This is why Wall Street gives its IT people 100k+ bonuses...

[mawilson 2,133]

Interesting and depressing at the same time.

What's so depressing about it?

Because this is a story of how money is made without any value being added.

I wouldn't say that. Wall Street drives technological innovation to make low-latency high-volume trading possible.

The Che-worshippers will always diss what they do not understand.

[Heracles 417]

My friend's salary working in IT on wall street hit about $300K this year. The guy has so much money he doesn't know what to do with it. For example, he flew down the other day and spent about $1.5k and wasn't even here for 16 hours.

[mawilson 2,133]

My friend's salary working in IT on wall street hit about $300K this year. The guy has so much money he doesn't know what to do with it. For example, he flew down the other day and spent about $1.5k and wasn't even here for 16 hours.

$300K seems like a lot of money in NYC until you start looking at property values; then you realize

you need a lot more money to be able to afford a half-decent place.

[w¡n9Nµ7 §£@¥€r 123]

My friend's salary working in IT on wall street hit about $300K this year. The guy has so much money he doesn't know what to do with it. For example, he flew down the other day and spent about $1.5k and wasn't even here for 16 hours.

$300K seems like a lot of money in NYC until you start looking at property values; then you realize

you need a lot more money to be able to afford a half-decent place.

True, $300k a year isn't great money if you want to live in Manhattan.

[Nik+Heather 121]

Interesting and depressing at the same time.

What's so depressing about it?

Because this is a story of how money is made without any value being added.

I agree, it sounds to me like they are just gaming the system.

[mawilson 2,133]

My friend's salary working in IT on wall street hit about $300K this year. The guy has so much money he doesn't know what to do with it. For example, he flew down the other day and spent about $1.5k and wasn't even here for 16 hours.

$300K seems like a lot of money in NYC until you start looking at property values; then you realize

you need a lot more money to be able to afford a half-decent place.

True, $300k a year isn't great money if you want to live in Manhattan.

Roughly 40-50% of it is lost to taxes (Federal + State + NYC taxes).

You're left with $150k in a city where you need $4-5k a month to rent a 3 bdrm apartment.

If you have a car, that's another $1000 a month (parking + insurance).

If you can save $80k a year, in 5 years you'll have enough for a 20% down payment on a $2M apartment.

Edited July 24, 2009 by mawilson

[Heracles 417]

He doesn't pay as much tax as he is on a temporary visa. He pays zero SS. He also gets to claim his rent.

He managed to save $100k in a year. This guy eats out every meal and has the latest stuff. This guy is by no mans frivolous. For example, he has a cell phone and data plan with every carrier. Latest diesel clothes of course etc etc.

Edited July 24, 2009 by haza

[Mr. Big Dog 10,747]

Interesting and depressing at the same time.

What's so depressing about it?

Because this is a story of how money is made without any value being added.

I wouldn't say that. Wall Street drives technological innovation to make low-latency high-volume trading possible.

Yes, and space travel brought us more comfortable matresses and pens that write upside down.

Edited July 24, 2009 by Mr. Big Dog

[Mr. Big Dog 10,747]

Interesting and depressing at the same time.

What's so depressing about it?

Because this is a story of how money is made without any value being added.

I agree, it sounds to me like they are just gaming the system.

Sounds to me a bit like insider trading - you have access to and act on information not yet available to the market at large. Not sure why one is illegal and the other isn't.

[mawilson 2,133]

Sounds to me a bit like insider trading - you have access to and act on information not yet available to the market at large. Not sure why one is illegal and the other isn't.

No, it's not like that. The information *is* available, but some firms have faster connections than others.

If you send an order to the exchange to buy X shares of company Y and your order gets filled, it's possible

that some other firm will see the trade print before you do and react on it (before you do.)

[Dan J 277]

Interesting and depressing at the same time.

What's so depressing about it?

Because this is a story of how money is made without any value being added.

I wouldn't say that. Wall Street drives technological innovation to make low-latency high-volume trading possible.

There are other things that would drive innovation for low latency computer systems.

Markets do add some value to the economic system, in helping money and capital flow between banks and companies. But Its getting to the point where the trading companies on wall street exist not to facilitate trading, but to exploit as much wealth as possible by manipulating the markets. At one point, we used to call manipulating the price of a stock, securities fraud.

I suppose once all the traders get down to nanosecond trading, no one will be able to get an advantage over anyone else as all trades will happen faster than a computer can manipulate.

[Mr. Big Dog 10,747]

Sounds to me a bit like insider trading - you have access to and act on information not yet available to the market at large. Not sure why one is illegal and the other isn't.

No, it's not like that. The information *is* available, but some firms have faster connections than others.

If you send an order to the exchange to buy X shares of company Y and your order gets filled, it's possible that some other firm will see the trade print before you do and react on it (before you do.)

From the same article - and this is what triggered my statement:

While markets are supposed to ensure transparency by showing orders to everyone simultaneously, a loophole in regulations allows marketplaces like Nasdaq to show traders some orders ahead of everyone else in exchange for a fee.

Edited July 24, 2009 by Mr. Big Dog

[mawilson 2,133]

From the same article - and this is what triggered my statement:

While markets are supposed to ensure transparency by showing orders to everyone simultaneously, a loophole in regulations allows marketplaces like Nasdaq to show traders some orders ahead of everyone else in exchange for a fee.

I'm not aware of this loophole. Nasdaq offers different subscription packages and the more expensive

ones include more information.

The most detailed one (full depth by order) that I'm aware of is the TotalView data feed.

If there's a better feed, I'd like to know about it.

NASDAQ Data Feeds

[ready4ONE 5,400]

Wall Street on Speed

Robert Kuttner

Co-Founder and Co-Editor of The American Prospect

Posted: July 26, 2009 09:19 PM

The New York Times recently reported that the latest scheme--or scam--on Wall Street is something called High Frequency Trading. Very sophisticated financial firms, such as Goldman Sachs, are tipped off by the New York Stock Exchange's own computers to pending buy and sell orders. Armed with ultra sophisticated computer algorithms, the insiders anticipate the direction of the market based on what they learn about supply and demand for a given security. They can make an extra penny here and an extra penny there at the expense of us suckers, adding up to billions.

"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," wrote the Times' Charles Duhigg in a front page piece that was the talk of New York and Washington. "High-frequency trading is one answer."

As debates in the blogosphere in the last couple of days have made clear, there are a couple of possibilities of what is at work here. One is that Goldman and others are literally using privileged information to make trades ahead of markets, in which case they are committing a felony. Specifically, the abuse is known as "front-running," or trading ahead of customers, and it is an explicitly illegal form of market manipulation. Front running is epidemic on Wall Street--the whole point of an investment bank trading for its own account is to take advantage of its specialized knowledge of markets--and the SEC or the Justice Department shuts down front-running when it becomes too blatant to ignore.

The other possibility is that the Goldmans of the world have found themselves a nice loophole. Tapping into the Stock Exchange's own computers and other sources of trading activity is something that anyone in theory could do, but only a few privileged insiders have the sophistication to exploit what they find. Often orders are placed, only to be cancelled. Their purpose is to figure out what the market is willing to pay, and then get in ahead of it.

But suppose that High Frequency Trading doesn't violate any law. It still is the essence of what's wrong with the recent metastasis of money markets into private game preserves for insider-traders.

Consider for a moment some first principles. The legitimate and efficient function of financial markets is to connect investors to entrepreneurs, and depositors to borrowers. There is no legitimate reason whatever for this to be done by the millisecond. At bottom, the process is pretty simple. The intermediary--the bank, savings institution, or investment bank makes its fees for making a judgment about risk and reward. How likely is the loan to be paid back? How high an interest rate should it charge? How should a new issue of securities be priced? The investor decides whether to indulge a taste for risk or for prudence.

But the hyperactive trading markets and creations of recent decades such as credit default swaps and high speed trading algorithms add nothing to the efficiency of financial markets. They add only two things--risk to the system, and the opportunity for insiders to reap windfall profits.

Therefore, whether or not Goldman's lawyers have figured out how it can engage in High Frequency Trading and stay within the law, there is a strong case that this entire brand of financial engineering should be prohibited. The whole game should be slowed down. Bona fide investors should get in line under the rule of first come, first served. Anything else should be considered illegal market manipulation. No dummy transactions. There is absolutely no gain to economic efficiency from having prices of securities change in milliseconds, and much gain to the opportunities for manipulation.

The need to restrain traders from exploiting their privileged knowledge is an old fight. During the New Deal, for example, many reformers proposed that floor specialists for investment bankers and brokerage houses simply be prohibited from trading for their own accounts. They should be there simply to execute buy and sell orders for customers. Otherwise, the conflict of interest would be overwhelming--and this was before computers. These reformers were overruled, but insider trading was explicitly prohibited (and good luck catching it.)

Now, as then, it is a mark of Wall Street's stranglehold on politics that the most sensible of remedies seem impossibly radical. One very good way to damp down the dictatorship of the traders, and raise some needed revenue along the way, would be through a punitively high transactions tax on very short term trades. Genuine investors should get favored fax treatment. Pure traders should be taxed, and very short term manipulation taxed into oblivion.

If the financial crisis has proven anything, it is that capital markets have become an insiders' game in which trading profits crowd out the legitimate business of investment. The whole business-models of the most lucrative firms on Wall Street are a menace to the rest of the economy. Until the Obama administration recognizes this most basic abuse and shuts it down, it will be more enabler than reformer.

Robert Kuttner is co-editor of The American Prospect, and a senior fellow at Demos. His recent book is Obama's Challenge.

http://www.huffingtonpost.com/robert-kuttn...d_b_245121.html

[justashooter 430]

Interesting and depressing at the same time.

What's so depressing about it?

Because this is a story of how money is made without any value being added.

which is how we got ito this mess, in the first place.