High-Frequency Trading: A Sociologist’s Take

For Donald MacKenzie, individuals’ interactions with machines, mathematics and technology in competitive settings – and the risks that may ensue – are subjects of great fascination, whether in financial markets, bitcoin mining or nuclear weaponry.

MacKenzie comes at it not as a technologist, mathematician or engineer, but rather as a social scientist.

Professor Donald MacKenzie weighs the risks of models, algorithms, market concentration and jitter in this article by Katherine Heires and published on the GARP website. Read it HERE.

Goldman Sachs programmer has HFT code theft conviction overturned

From Finextra –

“Former Goldman Sachs programmer Sergey Aleynikov has had a conviction for stealing the bank's propriety HFT code thrown out for the second time.

State judge Justice Daniel Conviser overturned a jury verdict from May that found Aleynikov guilty of breaking a law called the "unlawful use of secret scientific material".

In a 72-page opinion, Conviser wrote that the programmer "acted wrongly" when he copied Goldman's HFT code when he left the firm in 2009 but that prosecutors "did not prove he committed this particular obscure crime".

This is the second time that Aleynikov has had a conviction overturned. He was first found guilty by a Manhattan jury in December 2010 of federal criminal charges relating to the theft of trade secrets and interstate transportation of stolen property. However, after serving little more than a year of his 97 month sentence, a US Appeals Court overturned the conviction.”

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British trader arrested and charged with helping cause 2010 'Flash Crash'

A United Kingdom trader has been arrested and will remain in custody, pending extradition to the U.S. to face criminal and civil charges that include wire fraud, commodities fraud, attempted manipulation and spoofing.

From USA Today –

“Alleged market manipulation by a London-based high-frequency trader helped cause the 2010 "Flash Crash" that roiled financial exchanges and severely tested investors' confidence, U.S. authorities said Tuesday.

Navinder Singh Sarao, 37, and his company, Nav Sarao Futures Limited PLC, used computer software to manipulate Standard & Poor's futures contracts through a practice known as "spoofing," according to the Commodity Futures Trading Commission and the Department of Justice.”

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Former Goldman programmer faces second trial over HFT code theft

From Finextra –
“Sergey Aleynikov, the former Goldman Sachs programmer who had a conviction for stealing the bank's propriety HFT code overturned is back on trial on charges related to the same incident.

Aleynikov was found guilty by a Manhattan jury in December 2010 of federal criminal charges relating to the theft of trade secrets and interstate transportation of stolen property. However, after serving little more than a year of his 97 month sentence, a US Appeals Court overturned the conviction.

Yet a State judge quickly ruled that double jeopardy does not apply and that New York prosecutors could make their own case against the Russian-born programmer because the charges are different. Aleynikov now faces a second prison term of between 18 months and four years, if convicted.”

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High-frequency trading might reduce liquidity, not boost it as its defenders claim

From The Economist
“In the wake of the publication earlier this year of “Flash Boys”, a book that criticised high-frequency trading (HFT)—the use of algorithms to buy and sell shares and other financial assets at vanishingly short intervals—regulators and investors have been debating whether and how to curb it. One mooted response is to introduce deliberate delays before trades are executed. Another is to shuffle the order in which they are processed. HFT firms maintain that no change is needed, on the grounds that they help to lubricate markets by increasing volumes and ironing out inconsistencies in prices. But a recent paper argues that they do indeed create inefficiencies and suggests a more fundamental reform to how markets operate in order to stave them off.

“Flash Boys” took HFT firms to task for a strategy called front-running. When an investor is buying or selling a big block of shares, it is common to split the order across multiple exchanges (say, the NASDAQ and the NYSE) in search of a better overall price. HFT algorithms can observe the order on one exchange and “front-run” the investor to the next one, buying up the available stock there and selling it to the sluggish investor at a higher price.”

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