Tag Archives: Flash Boys

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Fintech Startup Alpha Trading Labs Brings HFT to Retail Traders

Alpha Trading Labs, the Chicagoland fintech “crowd sourcing startup” has thrown the gauntlet down and threatens to democratize the sacred world of HFT wonks, those hoodie-wearing quant jocks who occupy $1mil per yr cubicles at high-frequency trading firms like Virtu, Citadel, Jones Trading, Hudson Trading, and Two Sigma (among others). You know who mean, those cool kid computer wizards who make their bosses billions (or at least tens of dozens of millions) using computer-generated trading schemes. That’s right, Matilda (and you Mark, Mary, Max, Moshe, Mel, and Melissa) and everyone else who aspires to be a Flashboy (or Flashgirl), can jump into the fray thanks to serial fintech entrepreneur Max Nussbaumer.

max-nussbaumer
Max Nussbaumer, Fintech Entrepreneur

While the criteria to be accepted into the new program sponsored by fintech startup Alpha Trading Labs is not nearly as simple “High Frequency Trading for Dummies“, if you’ve got a reasonable thesis as to trading strategy and are reasonably computer literate, each of you can become a quant jock now! No more merely dreaming about having command and control of the same HFT weapons deployed by those ‘secretive prop trading firms’ that make fractions of pennies tens of thousands of times per day while trading cross the electronified world of stock, options and futures trading.

Per excerpt from WSJ trading markets reporter Alexander Osipovich’s latest piece, “Alpha Trading Labs is throwing its system wide open, with a programming tool kit that anyone can use to access high-powered trading machines.The company, which launched its do-it-yourself platform in January, has invited anyone with a trading idea and coding skills to try it out. Those who craft successful algorithms can get a chance to run them and share profits with Alpha Trading Labs, whose owners have up to $100 million to allocate to crowdsourced trading strategies..”

Chicago-based Alpha Trading Labs says it will execute trades through computers housed in the data centers of Nasdaq Inc., the New York Stock Exchange and other markets, a practice known as “co-location.” For those not aware, HFT firms use co-location to execute trades without being slowed down by the need to transmit electronic signals over long distances.

Alpha Trading Labs’ main investor is CMT Group , a firm founded by two veteran traders in 1997, with businesses that now run the gamut from high-speed trading to venture capital to real estate. It was an early investor in Dollar Shave Club, the razors-by-mail service acquired by Unilever PLC for $1 billion in 2016.

Read the full story at the WSJ via this link

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NYSE Uses Sharp Elbows to Box Out IEX; Hijacks Technology

The electronic exchange playing field is not for boy scouts. All is fair in love and war. That’s the message NYSE is sending to upstart “Investors Exchange” aka IEX, as the world’s most formidable financial market trading platform is simultaneously lobbying SEC regulators to block IEX’s application to be designated as a full blown exchange because its speed bump technology slows down important liquidity providers from the HFT world, and at the same time, ICE-controlled NYSE Group is picking the pockets and hijacking IEX’s most compelling order technology for its own use. IEX, which developed a new discretionary peg order type known as “D-Reg” and designed to deliver even sharper pricing for those executing block trades is a secret sauce that purportedly delivers a noticeable $68k in savings on a typical $1bil portfolio execution strategy. Pennies perhaps, but pennies add up when being counted by both buy-side and sell-side commission revenue bean counters. And it’s the buyside who count the most, simply because they provide the fuel that feeds the Wall Street trade execution engine.

In case you’ve been asleep for the past several years, IEX, whose brand was burnished when the firm was profiled in the HFT-slam book “Flash Boys”, is backed with nearly $100mil provided by buy-siders for this value proposition: “Unlike all other U.S. equities trading venues, IEX does not adhere to the principle of price-time priority. Instead, the IEX prioritizes orders by price, followed by broker trades, and lastly time.”

When considering the not-so-subliminal Bronx Cheer filing made recently by NYSE to SEC to promote a new application based on IEX technology, the NYSE unabashedly stated: “we want to create a new order type based on IEX technology. The new order would allow market participants “to serve their customers better, thereby protecting investors and the public interest,”

Brad Katsuyama, IEX
Brad Katsuyama, IEX

Fintech wonks might like to believe that intellectual property means something that protects proprietary innovation that others cannot infringe on, but in the regulated world of financial markets, the so-called “what is in best interests of investors” always trumps IP. The take-away message for Brad Katsuyama, the former electronic trading and sales wonk for RBC Capital Markets and brain child of IEX of the ‘altruistic’ platform backed with nearly $100 mil thanks to a group of buy-side flavored investors  “All is fair in love and war when it comes to so-called intellectual property within the world of regulated financial markets.”

IEX investors include an assortment of buy-side firms, along with world-famous technology entrepreneurs and even casino magnate Steve Wynn. That said, MarketsMuse curators have a personal note for Wynn:

Dear Steve: Good news. Playing in the world of electronic stock markets is a contact sport. Get your elbow pads on.”

Gretchen Morgenson of the New York Times tells the story in detail via her 10 April NYT column here

 

Watch Out Wall Street-The Big Short is Coming

For Wall Street bankers and brokers who have been in the business since at least the early 2000’s and are still working on the Street, and who think you’ve already been pilloried plenty for the work you do, watch out, former Lehman broker-turned best-selling author Michael Lewis (“Liar’s Poker“, “Money Ball“, “Flash Boys“) isn’t finished with you just yet.

The film adaption of Lewis’s 2010 best selling book, “The Big Short: Inside the Doomsday Machine,” a story that seeks to encapsulate the Wall Street culture and practices that some (not all) believe were responsible for the 2008 financial crisis, is coming to a theater near you.

Starring Christian Bale, Steve Carell, Ryan Gosling and Brad Pitt,  MarketsMuse movie critic has eyes on the December 2015 Netflix schedule, only because we thinketh this movie might be a prime candidate for dual-listing in order to hedge against lots of competition during the movie industry’s peak selling season.

Market Structure: The Great “Flash Boys” Debate and Putting the Genie Back in The Bottle

tumblr_m66pvmdFe61rog4ypo1_500  MarketsMuse Editor Note:  Though we typically focus on using a high-touch approach to aggregating the more topical  and poignant ETF, Options and Macro-Strategy news items, the  nearly never-ceasing diatribes re market structure and the impact of “high-frequency trading” which has either been incited or simply elevated by Michael Lewis’s book “Flash Boys” inspires us to distill the multitude of most recent opinion articles and punditry promoted by the ever-increasing universe of “content experts.”

In that spirit, we point our readers to 2 different pieces worth picking over:

1. For the ETF-focused audience, this week’s published comments from ETF.com’s Dave Nadig, “Great Flash Boys Idea IEX Doesn’t Matter” is a solid read for RIAs and the universe of investment managers who use exchange-traded funds. As always, Dave frames his observations and insight in a thoughtful, non-conflicted and erudite manner. Here’s the link to the ETF.com posting.

2. For institutional equity fund managers, institutional equity brokers and whomever else might be intrigued by the latest “survey of capital market professionals” conducted by ConvergEX, one of the major institutional order execution platforms. Their study finds that 70% of those canvassed believe the market structure is “unfair” to them. The study was published this week and since re-published by an assortment of industry media websites, including TABB Forums, and starts with the following: Continue reading