Bombshell: Is the U.S. stock market rigged?

[Roger Bacon]

It seems like there are so many better places you can stick your money...

Is the U.S. stock market rigged?

The upcoming book by best selling author Michael Lewis entitled 'Flash Boys' details how the US stock markets are rigged, with big players making tens if not hundreds of billions of dollars on insider information.

How does the scam work? Let's say a large mutual fund or pension fund was to execute a substantial stock market trade, the button was pushed, and the insiders having this information would put in their own trade milliseconds or fractions of a millisecond beforehand, reaping untold bounty.

Large trades were traditionally executed through the stock exchanges computer networks based in New Jersey, it was discovered that when trades were executed through other routes than the central networks run by the exchanges, the problem of "front running" didn't happen.

'60 Minutes' and this new book does a good job of showing just what a sham Wall Street remains.

It reminds me a little bit of a nervous period for investors way back in October of 1987. The markets were volatile, and '60 Minutes' did a timely interview with the reigning Wall Steet Guru and Oracle from on high of his day Elliot Prechter, who went on to explain his "Elliot Wave" and Fibonacci numbers and how everything was just fine.

Wall Steet Guru Elliot Prechter looked like a utter loon, and the Dow dropped 22% the very next day, 2nd only to the crash of '29.

The words gonna get out on this book. Wall Street has been exposed as a sham once again. Hopefully the reaction won't be as bad as it was back in 1987.

http://www.cbsnews.com/news/is-the-us-stock-market-rigged/

[King Shizzo]

It might not be rigged, but all of the big players seem to have the inside info.

Maybe its because you have to have money to make money.

[ganero76]

It might not be rigged, but all of the big players seem to have the inside info.

Maybe its because you have to have money to make money.

Quiet. Grown ups is talking.

[_aj_]

Seems so. I got completely out in '08. Have never regretted it.

[That_Dude]

It is 100% rigged the stock market is basically like betting on horses....without the horses

[El Diablo Blanco]

It is 100% rigged the stock market is basically like betting on horses....without the horses

It's the epitome of a ponzi scheme. The story is these guys invested in super fast network lines to the exchanges. They can trade milliseconds quicker than anyone else.

[jude2]

Of course these frequent traders who have access to the fast equipment are cleaning up. They are able to see what others are trying to buy before the trade takes place.  This is nothing new.  The SEC is letting them get away with it.

[pedro01]

Of course these frequent traders who have access to the fast equipment are cleaning up. They are able to see what others are trying to buy before the trade takes place.  This is nothing new.  The SEC is letting them get away with it.

How do they see what others want to buy?

If someone submits an order to buy at market, then that order goes through their broker directly to the exchange. Are you saying that HFTs have hacked the lines that go into the exchange? If not - how else would they do it.

Futures contracts are traded on a single exchange. Orders go to that exchange and THEN everyone can see them - but HFTs can of course see them first but this is still after they hit the exchange - they can't be front run.

On NASDAQ, which is effectively a collection of exchanges, then a price may get updated on one of the participating exchanges before another giving the HFTs a chance to arb the difference.

Guys that swing trade stocks probably saw day traders as an 'evil' just the same way that a lot of traders how see HFT as evil.

Bottom line - if you aren't making money in the markets - it's your fault, not the HFTs.

[ESFitness]

Seems so. I got completely out in '08. Have never regretted it.

I think '08/09 is when I made the most! lol

[jude2]

Pedro I think they mainly profit when a Hedge funds goes and makes a big purchase. IF u knew this info u could make serious $$$ very quickly. I don't know what they do exactly, but we will see what the FBI comes up with. Might just be old brokers who are pissed because they don't have the tech or know how to compete with the new guys.

[ESFitness]

How do they see what others want to buy?

If someone submits an order to buy at market, then that order goes through their broker directly to the exchange. Are you saying that HFTs have hacked the lines that go into the exchange? If not - how else would they do it.

Futures contracts are traded on a single exchange. Orders go to that exchange and THEN everyone can see them - but HFTs can of course see them first but this is still after they hit the exchange - they can't be front run.

On NASDAQ, which is effectively a collection of exchanges, then a price may get updated on one of the participating exchanges before another giving the HFTs a chance to arb the difference.

Guys that swing trade stocks probably saw day traders as an 'evil' just the same way that a lot of traders how see HFT as evil.

Bottom line - if you aren't making money in the markets - it's your fault, not the HFTs.

this x2

[pedro01]

Pedro I think they mainly profit when a Hedge funds goes and makes a big purchase. IF u knew this info u could make serious $$$ very quickly. I don't know what they do exactly, but we will see what the FBI comes up with. Might just be old brokers who are pissed because they don't have the tech or know how to compete with the new guys.

If a hedge fund - or a Mutual fund for that matter wanted to buy a 5% stake in a company - they would not make that purchase in a single order that could be front run.

They would finesse their way in - it would take days and probably weeks and in fact, they would not even be doing it themselves. They would get a specialist to do it for them. They may even do a lot of it away from the electronic the exchanges altogether.

An HFT isn't going to jump in front of a single 100 million dollar order 'cause there aren't any single 100 million dollar orders.  Front running in HFT terms is taking pennies from thousands of small orders time and time again. Still - by what mechanism is it doing that? Most HFTs are effectively market making.

Fact is a major purchase or sale takes time and whilst you can't know 100% sure what is going on, there are tracks - and people have been observing this behavior and betting on it for over a century.

[TheGrinch]

President Regan passed a law it could be rigged anytime they want..


Read up on it..


http://en.wikipedia.org/wiki/Working_Group_on_Financial_Markets


its a REALITY and has been for some time