High-Frequency Trading

  • Aired:  11/14/12
  •  | Views: 46,359

Much like Maroon 5, computer traders make money just by churning out the same formula over and over again. (2:31)

SEEN NOTHING YET." (LAUGHTER AND APPLAUSE) FOLKS, WALL STREET IS TAKING A LOT OF HEAT LATELY.

YOU DESTROY THE GLOBAL ECONOMY ONCE AND EVERYONE FORGETS ALL THE TIMES YOU DIDN'T DESTROY IT.

(LAUGHTER) PLUS OUR FINANCE SECTOR IS MUCH SAFER NOW BECAUSE WALL STREET HAS REMOVED THE WEAKEST LINK-- MAN.

>> FOR 150 YEARS, THE FLOOR OF 2 T CHANGE WAS THE CENTER OF THE FINANCIAL WORLD.

BUT LESS THAN 30% OF THE TRADING IS CONDUCTED HERE NOW AND THE SPECIALISTS IN THE NOISE OF THE

FLOOR IS BEING REPLACED BY THE SPEED AND QUIET EFFICIENCY OF COMPUTERS.

>> Stephen: THOUGH HUMANS STILL PLAY AN IMPORTANT ROLE-- AS SEEN HERE AS GOLDMAN SACHS.

(LAUGHTER) NOW, FOLKS, SUPERFAST COMPUTERS ARE NECESSARY FOR SOMETHING CALLED HIGH FREQUENCY TRADING OR

H.F.T. OR HFT" THE SOUND OF YOUR PENSION EVAPORATING.

COMPUTERS CAN MOVE MILLIONS OF SHARES AROUND IN MINUTES EARNING A TENTH OF A PENNY OFF EACH SHARE.

THAT ADDS UP TO SERIOUS MONEY WHEN THEY FINALLY TAKE IT DOWN TO THE WALL STREET COINSTAR.

(LAUGHTER) AND ONCE THE COMPUTER HAS A TRADING STRATEGY OR ALGORITHM IT MAKES MONEY JUST BY CHURNING THE

SAME FORMULA OVER AND OVER AGAIN.

LIKE MAROON 5.

(LAUGHTER) (CHEERS AND APPLAUSE) AND EVEN SIMPLE ALGORITHM CANS DRAMATICALLY INFLUENCE THE MARKET.

EARLIER THIS FALL A SINGLE MYSTERIOUS COMPUTER PROGRAM THAT PLACED ORDERS AND SUBSEQUENTLY

CANCELED THEM MADE UP 4% OF ALL QUOTE TRAFFIC IN THE U.S. STOCK MARKET.

THAT'S RIGHT.

ONE ALGORITHM IS 4% OF ALL TRADES.

THE OTHER 96% WERE PEOPLE DUMPING FACEBOOK STOCK.

(LAUGHTER) AND THE SOURCE OF THAT MYSTERIOUS ALGORITHM IS UNKNOWN BUT EXPERTS SUSPECT IT WAS

DESIGNED TO GUM UP THE SYSTEM SO IT SLOWS DOWN OTHERS AND ALLOWS THE COMPUTER TRADERS TO GAIN A

MONEY-MAKING OPPORTUNITY.

IN OTHER WORDS, NOT ONLY WAS HE FAST, HE MADE EVERYONE ELSE SLOWER.

LIKE IF INSTEAD OF JUST DOPING LANCE ARMSTRONG ALSO MADE

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