-- Posted Friday, 31 July 2009 | Digg This Article
| | Source: GoldSeek.com
Rick’s Picks
Friday, July 31, 2009
“Phenomenally accurate forecasts”
Sadly, another venerable American institution has lost its way: the New York Stock Exchange. We read the other day that the Exchange is building a fast-trade hub in northern New Jersey that supposedly will help secure its future in an increasingly electronic world. But raising capital for companies that could presumably help Build a Better Tomorrow is nowhere on their agenda. In fact, “fast trading” will be about as helpful in achieving that goal as placing five hundred slot machines in the NYSE’s lobby. Instead of one-armed bandits, however, the Exchange will be installing in its new Mahwah facility some very sophisticated computing equipment that will allow hedge funds and other firms to engage in high-frequency trading.
This type of trading is all the rage these days, and the firms who do it will be trying to get the jump on other traders who lack the hardware to execute scores or even hundreds of transactions in mere seconds. Firms on the cutting edge will be better able to exploit order flow in ways that traders could not have imagined even five years ago. Our guess is that fast trading was invented by the same geeks who gave us program trading. Who’d have imagined they could one-up themselves with yet a new game to further destabilize the markets? The NYSE will say that more efficient markets will better serve the public. Having worked on an exchange floor ourselves for a dozen years, we think fast trading will better serve white collar criminals whose tactics have yet to be imagined by the regulators.
Stick to ‘Gambling and Prostitution’
It would be bad enough if the NYSE viewed fast trading as just another profit center. Unfortunately, the Exchange sees it as its bread and butter. “When people talk about the New York Stock Exchange, this is it,” NYSE Euronext co-CIO Stanley Young told a reporter. “This is our future.” We suspect that Young will be proven wrong, and in a big way. For one, we see fast trading as so far-removed from the Exchange’s core mission that it cannot possibly come to any good. Like Vito Corleone, the NYSE should stick to its brand of gambling and prostitution, passing up the hard-core “drug” of high-frequency executions. Moreover, we have our doubts that the trading is a growth industry. Until recently, trading in financial derivatives alone created a paper market aggregating into the hundreds of trillions of dollars. How can this be when all the goods and services produced on the planet are valued at only $60 trillion or so? Clearly, this game cannot continue. Nor will it. It is in fact the reason why deflation is wringing out the global financial system, bringing speculation back into line with real economic activity. The process has a long way to go, and we doubt it will long abide the feather merchants’ latest scheme, fast trading.
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Midnight Briefing
There’s good news for traders who were unable to attend the Morning Briefings that Rick held in June before the opening bell. To gauge demand for a late-hours briefing, especially from traders in Europe and Asia, Rick will hold a Midnight Briefing on three successive days next week: Tuesday, Wednesday and Thursday, August 4,5 and 6, starting just after midnight EDT. Click here to sign up.
These 20-minute sessions will begin at 12:01 a.m. EDT (GMT-5:00). During this time, we will attempt to identify timely trading opportunities mainly in the E-Minis and Comex Gold. Last month’s briefings were enormously popular, drawing as many as a thousand traders on some mornings. To reserve a place, register now.
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Rick's Picks publishes a daily trading newsletter for gold, stock, commodity, and mini-index traders 240 times per year. Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers' initials will be used unless express written permission has been granted to the contrary. All Contents © 2009, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Friday, 31 July 2009 | Digg This Article | Source: GoldSeek.com
