Goldman Sach's stolen algo: Tool for Legal Frontrunning

[trader_dante]

Hi BSD, great article. Just read it in the IHT over breakfast.

Always makes me laugh, when people try to scalp, particularly when spreadbetting

 

[pedro01]

what a crock.

this journalist knows sweet FA about trading. Even if its true that GS can rake in billions trading in milliseconds, how on earth does that put other traders at a disadvantage ?
If you're trading on a 5- a 15- a 60 or 240- minute chart, whatever, these nonsensical moves that make these billions aren't even going to register with you.
If you're Long and hoping for price to increase, the likes of GS coming in Short with 1,000,000 cars for a few seconds and then having to buy those Shorts back to close, could actually increase the potential for your Long target to get hit ....

completely meaningless journalistic drivel

Not really - if a company can front run trades & cause the price to be 1 tick higher for the person intending to buy it, you effectively have an increased spread.

Why would that be acceptable ?

I do think the volumes & timescales discussed are ******** - but anything that increases the effective spread is not on IMO

 

[shadowninja]

secret computer codes

"codes"? Is the journalist an idiot? It's not about secret WW2 messages tied to pigeons. The devil is in the detail. If you're writing and trying to sound clever, the detail is important. CODES???

 

[sandpiper]

completely meaningless journalistic drivel

Exactly that.

Perhaps people should take the time to research exactly what specialists and market makers actually do (and have always done, by and large) before getting all wound up about this stuff.

All of this conspiracy theory rubbish neglects to mention the fact that a great deal of algorithmic trading is due to sell-side execution rather than just buy-side strategies. To my knowledge, nobody has yet proved that it wasn't in fact Goldman's sell-side algorithmic trading capability that wasn't compromised rather than any proprietary capability.

All very entertaining.

 

[oildaytrader]

SEC Investigates Wall Street Front-Running

Can't be drivel !

The New York Times reported that the SEC is investigating several Wall Street banks for potentially divulging inside information to clients in advance of large institutional trades. The recipients of such information could use it to front-run the trades, whereby they take a position that will benefit once the brokerage executes the trade for the institution (commonly, mutual fund companies)

Maybe some of these funds are under direct management of the brokers/bankers of front-running.

Fund Times: SEC Investigates Wall Street Front-Running - Morningstar Advisor

Illegal software is not uncommon amongst brokers.Here is a software used to rob traders on slippage , and it is used extensively by many forex brokers.Similiar software can be designed for front running.

 

[sandpiper]

oildaytrader,

1) 2007? Well, that's a pretty current investigation then isn't it? You could could of course recount all the past misdeeds of Abbey Cohen, et al. if you want to. And still, none of it has anything to do with the current spate of drivel trying to pass itself off as investigative journalism.

2) Errr. What have forex bucket shops got to do with anything for heavens sake?

I guess that, for some at least, taking this stuff at face value is just far easier than actually doing the research to figure out what really goes on. I look foward to the Daily Star's take on it.

 

[oildaytrader]

oildaytrader,

I guess that, for some at least, taking this stuff at face value is just far easier than actually doing the research to figure out what really goes on.

Goldman's is going to give you a sniff of what really goes on ?.They will be in and out like the wind , try and catch it.

Same tactics as bucket shops by big boys , execution delays pre programmed into instituitional trades whilst abbey stock ramper cahuna loads the ramp up front running software.Stupid cow ramped the all Nasdaq , yeah with dot com bubble.

New York Times has always looked at them Dot com bubble masters with suspicion.This latest article is just ongoing extension of the front running since 2007.

The Big Lie Exposed: Wall Street as Institutionalized Fraud

Jeff Schweitzer: The Big Lie Exposed: Wall Street as Institutionalized Fraud

And some of you tink GOVERNMENT SACHS was slippery , got Paulson to raid the taxpayer for the GREAT GOLDMAN SACHS BAILOUT , with Blankstein the only attendee at New York Feds last meeting before bailout.

Yet none can prove it was A Goldman's bailout, how on earth can you really prove what really goes on?

O D T

 

[sandpiper]

Same old, same old.

Nothing to do with anything really. As for Sweitzer's "big reveal". Well, no body had figured out that Wall St, et al. was bent had they?

The only thing that is even remotely surprising is that people continue to bleat about it and expect "bankers" to display a level of morality that they themselves don't display faced with lesser temptation and certainly wouldn't display in the same circumstances.

Wall St. et al's lack of morality still doesn't support the tripe in the OP's link.

 

[oildaytrader]

Nothing to do with anything really. As for Sweitzer's "big reveal". Well, no body had figured out that Wall St, et al. was bent had they?

Wall street and the city is bent , it has always been a casino where tables are rigged and the punters fleeced.The facts are startling.

http://www.afajof.org/pdfs/2004program/UPDF/P177_Market_MicroStructure.pdf

Nowadays they use automated software to fleece the punters.A leopard never loses its spots.

 

[montmorencyt2w]

Yeah, it is pretty scandalous.

Bit of a joke there where the US prosecutor going after the guy that nicked GS's algo said that "in the wrong hands the market could be manipulated."

Yes, I rather chuckled at that particular phrase.

 

[MakkaPakka]

There should be a big sign when entering the financial district of London, New York, Chicago, Tokyo etc. that reads: "Everything you are about to see was paid for by customers losses".

The crafty thing about this sort of algo trading is that in and of itself it can operate flat or at a loss. Its function is to induce trading which generates commissions and spreads for big market makers.

Plus I would imagine that other algos in the ecology could be tuned to pick up on trades made by trigger happy technical scalpers and induced by this churning.

Of course market makers have done this kind of thing since the buttonwood tree was a nut the only difference is the timescale.

Mind you there is some evidence that this would not be regarded as good clean fun by the regulators. Apologies if someone else has posted this up before but I found it interesting ...

Zero Hedge: Is A Case Of Quant Trading Sabotage About To Destroy Goldman Sachs?

cheers,

MP

 

[Garbanzo]

How is this bad?
They are providing extra liquidity to the system,all these moves are liquidity induced,not information induced and they are self defeating eventually.
Just like statistical arbitrage.

 

[TAjammy]

personally, i think it's volume, not liquidity

 

[N Rothschild]

oh yeh? whats the difference between volume and liquidity? stop regurgitating stuff you read somewhere else

 

[TAjammy]

well, volume just means buyers=sellers, liquidity is basically when you can easily exit/ enter positions,it's going to be hard to buy into millisecond trades done by algos

 

[mr.marcus]

well, volume just means buyers=sellers, liquidity is basically when you can easily exit/ enter positions,it's going to be hard to buy into millisecond trades done by algos

...volume is when a transaction has occured...liquidity is potential for a transaction to occur.

...volume can be opening or closing of postions....if it is opening then this will play apart in future liquidty at some point....where volume has been doesnt tell you where liquidty will be....contrary to what some VAP traders would like to believe.

 

[pedro01]

How is this bad?
They are providing extra liquidity to the system,all these moves are liquidity induced,not information induced and they are self defeating eventually.
Just like statistical arbitrage.

If this is front-running, then the liquidity for the trade in question is already there.

On the buy side, they would get in ahead of your trade - soak up the shares & then pass them to you a tick higher.

 

[rathcoole_exile]

yes but for every Long who would lose in this way, surely there'd be a Short (entrant) who would benefit ?
and if like me, you only used resting Buy Stops as your Long entries, surely you'd get swept up in the GS tide and carried North, which can only be good ?

 

[pedro01]

yes but for every Long who would lose in this way, surely there'd be a Short (entrant) who would benefit ?
and if like me, you only used resting Buy Stops as your Long entries, surely you'd get swept up in the GS tide and carried North, which can only be good ?

If you have a stop order, in theory GS could have you in the market by going a tick higher when there isn't the 'real' momentum to carry it further. If the real order would have gotten in at 20.10 instead of 20.09 because of GS front running, it's not necessarily a good thing that your 20.10 order gets triggered

 

[rathcoole_exile]

Pete, I don't want to argue about this. Basically I'll just give you a slap in the pub next time I see you and you"ll agree that I'm right.
How does that sound ?

Friday night ? :cheesy: