In Report, Speed Trades’ Problems and Pluses by Nathaniel Popper October 22, 2012. The New York Times http://www.nytimes.com/2012/10/23/business/in-report-speed-trades-problems-and-pluses.html?nl=todaysheadlines&emc=edit_th_20121023&_r=0
[Excerpted]The rise of controversial high-speed trading firms has generally been a good thing for ordinary investors, a two-year British government study has concluded. The study, however, found that the increasing prevalence of computerized trading may lead to isolated incidents of instability in the financial markets....
The committee that oversaw the study largely rejected some of the most troubling accusations that have been made about the firms that practice high speed trading, or H.F.T., including charges that they have caused greater volatility in markets and manipulated stock prices.
...But the committee concluded that regulators had failed to gather enough data or build the expertise needed to allay a widespread assumption among professional investors that faster traders have an advantage and profit at the expense of ordinary investors.
MAJIA here: This report is simply another COVER-UP of the fraud and corruption endemic throughout so many of our financial and political institutions.
In early October an article ran that explored how high frequency traders can actually BLOCK other traders from participating in the market for short periods of time:
One Algorithm Made Up 4% of Quote Traffic Last Week by John Melloy CNBC http://finance.yahoo.com/news/one-algorithm-made-4-quote-204830799.html
[Excerpted] Eric Hunsader, head of Nanex and the No. 1 detector of trading anomalies watching Wall Street today. "Exchanges are just not monitoring it."
(Read More: Ex-Insider Calls High-Frequency Trading 'Cheating')
Hunsader's sonar picked up that this was a single high-frequency trader after seeing the program's pattern (200 fake quotes, then 400, then 1,000) repeated over and over. Also, it was being routed from the same place, the Nasdaq (COMP).
"My guess is that the algo was testing the market, as high-frequency frequently does," says Jon Najarian, co-founder of TradeMonster.com. "As soon as they add bandwidth, the HFT crowd sees how quickly they can top out to create latency."
Translation: the ultimate goal of many of these programs is to gum up the system so it slows down the quote feed to others and allows the computer traders (with their co-located servers at the exchanges) to gain a money-making arbitrage opportunity....
Majia here: High frequency trading is being used as a tool by powerful players with super-fast computers to MANIPULATE the markets, to SCALP other players' transactions.
Financial markets are infused with FRAUD.
PREVIOUS POSTS ON HIGH FREQUENCY TRADING
Apr 09, 2012
Majia here: High frequency trading allows companies to engage in a variety of fraudulent activities -- including quote stuff and naked short selling -- thereby allowing companies to 'scalp' other traders' legitimate trades.
Sep 15, 2012
Financial Warfare Using High Frequency Trading, Quote Stuffing and Naked Short Selling http://majiasblog.blogspot.com/2011/08/financial-warfare-using-high-frequency.html ...
Aug 28, 2011
High frequency trading (HFT) technology enables profits to be gleaned from “movement” itself within markets by skimming the purchasing and selling activities of other traders, especially large institutional investors such as ...
Aug 20, 2012
The power of the financial industry grew exponentially, particularly through the strategic uses of derivatives and high frequency trading. These strategic technologies allowed unprecedented influence as western banking ...
Aug 27, 2012
On the Use of High Frequency Trading and Naked Short Selling to Manipulate Markets and as Tools for Financial Warfare. http://majiasblog.blogspot.com/2011/08/financial-warfare-using-high-frequency.html. On Hedge Funds ...
Aug 11, 2012
HOWEVER, a former Goldman Sachs computer programmer, Sergey Aleynikov, who allegedly absconded with code for high frequency trading he had written, is now being charged AGAIN with two felonies by the Manhattan ...
Oct 24, 2009
In today's WSJ, Jason Zweig writes that "More than two-thirds of stock-market volume comes from high-frequency traders, who can buy or sell in less thant 400 microseconds, or nearly a thousand times faster than you can ...
Oct 23, 2011
This essay has a rather theoretical introduction, but a detailed discussion of the criminal-type behavior involved with high frequency trading, naked short selling, and credit defaults fraud can be found if one skips past the ...