As one who takes a certain pleasure in ironic reflexivities, and is none too fond of the current system of high frequency computerized trading (HFT), I am amused to hear that the high-speed exchange, Bats Global Markets (BATS), was compelled to cancel its initial public offering (IPO) today because of errors in its own computer system which, incidentally, forced a halt in trading Apple! I hope that this will encourage further scrutiny of the HFT enterprise–not only because of their ability to radically move the market, sometimes in out-of-control ways, but also because of the advantage they enjoy by placing (and canceling) stock orders thousands of times a second, capitalizing on information about (intended and realized) trades seconds before everyone outside the HFT loop. Stock valuations have little to do with it. It is said that these densely-packed trading systems maximize the speed of trading to something close to the speed of light—correctly determined, I assume. Continue reading
1. Not Phil’s Stock World. It seems that someone has confused my PhilStock musings with a real (for-profit) stock-market site run by a guy named Phil. Phil’s Stock World, at http://www.philstockworld.com, calls itself “high finance for real people,” which may distinguish it from being for the computerized robots that conduct roughly 70 percent of all trading. These days the robots are reading their own reports, generating further “structured” data that are folded into “narratives” tailored to the target audience of the moment.
What I’d like to know is whether programmers endow computerized traders with the same superstitions as their human counterparts. [i] When you consider that stock-trading “experts” are not accountable for predictions that don’t pan out, it is easy to see why superstitions are common among traders. (Even a rare trader, such as myself, would need to take them into consideration simply because of the psychology of others.) You only need to follow what the 5-to-8 key market reports say about the same stock on the same day to see that they’re all over the map. Anyway, listen to Phil if you wish, but don’t forget my standard caveat for PhilStock: Never take any stock advice from me.[i]
2. Diamond Offshore (DO). DO, the stock metaphorically tied to this blog’s deep-drilling excursions into statistical foundations—and reported at $60 in my December 20, 2011 post—is now up to around $67! Continue reading
Anyone who trades in biotech stocks knows that the slightest piece of news, rumors of successful /unsuccessful drug trials, upcoming FDA panels, anecdotal side effects, and much, much else, can radically alter a stock price in the space of a few hours. Pre-market, for example, websites are busy disseminating bits of information garnered from anywhere and everywhere, helping to pump or dump biotechs. I think just about every small biotech stock I’ve ever traded has been involved in some kind of lawsuit regarding what the company should have told shareholders during earnings. (Most don’t go very far.) If you ever visit the FDA page, you can find every drug/medical device coming up for considerations, recent letters to the company etc., etc. Continue reading
A couple of months ago I was about to start an “other blog” (as Google calls it), this one on philosophical reflections on the stock market (PhilStock), but as I cannot even keep up one blog, I wisely discarded that idea after a single post (on high speed trading). So if I dip into that area on this blog, I will warn readers with the “Phil Stock Blog” tag[i]. First and last rule on PhilStock: Never listen to anything I say about the stock market.