JackLuis
Literotica Guru
- Joined
- Sep 21, 2008
- Posts
- 21,881
Former New York Stock Exchange Head Says That The Stock Market Is Rigged
But, but it's over regulated, isn't it?
But, but it's over regulated, isn't it?
Oh No, The Stock Market Rigged?
- Thread starter JackLuis
- Start date
- Joined
- Apr 29, 2015
- Posts
- 19,247
Anyone that thinks people are not smart enough to create volatility in the market in a matter of minutes are utter morons. I've talked to guys that will openly tell me they make more money when the market and the economy are doing poorly.
phrodeau
Literotica Guru
- Joined
- Jan 2, 2002
- Posts
- 78,588
The answer to that is it always has been rigged, and Grasso was right in the middle of it (and as a disclaimer, I work in the middle of the industry, I worked at the NYSE years ago, and have been in the cutting edge of electronic trading for for several decades).
Yes, flash trading, where they can execute trades in 17 microseconds (.00017 seconds), where people are pumping order volume through routing systems to various exchanges and executors, doing things like sending an order with a cancel a milisecond after), and as a result the market can fluctuate a lot, it can go down rapidly, could actually be manipulated to crash or go up (though there are regulators watching that). If a 'little guy' thinks in the short term he is going to beat these guys, they are likely to lose big time, short term trading, day trading, is a no win situation.
However, hate to tell people, but Grasso is lying through his teeth, because the markets have never been fair. For example, on an IPO, ever wonder why only heavy hitters seem to get in, why 'little people' never get in on the IPO price (with some exceptions)? It is because the shares all go to big players, the underwriting brokers and such have favored clients, and you don't get them (Google was an exception, they used a dutch auction and anyone could get in). The only time people get into IPO's is when brokers realize they are a turkey, and they are trying to dump shares from their own accounts onto suckers thinking they are getting something.
Grasso also is a big proponent of the specialist system, where specialists on the floor trade the stocks (which these days is kind of an anachronism; other than on IPO's, and for closing action, 85% of NYSE's traffic is executed by NYSE express, the electronic execution service, during the day the NYSE is primarily a giant TV studio for the financial channels.
Specialists were no bargain, they routinely did things like ignore a customer order to trade ahead of them for their own accounts (which they weren't supposed to do). Back then, they cold hold an order in their book for a pretty long period of time, so they would let customer orders languish, while they traded their own accounts, and often left the book holder with a higher price, plus specialist commission fees. They also did things they weren't supposed to, they have rules where individual investor orders/small orders are supposed to take precedence, especially during trading breaks, but what happens is someone comes over from the broker booths, with a large order, and the specialist is going to give them the better price over the small order guys (lot more commission, too, on a 3000 share order than a 100 one).
Basically, the market always has been rigged in favor of the big boys, nothing has changed. yeah, weird market breaks are a lot more possible today, the volumes, and the way these guys trade with algo systems and order routing across a wide variety of financial products, but it is no more or less rigged than it was back then, just differently.
In terms of investing, what was true back then is true today, if you trade in the short term you will get killed, I don't care what E trade ads say or TD Ameritrade and so forth. More importantly, you will do a lot better finding things like index funds and mutual funds for most of your investing, and then have the rest to play with. In the long term, you actually do a lot better in the markets this way, index funds beat out most investments over the long term. And if you find a fund paying out 20% steady through the years, get what you can, then sell out, so when it is found to be a ponzi scheme, you already got yours (and if you get out early enough, not likely to get clawbacked
.
Yes, flash trading, where they can execute trades in 17 microseconds (.00017 seconds), where people are pumping order volume through routing systems to various exchanges and executors, doing things like sending an order with a cancel a milisecond after), and as a result the market can fluctuate a lot, it can go down rapidly, could actually be manipulated to crash or go up (though there are regulators watching that). If a 'little guy' thinks in the short term he is going to beat these guys, they are likely to lose big time, short term trading, day trading, is a no win situation.
However, hate to tell people, but Grasso is lying through his teeth, because the markets have never been fair. For example, on an IPO, ever wonder why only heavy hitters seem to get in, why 'little people' never get in on the IPO price (with some exceptions)? It is because the shares all go to big players, the underwriting brokers and such have favored clients, and you don't get them (Google was an exception, they used a dutch auction and anyone could get in). The only time people get into IPO's is when brokers realize they are a turkey, and they are trying to dump shares from their own accounts onto suckers thinking they are getting something.
Grasso also is a big proponent of the specialist system, where specialists on the floor trade the stocks (which these days is kind of an anachronism; other than on IPO's, and for closing action, 85% of NYSE's traffic is executed by NYSE express, the electronic execution service, during the day the NYSE is primarily a giant TV studio for the financial channels.
Specialists were no bargain, they routinely did things like ignore a customer order to trade ahead of them for their own accounts (which they weren't supposed to do). Back then, they cold hold an order in their book for a pretty long period of time, so they would let customer orders languish, while they traded their own accounts, and often left the book holder with a higher price, plus specialist commission fees. They also did things they weren't supposed to, they have rules where individual investor orders/small orders are supposed to take precedence, especially during trading breaks, but what happens is someone comes over from the broker booths, with a large order, and the specialist is going to give them the better price over the small order guys (lot more commission, too, on a 3000 share order than a 100 one).
Basically, the market always has been rigged in favor of the big boys, nothing has changed. yeah, weird market breaks are a lot more possible today, the volumes, and the way these guys trade with algo systems and order routing across a wide variety of financial products, but it is no more or less rigged than it was back then, just differently.
In terms of investing, what was true back then is true today, if you trade in the short term you will get killed, I don't care what E trade ads say or TD Ameritrade and so forth. More importantly, you will do a lot better finding things like index funds and mutual funds for most of your investing, and then have the rest to play with. In the long term, you actually do a lot better in the markets this way, index funds beat out most investments over the long term. And if you find a fund paying out 20% steady through the years, get what you can, then sell out, so when it is found to be a ponzi scheme, you already got yours (and if you get out early enough, not likely to get clawbacked
.Similar threads
