B.O.E. gets tougher on bankers
Discussion
toppstuff said:
crankedup said:
Educate me about the dark pools as offered earlier, I am intrigued as to how it works! I will admit that all I know about this system of extracting a profit is that the trader has milliseconds to action a trade, (time taken for transaction to be zipped through?) just prior to an open legitimate outsider purchaser, therefore secures a stock at a slightly lower price. So in a sense the trader is using inside information knowing a large stock purchase is taking place and can dive in to purchase at a slightly lower price just prior to the ongoing purchase mentioned. When multiplied that tiny % it adds a nice profit margin. O f course said trader can off load the stock at the slightly higher price for the profit that has just been manufactured. That is my very basic understanding which of course is no doubt entirely wrong.
This is algorithmic trading. It is not done by people, it is done by software. The idea is that software can identify the minutest trends using data collection and so, using an algorithm, anticipate movements the moment they occur and take a position before they gain momentum.Edited by crankedup on Thursday 7th August 12:36
Most of the major movement in stock prices however, comes from index funds and pension funds. The single largest stockholder in Europe is not some "black box" hedge fund but in fact is the Norwegian Petroleum reserve fund. Dark pools are not IMO a major worry yet, but they could be.
A dark pool is essentially a "slush pot" of stock inside financial institutions that trade between themselves. The idea is that they allow institutions to aggregate positions into a single, larger, pot, so that when they go to the market to buy or sell, the identity of the individual holders is not immediately apparent - the whole deal will be pinned to a single bank rather than the multiple institutions that may stand behind it. So, for example, if Google wanted to buy stock in Amazon, they may get a bank to build a dark pool of their stock ( and others ) and then make a move with the total, aggregated position, without immediately tipping off the market who is making the move.
Dark pools are also used by some of the quanty, algorithm-driven hedge funds.
The regulators are onto this. The SEC has a working group on the subject and it is certainly not being ignored. Time will tell what will happen.
As I said though, it is worth remembering that the bulk of trading is still done by traditional pension funds and institutions like Norway, rather than a few blokes in Mayfair and a fund in the Caymans.
crankedup said:
Educate me about the dark pools as offered earlier, I am intrigued as to how it works!
Oh boy. I'll address the 'insider trading' issue because thats what's you brought up, but you'll also be interested in the dealings of bank owned exchanges which i'll touch on, seperate issues, unfortunately you need a little background first. 'Dark pools' are nothing new, the name sounds sinister but just describes a non public 'pool' of liquidity where people can trade if they want. Now maybe about 10 years ago, I forget, the stock exchanges went public and rival exchanges were allowed to compete, they sprung up everywhere. When you submit an order to your broker he then transmits your order to all the exchanges. Of course if one exchange is 50 miles away and the other 500 miles away the order gets to the nearest exchange 450/186000 = 2.4 milliseconds ahead of the furthest. For the hedge fund computers working in microseconds they might as well send a letter.
A whole industry of math, engineering and computer science genii sprung up around sniffing out the order at the closest exchange then rushing off faster than the broker and bank orders to execute the majority of the order ahead of them.* They invested hundreds of millions in fiber optic cables, microwave repeater stations, computer programmers and the fastest hardware money could buy to do this. It went on for years and the technology driven hedge funds made billions. IMO it was abusive and would be front running in any other market, but no one, even the banks (they had other problems!), had really figured it out. Once people did, exchanges popped up with time delays and anti abuse technology to stop it and now the regulators are all over it.
Michael Lewis, an author I've recomended to you before ('The Big Short' - IMO one of the best books on the credit crisis along with 'Too big to fail' by Sorkin) recently wrote a book on this, 'Flash Boys'. This is why everyone is now an 'expert' and the more tinfoily parts of the internet don't realise they are years late to the party. As usual its a great read but technically its not even close to his other stuff. I don't mean to be funny Cranked but you would enjoy it, he really has it in for the hedge funds and banks. You won't believe the effort that went into this 'enterprise'. However, it is very unbalanced and I don't recall him ever mentioning any of the very real benefits that came from all these shenanigans, namely vast almost free liquidity for the little guy... like me, and you.
The second issue that IMO will be hitting the news increasingly is the dark pools run by the banks themselves. Most big banks are also brokers, not so much for you and I but for pension funds etc... Obviously if they can find a buyer and seller at the same time from amongst their customers, they dont have to go out into the wider world and pay someone elses exchange fees to do it, fantastic(!), assuming the customer is still getting the best price available. Well are they? Who knows. Did the bank really route your order to NYSE and BATS like you requested or did they keep it in their dark pool and get you a s
ttier price from one of their hedge fund buddies? Give it another 6 months for the SEC to sink their teeth into it and you can probably start a thread to rival Steffans...* I should probably add, these are the infamous high frequency traders, as Toppstuff says, computer algorithms. The front running/arbitrage lark was only one of many strategies that these guys ran to make money. As far as I know most were not nearly as dodgy but rather brilliant.
Edited by anonymous-user on Thursday 7th August 17:58
toppstuff said:
The woeful performance of labour over more than a decade when it comes to the economy and regulation is clear and demonstrable, not emotive hype. This mess was created on labours watch and through their policies.
Labour deserve all the contempt possible and more.
I simply refuse to listen to anything Labour have to say while anyone from the previous government remains in the labour shadow cabinet. A pox on all their houses.
That's funny....Labour deserve all the contempt possible and more.
I simply refuse to listen to anything Labour have to say while anyone from the previous government remains in the labour shadow cabinet. A pox on all their houses.
DeltonaS said:
toppstuff said:
The woeful performance of labour over more than a decade when it comes to the economy and regulation is clear and demonstrable, not emotive hype. This mess was created on labours watch and through their policies.
Labour deserve all the contempt possible and more.
I simply refuse to listen to anything Labour have to say while anyone from the previous government remains in the labour shadow cabinet. A pox on all their houses.
That's funny....Labour deserve all the contempt possible and more.
I simply refuse to listen to anything Labour have to say while anyone from the previous government remains in the labour shadow cabinet. A pox on all their houses.
crankedup said:
Well thanks fblm, between yourself and toppstuff posts I have actually enjoyed reading the posts this afternoon and pleased that at my very ripe old age I have managed to learn something from the City!
Knowledge is Power
By the way, to tie the whole HTF/dark pool/front running thing back to the topic in hand... I've repeatedly said all this meddling with nonsense like lock up periods will inevitably have unforseen consequences, just as the clamour for lower bonuses resulted in higher salaries, well, google 'Reg NMS'. Yet another regulation imposed on the market with laudable aims by people who didn't understand the details, which has resulted in the unfathomably complex market which all these HFT's exploit. Knowledge is Power
http://online.wsj.com/news/articles/SB100014240527...
is that today we have the Money always talks, the bigger the pot then the louder the talk. The financial centres are the Governments, Wall St, London. Since the time of the Romans great power it has been 'money is power', it isn't going to change any time soon I guess. The major difference that has evolved is that we now believe we have much greater transparency creating even greater division within sectors of society.
crankedup said:
is that today we have the Money always talks, the bigger the pot then the louder the talk. The financial centres are the Governments, Wall St, London. Since the time of the Romans great power it has been 'money is power', it isn't going to change any time soon I guess. The major difference that has evolved is that we now believe we have much greater transparency creating even greater division within sectors of society.
Is 'creating division' a newspeak way of describing the means by which transparency allows envious people to get more ammunition to feed their envy? If such people paid as much attention to their own circumstances and responsibilities as they do to others, they might get somewhere.
turbobloke said:
crankedup said:
is that today we have the Money always talks, the bigger the pot then the louder the talk. The financial centres are the Governments, Wall St, London. Since the time of the Romans great power it has been 'money is power', it isn't going to change any time soon I guess. The major difference that has evolved is that we now believe we have much greater transparency creating even greater division within sectors of society.
Is 'creating division' a newspeak way of describing the means by which transparency allows envious people to get more ammunition to feed their envy? If such people paid as much attention to their own circumstances and responsibilities as they do to others, they might get somewhere.
knowledge can only be extruded from the ability to learn and understand what it is that leads to the capability of running business for profit.
However, transparency can also lead to an insight of what may be wished for but unattainable for some. This condition can rear its head in school playgrounds involving bags of sweets.
Somewhere in the middle of these two extremes lye the vast majority, imo, of democratic thinking people. This leaves room for those who have enriched themselves with knowledge to be able to share their hard work and good fortune to those from the second group who missed out on the bag of sweets. Of course that is a matter for the individuals concerned and comes under the banner of 'charitable' in mind and pocket.
Then we have the third group, those that have the knowledge and wherewithal of a true business person but have tripped over a crack in the path and found themselves bankrupt. Perhaps a little 'charity' would see these people back onto their feet, are they deserving of that charity though?
Complicated business this life journey
crankedup said:
turbobloke said:
crankedup said:
is that today we have the Money always talks, the bigger the pot then the louder the talk. The financial centres are the Governments, Wall St, London. Since the time of the Romans great power it has been 'money is power', it isn't going to change any time soon I guess. The major difference that has evolved is that we now believe we have much greater transparency creating even greater division within sectors of society.
Is 'creating division' a newspeak way of describing the means by which transparency allows envious people to get more ammunition to feed their envy? If such people paid as much attention to their own circumstances and responsibilities as they do to others, they might get somewhere.
knowledge can only be extruded from the ability to learn and understand what it is that leads to the capability of running business for profit.
However, transparency can also lead to an insight of what may be wished for but unattainable for some. This condition can rear its head in school playgrounds involving bags of sweets.
Yes indeed, but even in the playground it's down to base instincts - the key difference is that politicians can't exploit playground situations for their own benefit quite so easily.
crankedup said:
Somewhere in the middle of these two extremes lye the vast majority, imo, of democratic thinking people. This leaves room for those who have enriched themselves with knowledge to be able to share their hard work and good fortune to those from the second group who missed out on the bag of sweets. Of course that is a matter for the individuals concerned and comes under the banner of 'charitable' in mind and pocket.
That's what taxation and safety nets are there for. It can and does happen, but it's also exploited by both recipients and politicians to the detriment of the hardworkingclass taxpayer. crankedup said:
Then we have the third group, those that have the knowledge and wherewithal of a true business person but have tripped over a crack in the path and found themselves bankrupt. Perhaps a little 'charity' would see these people back onto their feet, are they deserving of that charity though?
As above, taxation funding a safety net will do nicely, we're way past that now.crankedup said:
Complicated business this life journey
Sure.And as long as those making bad decisions and making the mistakes take responsibility for them without blaming everyone else, and as long as the safety net they need and which taxpayers are already funding isn't extended to allow for do-nothing lifestyle choices, all is well. Unfortunately all is not well, and looking at what other people earn and getting exercised over it won't do any long-term good.
crankedup said:
I believe 'transparency' can be a double edged sword
Are things really more transparent than 'before'? Despite the odd Snowden moment secrets are still secrets. We still don't know what we don't know. The internet makes things feel more open but it has also given everyone a voice; maybe now distinguishing fact from opinion, coincidence from evidence and correlation from causation is harder than ever. If you did stumble across 'something you shouldn't' today, IMO, it would be all but impossible to be heard above the cacophony of crackpottery. Before you got suicided.crankedup said:
Then we have the third group, those that have the knowledge and wherewithal of a true business person but have tripped over a crack in the path and found themselves bankrupt. Perhaps a little 'charity' would see these people back onto their feet, are they deserving of that charity though?
You mean the banks right? 
As you are aware I am a strong believer in putting forward the argument that the wealth divide is approaching the unsustainable. It is the divide growing wider that has people protesting in the streets, not because they are envious but because the balance is too far over with the wealthy increasing their wealth and the working classes basic standard of living is decreasing. For the 'top' to enjoy the fruits of success whilst the workers who have contributed toward this success remain without further reward has a basic unfairness about it. That is the basis of the street protest.
Fairness, a much derided term perhaps, is a cornerstone of Britishness and has been that way for decades. If we are now ditching that attribute it will be at the cost of Social unrest imo.
Profit sharing amongst the entire workforce/ staff seems to have taken a back seat since the recession and more workers than jobs is likely to see it remain that way for the foreseeable future.
Fairness, a much derided term perhaps, is a cornerstone of Britishness and has been that way for decades. If we are now ditching that attribute it will be at the cost of Social unrest imo.
Profit sharing amongst the entire workforce/ staff seems to have taken a back seat since the recession and more workers than jobs is likely to see it remain that way for the foreseeable future.
fblm said:
crankedup said:
I believe 'transparency' can be a double edged sword
Are things really more transparent than 'before'? Despite the odd Snowden moment secrets are still secrets. We still don't know what we don't know. The internet makes things feel more open but it has also given everyone a voice; maybe now distinguishing fact from opinion, coincidence from evidence and correlation from causation is harder than ever. If you did stumble across 'something you shouldn't' today, IMO, it would be all but impossible to be heard above the cacophony of crackpottery. Before you got suicided.crankedup said:
Then we have the third group, those that have the knowledge and wherewithal of a true business person but have tripped over a crack in the path and found themselves bankrupt. Perhaps a little 'charity' would see these people back onto their feet, are they deserving of that charity though?
You mean the banks right? 'You mean the banks right?' well I guess that plenty of staff from the retail side have lost their jobs, as well as from the investment side. Maybe the charity could do with a cut off grade, 250k + former salary lost. Anyhow, the banks tripped over a canyon I reckon.
crankedup said:
As you are aware I am a strong believer in putting forward the argument that the wealth divide is approaching the unsustainable...
We're aware But what does it actually mean? Where is the line that marks out "sustainable" and "unsustainable"? Who decides? And on what basis?And once you've decided, how the hell do you control it?
I wonder more what would happen if markets/systems (in the broadest sense) were allowed to truly find their own level, without politicians and/or idealists interfering and making the situation worse.
Murph7355 said:
crankedup said:
As you are aware I am a strong believer in putting forward the argument that the wealth divide is approaching the unsustainable...
We're aware But what does it actually mean? Where is the line that marks out "sustainable" and "unsustainable"? Who decides? And on what basis?And once you've decided, how the hell do you control it?
I wonder more what would happen if markets/systems (in the broadest sense) were allowed to truly find their own level, without politicians and/or idealists interfering and making the situation worse.
Government Policies are the only way for change to be implemented, what changes? Whatever they are its going to upset some but please the majority. Minimum wage rate abandoned in favour of 'cost of living wage' might be a good place to start.Lower tax on wage packets, closed door to all out friends from abroad, more Government assistance in the form of finance to Companies taking on apprentices. Continue cap reductions in benefits. Going to be downsides to that stuff I guess but at least it's a discussion point.
crankedup said:
Murph7355 said:
crankedup said:
As you are aware I am a strong believer in putting forward the argument that the wealth divide is approaching the unsustainable...
We're aware But what does it actually mean? Where is the line that marks out "sustainable" and "unsustainable"? Who decides? And on what basis?And once you've decided, how the hell do you control it?
I wonder more what would happen if markets/systems (in the broadest sense) were allowed to truly find their own level, without politicians and/or idealists interfering and making the situation worse.
That'll be the streets home to events overseen by professional anarchists and toytown trots from the UK and abroad and further populated by a handful of Wolfie Smiths and various middle class gangsta wannabes who read about it on Facebook and then saw 'go to jail' signs flashing - for longer than they expected - also in double quick time and all for the revolutionary act of looting a bottle of water from a broken shop window. Whatever the cause, if there is a next time the thugs involved won't get a couple of days' head start.
crankedup said:
Government Policies are the only way for change to be implemented, what changes? Whatever they are its going to upset some but please the majority. Minimum wage rate abandoned in favour of 'cost of living wage' might be a good place to start. Lower tax on wage packets, closed door to all our friends from abroad, more Government assistance in the form of finance to Companies taking on apprentices. Continue cap reductions in benefits. Going to be downsides to that stuff I guess but at least it's a discussion point.
Those who are upset can contact their MP to complain. If not and they go further i.e. outside the law, it seems that spaces in our overcrowded jails can be found quickly when needed.turbobloke said:
crankedup said:
Murph7355 said:
crankedup said:
As you are aware I am a strong believer in putting forward the argument that the wealth divide is approaching the unsustainable...
We're aware But what does it actually mean? Where is the line that marks out "sustainable" and "unsustainable"? Who decides? And on what basis?And once you've decided, how the hell do you control it?
I wonder more what would happen if markets/systems (in the broadest sense) were allowed to truly find their own level, without politicians and/or idealists interfering and making the situation worse.
That'll be the streets home to events overseen by professional anarchists and toytown trots from the UK and abroad and further populated by a handful of Wolfie Smiths and various middle class gangsta wannabes who read about it on Facebook and then saw 'go to jail' signs flashing - for longer than they expected - also in double quick time and all for the revolutionary act of looting a bottle of water from a broken shop window. Whatever the cause, if there is a next time the thugs involved won't get a couple of days' head start.
crankedup said:
Government Policies are the only way for change to be implemented, what changes? Whatever they are its going to upset some but please the majority. Minimum wage rate abandoned in favour of 'cost of living wage' might be a good place to start. Lower tax on wage packets, closed door to all our friends from abroad, more Government assistance in the form of finance to Companies taking on apprentices. Continue cap reductions in benefits. Going to be downsides to that stuff I guess but at least it's a discussion point.
Those who are upset can contact their MP to complain. If not and they go further i.e. outside the law, it seems that spaces in our overcrowded jails can be found quickly when needed.Gassing Station | News, Politics & Economics | Top of Page | What's New | My Stuff