19 July 2018
Paul Penrose


Paul Penrose - Finextra

307Posts 1,376,606Views 248Comments


A place to share stuff that isn't at all fintec related but is amusing, absurd or scary.

Don't give up the day job...ever

20 May 2010  |  6103 views  |  0

Just stumbled across this jaw-dropping anecdote from a NY Times article on the May 6 Flash crash:

The founder of Tradebot, in Kansas City, Mo., told students in 2008 that his firm typically held stocks for 11 seconds. Tradebot, one of the biggest high-frequency traders around, had not had a losing day in four years, he said.

Tradebot, incidentally, was one of the auto-trading outfits that decided to shut up shop when the Dow fell off a cliff early this month.

As Finextra concluded at the time: The HFT's routine defence against regulatory restrictions is that they provide a valuable source of liquidity during times of extreme market distress. This deep well of liquidity suddenly seems a little shallow.

In their first joint report into the cause of the crash, the SEC and CFTC pointed merely to market dislocations and had little to say about the influence of machine-based trading programs on the Dow plunge.

This caused democratic Senator Ted Kaufman to issue the following statement: "Why on May 6 did our markets for 20 minutes stop performing their essential function: discovering the prices of securities based on a balance between buyers and sellers?  The answer, I suspect, remains wrapped up with the fact that 70 percent of the daily trading volume is by black-box computers that, for the most part, do not care about the intrinsic value of the stocks underlying their trades."

It appears that the global stock markets have moved away from their original remit and mutated into a grotesque hi-tech casino, over which the regulators have Canute-like influence.

One thing's for sure, a market that can suffer an intra-day 1000 point swing is no longer a safe place for small investors - unless the ability to buy Apple shares at $100,000 a pop floats your boat.

So, with equity premiums looking like a thing of the past, near-zero interest rates for savers and the bond markets an accident waiting to happen, small investors may as well put their retirement funds in the mattress. For those of you counting the days to retirement and a comfortable pension, my advice would be: Don't give up the day job...ever.

TagsTrade executionWholesale banking

Comments: (0)

Comment on this story (membership required)

Latest posts from Paul

ANZ and Visa lose the plot

30 June 2011  |  6857 views  |  0 comments | recomends Recommends 0 TagsMobile & onlineRetail banking

Don't give up the day job...ever

20 May 2010  |  6103 views  |  0 comments | recomends Recommends 0 TagsTrade executionWholesale bankingGroupWhatever...

Now we are ten

19 April 2010  |  6473 views  |  3 comments | recomends Recommends 0 TagsRetail bankingWholesale banking

Finextra's Best of the Web

05 March 2010  |  5982 views  |  1 comments | recomends Recommends 0 TagsRetail bankingWholesale banking

The ATM was the last great financial innovation

25 February 2010  |  10136 views  |  8 comments | recomends Recommends 0 TagsRetail bankingWholesale bankingGroupFinance 2.0

Paul's profile

job title Head of Research
location London
member since 2007
Summary profile See full profile »
I'm responsible for editorial content and quality control across the full range of Finextra media.

Paul's expertise

Member since 2006
307 posts248 comments

Who's commenting on Paul's posts