Trading on Wall Street:

Discussion in 'Politics, Religion, Social Issues' started by eric/, Aug 6, 2012.

  1. eric/ Guest

    eric/

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    #1
    Thought you guys would find this interesting:

    Link

    There's much more, but hopefully you get the basics.

    I think this is pretty crazy. It essentially is the beginning of eliminating humans from stock trading. No person can keep up with nano-second trades.

    Does anybody else think that this is somewhat crazy/fishy? Perhaps the government should be investigating this?
     
  2. eric/ thread starter Guest

    eric/

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    #2
    Here is the TL;DR why you should care version:


     
  3. P-Worm macrumors 68020

    P-Worm

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    #3
    Being someone that dabbles in stock trading, I have wondered about the future of this kind of trading. On one hand, I could see both sides of nano trading beating each other back and to the people that plan to hold the stock for years (instead of nanoseconds) will ride the stock as normal.

    But the other side of me sees the need for regulation. Is this kind of trading even considered investing? The point of the stock market is to buy pieces of companies and then as the business grows, your investment grows with it. The basic premise is that an increase in revenue/earnings/etc. makes the company more attractive as a potential buyout and therefore the share price increases to match this demand.

    Nano trading doesn't take any of this in to account and it isn't really investing. The only thing it is going to accomplish is to add technical glitches to the system (two flash crashes have happened in the past year and a half with the last one about a week ago). These kind of irrationalities in the market are not unexpected, but we should try to avoid them if possible.

    P-Worm
     
  4. mudslag macrumors regular

    mudslag

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    #4
    Trader here, I hate those asshats. Iv gotten run over a few times by them trading at night but if I was on the other side of that coin making that chedder, Id be loving it.

    I know there have been calls for everything investigating it high frequency trades to shutting them down. It is a conundrum.
     
  5. rdowns macrumors Penryn

    rdowns

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    #5
    Slap a tax on frequent traders and specifically earmark the funds for debt reduction.
     
  6. senseless macrumors 68000

    senseless

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    #6
    Yes. The next crash will be from some massive computer trading fiasco.
     
  7. eric/ thread starter Guest

    eric/

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    #7

    It's somewhat already happened. It's what recently happened with Knight Capital (I think that's what it was called). And if you read the article they mentioned that it happened with the Dow in 2010.

    I think that this sort of trading just needs to be banned, but the problem is that it would need to be banned world wide.

    The point of the stock market is to invest in a company, and hopefully that investment grows over time and you make money.

    This completely undermines the point of the stock market. :mad:
     
  8. VulchR macrumors 68020

    VulchR

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    #8
    This is a recipe for disaster. There should be taxes or transactions fees that curtail this kind of nonsense....
     
  9. NT1440 macrumors G4

    NT1440

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    #9
    Watch, everyone, and understand the significance of humans no longer (for quite some time now) controlling the societal mechanisms that dictate economics and their cyclical collapse. The future is the same boom-bust cycle as capitalism always follows, but at a speed we truly will be unable to understand (face it, none of it was at a scale comprehendable before).

    http://www.ted.com/talks/kevin_slavin_how_algorithms_shape_our_world.html
     
  10. eric/ thread starter Guest

    eric/

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    #10
    Well I don't necessarily think that blaming capitalism is a solution or the answer here. But I'll check out the video.
     
  11. mcrain macrumors 68000

    mcrain

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    Out of curiosity, is Wall St. even capitalism? It certainly doesn't seem like it. It's a secondary market that has little to no relationship with the ownership interests in the companies supposedly represented.
     
  12. P-Worm macrumors 68020

    P-Worm

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    #12
    Well, in many ways it does have relationship to the value of a company. As I said above, higher revenues and income makes the company worth more in actual dollars. And the more it's worth, the more a private person may want to have this company. In fact, the Best Buy creator is considering purchasing the entire company back and make it a private business again. In many ways, the value of the share price really is related to the value of the company.

    Think of it this way. Apple makes billions a year. The share price right now is about $620/share and with roughly a billion shares out there, has a total price of $620 billion. (As a note, this number is off. There aren't actually a billion shares out there right now, so their total value is actually $582 billion. I just said a billion shares to make the following math easier).

    Let's say that Apple's share price was actually $0.001/share. That would make the company as a whole worth (0.001)*(1billion) = $1 million. With a share price like that, you would be stupid not to buy the ENTIRE company for around $1 million because after a single quarter you would make plenty more than that back.

    Although it is popular to say that the stock market is totally removed from the company, that just isn't true. The market does absolutely irrational things with the share price of companies to be sure, but investing really is investing.

    P-Worm
     
  13. Rodimus Prime macrumors G4

    Rodimus Prime

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    #13
    yep. I agree. This is just asking for trouble. It means way to much money can be lost way to quickly causing wide spread problems. Plus they are gaming the system. THe next true panic will be caused by computer error.
     
  14. VulchR macrumors 68020

    VulchR

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    I wonder if it will come through hacking. Indeed, I wonder if some of the recent 'glitches' in bank software weren't actually hacks, and the authorities are just keeping it quiet so as not to further upset the economy.
     
  15. mcrain macrumors 68000

    mcrain

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    #15
    There is no question that the values in the market are related to the perceived value of the company, but all that is actually happening is people who buy and sell stock are betting on whether the market stated value will go up or down, or if the company will be profitable enough to issue dividends.

    My buying of 100 shares in AAPL doesn't necessarily have any direct relationship to the value of the corporation. The price is not set by the buyer or seller, but by the "market." It's gambling. Nothing more.
     
  16. NT1440 macrumors G4

    NT1440

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    Capitalism, plain and simple, can only exist where resources are infinite because its very nature is infinite growth or death.

    We need a new system.

    Keep in mind I'm talking about timescales that go generations ahead, we'll need to transition away from the ever expanding boom/bust cycle or it will fall like the house of cards that it is.
     
  17. eric/ thread starter Guest

    eric/

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    #17
    Capitalism is simply the private ownership of the means of production.

    We have capitalism, resources on this planet have never been infinite.

    So I don't really understand your point, or how it relates to this thread.

    The reason there is a boom in bust cycle is =/= capitalism.
     
  18. Ugg macrumors 68000

    Ugg

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    #18
    Perhaps what he really means is that human population is leveling off and human capital is shrinking while natural resources are becoming more expensive to exploit.
     
  19. hulugu macrumors 68000

    hulugu

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    #19
    I don't think this is true, the boom and bust cycles can be illustrated even before the 17th century tulip mania. Can you provide a source for this claim?

    Without serious changes in resource consumption, we either need a robust space program or we're in trouble.
     
  20. firestarter macrumors 603

    firestarter

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    While the volume and the automation is new, the concept of exploiting small differences in pricing is called 'arbitrage' and it's been around for ever. Arbitrage is absolutely essential in order to create a working financial market... arbitrage forces price equivalence across different instruments and creates liquidity.

    You might not know this, but often news of single large orders is held back on exchange-traded deals in order to not perturb the market.

    The financial markets are a technology arms race. One guy might exploit a new technique - but it won't be long before that opportunity gets shut down either though regulation or better market data (it wouldn't surprise me if the pricing data companies acted to aggregate and report on these micro-trades).

    I don't think this technique is anything to panic over.
     
  21. VulchR macrumors 68020

    VulchR

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    Except if a bunch of these organizations start doing this and create instability that leads to volatility that is even further divorced from the actual financial health of companies than we experienced before the 2008 crash. Anything that turns markets into gambling casinos rather than investment mechanisms is a bad thing, and just because this type of gambling has heretofore been allowed does not make it safe or useful.
     
  22. eric/ thread starter Guest

    eric/

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    #22
    I didn't make a claim, you did. Provide a source that capitalism = boon+bust.
     
  23. Zombie Acorn macrumors 65816

    Zombie Acorn

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    50% tax rate on stocks bought and sold within 2 minutes.
     
  24. hulugu macrumors 68000

    hulugu

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    #24
    So, basically we're doing the "nah'uh ya'ha!" thing.

    If you review the thread, you'll see that you made the claim. Please provide sources for your argument.

    If this is just your opinion, can you explain why you think this is true, especially considering that boom and bust cycles appear in markets throughout history, the Dutch "tulip mania" being one of most obvious.
     
  25. eric/ thread starter Guest

    eric/

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    #25
    The fact that it exists =/= capitalism caused it.

    I didn't make the claim, you did.
     

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