3,000 or try looking at:-

Value Of A Millisecond

http://www.slideshare.net/Scott_Blake/value-of-a-millisecond

 

The Robber Barons by Matthew Josephson
Tells us that the public was screwed big time. Was he right? Milton Friedman says no, a very firm no. He explains why? Professor Friedman was a Jew with a Nobel Prize in economics. He has a virtue, that he explains things clearly and well. See for yourself. Think for yourself. Decide for yourself. He is in action at Milton Friedman - The Robber Baron Myth - YouTube

One commentator feels that the author has Marxist leanings:-
QUOTE
If you're going to write history, the best thing to do is be objective and balanced. But if you can't do that, the second best thing is to broadcast your bias loud and clear.
By going the second route, this book provides not only a historical account of the robber barons, but a pretty clear picture of the Marxist perspective on them in 1934.
It's interesting at times to watch Josephson struggle for balance. On the one hand, he seems to almost admire the big capitalists when they're creating collectives by crushing the little capitalists. On the other hand, when they start tromping on the workers, they're clearly Very Naughty. And he addresses the rampant religious fervor of most of the barons, but never really figures out how to make it fit the picture other than by suggesting they're just enormously hypocritical.
The story of railroad, steel and banking essentially taking over the country is here, nicely organized so that we can follow relevant threads without getting to caught up in chronology. Josephson sometimes lets his billowing prose and sweeping characterizations overwhelm detail and fact; his style is definitely not for all tastes.
Ultimately it's a double history, not only of the Robber Barons themselves, but of the singular vantage point of the mid-thirties. Yes, Josephson is not the most objective of chroniclers, but his bias is so clearly stated and in evidence that it is easy to filter out, and his point of view becomes an interesting subject of this study in its own right.
UNQUOTE
Read and learn. It can pay off.

 

Insider Trading ex Wiki
Insider trading is the trading of a public company's stock or other securities (such as bonds or stock options) by individuals with access to non-public information about the company. In various countries, trading based on insider information is illegal. This is because it is seen as unfair to other investors who do not have access to the information.

The authors of one study claim that illegal insider trading raises the cost of capital for securities issuers, thus decreasing overall economic growth.^[1] However, some economists have argued that insider trading should be allowed and could, in fact, benefit markets.^[2]

Trading by specific insiders, such as employees, is commonly permitted as long as it does not rely on material information not in the public domain. However most jurisdictions require such trading be reported so that these can be monitored. In the United States and several other jurisdictions, trading conducted by corporate officers, key employees, directors, or significant shareholders must be reported to the regulator or publicly disclosed, usually within a few business days of the trade.

The rules around insider trading are complex and vary significantly from country to country and enforcement is mixed. The definition of insider can be very wide and may not only cover insiders themselves but also any person related to them such as brokers, associates and even family members. Any person who becomes aware of non-public information and trades on that basis may be guilty.

 

High Frequency Trading ex Wiki
High-frequency trading (HFT) is a primary form of algorithmic trading in finance.^[1] Specifically, it is the use of sophisticated technological tools and computer algorithms to rapidly trade securities.^[2][3][4] HFT uses proprietary trading strategies carried out by computers to move in and out of positions in seconds or fractions of a second.

It is estimated that as of 2009, HFT accounted for 60-73% of all US equity trading volume, with that number falling to approximately 50% in 2012.^[5][6]

High-frequency traders move in and out of short-term positions at high volumes aiming to capture sometimes a fraction of a cent in profit on every trade.^[3] HFT firms do not consume significant amounts of capital, accumulate positions or hold their portfolios overnight.^[7] As a result, HFT has a potential Sharpe ratio (a measure of risk and reward) tens of times higher than traditional buy-and-hold strategies.^[8] High-frequency traders typically compete against other HFTs, rather than long-term investors.^[7][9][10] HFT firms make up the low margins with incredible high volumes of tradings, frequently numbering in the millions. It has been argued that a core incentive in much of the technological development behind high frequency trading is essentially front running, in which the varying delays in the propagation of offers is taken advantage of by those who have earlier access to information.

A substantial body of research argues that HFT and electronic trading pose new types of challenges to the financial system.^[2][11] Algorithmic and HFT were both found to have contributed to volatility in the May 6, 2010 Flash Crash, when high-frequency liquidity providers rapidly withdrew from the market.^{[2][10][11][12][13]} Several European countries have proposed curtailing or banning HFT due to concerns about volatility.^[14] Other complaints against HFT include the argument that some HFT firms scrape profits from investors when index funds rebalance their portfolios.^[15][16][17] Other financial analysts point to evidence of benefits that HFT has brought to the modern markets. Researchers have stated that HFT and automated markets improve market liquidity, reduce trading costs, and make stock prices more efficient.^[18]

 

Front Running ex Wiki
Front running is the illegal practice of a stockbroker executing orders on a security for its own account while taking advantage of advance knowledge of pending orders from its customers. When orders previously submitted by its customers will predictably affect the price of the security, purchasing first for its own account gives the broker an unfair advantage, since it can expect to close out its position at a profit based on the new price level. The front running broker either buys for his own account (before filling customer buy orders that drive up the price), or sells (where the broker sells for its own account, before filling customer sell orders that drive down the price).^[1]

In 2003, several hedge fund and mutual fund companies became embroiled in an illegal late trading scandal made public by a complaint against Bank of America brought by New York Attorney General Eliot Spitzer. A resulting U.S. Securities and Exchange Commission investigation into allegations of front-running activity implicated Edward D. Jones & Co., Inc., Goldman Sachs, Morgan Stanley, Strong Mutual Funds, Putnam Investments, Invesco, and Prudential Securities.^[2]     

 

https://en.wikipedia.org/wiki/Dark_liquidity

Dark Pool
In finance, a dark pool (also black pool) is a private forum for trading securities that is not openly available to the public. Liquidity on these markets is called dark pool liquidity.^[1] The bulk of dark pool trades represent large trades by financial institutions that are offered away from public exchanges like the New York Stock Exchange and the NASDAQ, so that such trades remain confidential and outside the purview of the general investing public. The fragmentation of financial trading venues and electronic trading has allowed dark pools to be created, and they are normally accessed through crossing networks or directly among market participants via private contractual arrangements.

One of the main advantages for institutional investors in using dark pools is for buying or selling large blocks of securities without showing their hand to others and thus avoiding market impact as neither the size of the trade nor the identity are revealed until the trade is filled. However, it also means that some market participants are disadvantaged as they cannot see the trades before they are executed; prices are agreed upon by participants in the dark pools, so the market becomes no longer transparent.^[2]

There are three major types of dark pools. The first type is an independent company set up to offer a unique differentiated basis for trading. The second type is a broker-owned dark pool where clients of the broker interact, most commonly with other clients of the broker (possibly including its own proprietary traders) in conditions of anonymity. Finally, some public exchanges are creating their own dark pools to allow their clients the benefits of anonymity and non-display of orders while offering an exchange "infrastructure". Depending on the precise way in which a "dark" pool operates and interacts with other venues, it may be considered, and indeed referred to by some vendors, as a "grey" pool.^[3]

These systems and strategies typically seek liquidity among open and closed trading venues, such as other alternative trading systems. As such, they are particularly useful for computerized and quantitative strategies. Dark pools have been growing in importance since 2007, with dozens of different pools garnering a substantial portion of U.S. equity trading.^[4] Dark pools are of various types and can execute trades in multiple ways, such as through negotiation or automatically (e.g., midpoint crosses, staggered crosses, VWAP, etc.), throughout the day or at scheduled times.^[4]

Iceberg orders
Some markets allow dark liquidity to be posted inside the existing limit order book alongside public liquidity, usually through the use of iceberg orders.^[5] Iceberg orders generally specify an additional "display quantity"—i.e., smaller than the overall order quantity. The order is queued along with other orders but only the display quantity is printed to the market depth. When the order reaches the front of its price queue, only the display quantity is filled before the order is automatically put at the back of the queue and must wait for its next chance to get a fill. Such orders will, therefore, get filled less quickly than the fully public equivalent, and they often carry an explicit cost penalty in the form of a larger execution cost charged by the market. Iceberg orders are not truly dark either, as the trade is usually visible after the fact in the market's public trade feed.

 

Flash -Boys by Michael Lewis
Four years after his #1 bestseller The Big Short, Michael Lewis returns to Wall Street to report on a high-tech predator stalking the equity markets.

Flash Boys is about a small group of Wall Street guys who figure out that the U.S. stock market has been rigged for the benefit of insiders and that, post–financial crisis, the markets have become not more free but less, and more controlled by the big Wall Street banks. Working at different firms, they come to this realization separately; but after they discover one another, the flash boys band together and set out to reform the financial markets. This they do by creating an exchange in which high-frequency trading―source of the most intractable problems―will have no advantage whatsoever.

The characters in Flash Boys are fabulous, each completely different from what you think of when you think “Wall Street guy.” Several have walked away from jobs in the financial sector that paid them millions of dollars a year. From their new vantage point they investigate the big banks, the world’s stock exchanges, and high-frequency trading firms as they have never been investigated, and expose the many strange new ways that Wall Street generates profits.

The light that Lewis shines into the darkest corners of the financial world may not be good for your blood pressure, because if you have any contact with the market, even a retirement account, this story is happening to you. But in the end, Flash Boys is an uplifting read. Here are people who have somehow preserved a moral sense in an environment where you don’t get paid for that; they have perceived an institutionalized injustice and are willing to go to war to fix it.

 

Spread Networks ex Wiki
Spread Networks is a company founded by Dan Spivey and backed by James L. Barksdale (former CEO of Netscape Communications Corporation) that claims to offer Internet connectivity between Chicago and New York City at ultra-low latency (i.e. speeds that are very close to the speed of light), high bandwidth, and high reliability, using dark fiber.^[1][2] Its customers are primarily firms engaged in high-frequency trading, where small reductions in latency are important to the extent that they help one close trades before one's competitors.^[3][4][5]

History
The first cable line, running 827 miles (1,331 km) from Chicago (home to the Chicago Mercantile Exchange, where futures and options are traded) to Carteret, New Jersey (home to the Nasdaq data center), laid at a cost of $300 million USD, was unveiled in June 2010.^[3][5][6] According to a Forbes article, the idea for the line first came to Dan Spivey in 2007: Spivey contracted with a New York hedge fund to devise a low-latency arbitrage strategy, wherein the fund would search out tiny discrepancies between futures contracts in Chicago and their underlying equities in New York.^[5] Although he successfully created the strategy, he was not able to execute it because he was not able to get access to the market's lowest-latency line.^[5] He spent some time researching the feasibility of building an ultra-low-latency line, and then looked for people willing to fund it and found Jim Barksdale.^[5] Construction was in full swing (but in extreme secrecy, to avoid getting scooped by competitors) by early 2009.^[3][5]

In October 2012, Spread Networks announced latency improvements, bringing the estimated roundtrip time from 13.1 milliseconds to 12.98 milliseconds.^[7] In January 2014, Spread Networks announced that it had opened a point of presence at the NYSE Euronext trading center located in Mahwah, New Jersey.^[8]

Announced November 27, 2017, Zayo Group Holdings, Inc. (“Zayo”) (NYSE: ZAYO) entered into a definitive agreement to acquire Spread Networks for $127 million in cash.^[9][10]

 

Michael Lewis ex Wiki
Michael Monroe Lewis (born October 15, 1960)^[1][2] is an American author and financial journalist.^[3] He has also been a contributing editor to Vanity Fair since 2009, writing mostly on business, finance, and economics. He is known for his nonfiction work, particularly his coverage of financial crises and behavioral finance.

Lewis was born in New Orleans and attended Princeton University, from which he graduated with a degree in art history. After attending the London School of Economics, he began a career on Wall Street during the 1980s as a bond salesman at Salomon Brothers. The experience prompted him to write his first book, Liar's Poker (1989). Fourteen years later, Lewis wrote Moneyball: The Art of Winning an Unfair Game (2003), in which he investigated the success of Billy Beane and the Oakland Athletics. His 2006 book The Blind Side: Evolution of a Game was his first to be adapted into a film, The Blind Side (2009). In 2010, he released The Big Short: Inside the Doomsday Machine. The film adaptation of Moneyball was released in 2011, followed by The Big Short in 2015.

Lewis's books have won two Los Angeles Times Book Prizes and been notable selection features on the New York Times Bestsellers Lists.

 

http://www.amazon.com/Broken-Markets-Frequency-Destroying-Confidence/dp/0133993507

 

Davos Explained
Davos Is for Wimps, Ninnies & Pointless Skeptics says Michael Lewis who actually knows what he is talking about.