High-Frequency Trading with the MCP

The MCP (Master Control Program) from TRON is making high-frequency trades transmiting millions of orders at lightning speed and raking in billions at everyone else’s expense.  So this is the latest conspiracy theory as to why our portfolios have lost so much, blah, blah, blah.  Next thing you know when you submit your trade your computer will say, "No so Fast, End of Line."

High-Frequency Trading is suddenly one of the most talked-about and mysterious forces in the markets. So what the hell is it, is the MCP alive and real?  Not quite.

CASHING IN LIKE THE MCP 

Powerful computers, some housed right next to the machines that drive marketplaces like the New York Stock Exchange, enable high-frequency traders to transmit millions of orders at lightning speed and, their detractors contend, reap billions at everyone else’s expense.

These systems are so fast they can outsmart or outrun other investors, humans and computers alike. And after growing in the shadows for years, they are generating lots of talk.

Nearly everyone on Wall Street is wondering how hedge funds and large banks like Goldman Sachs are making so much money so soon after the financial system nearly collapsed. High-frequency trading is one answer.

I know what you're thinking, hack into the system and wait for these High-Frequency Trading computers to have the white block removed (with Flynn's help of course) then throw your disk as fast and hard as you can to destroy the evil system and bring peace and justice to us all (think TRON people).

I tend to side with Joe Weisenthal who said this week on the subject:

Seriously? What happened in October, 2008? We had an epic market crash and a series of unexpected events like we've never seen before. And they're blaming rebate traders for the widened spreads?

Look, as we said above, we don't doubt that traders are finding clever ways to game the market. There have always been ways to game the market, and institutional, big-block traders pay top-dollar to Russian mathematicians, who help them chop up their trades in such a way the orders an be executed smoothly, without giving up too much of a vig to the sharks on the other end. Some version of the sharks and whales game will always be around and this may be the latest version of it. The problem will go away, we suspect, on its own -- the real danger is if politicians and regulators get a hold of this idea, limit comptuer trading and impose some kind of forced limitation/latency , and cement in place a less-liquid environment that really does serve as an ongoing investor tax.

The again, maybe we are all just programs trying to get off the grid?