Surprise! The Markets Are ‘Rigged’

‘THE MARKETS ARE RIGGED…’

High Frequency Trading Comes Under Fire as Feds Launch Probe

By Jerry Robinson 

FTMDaily.com – It is no secret that many Americans have lost faith in the financial markets. Now, a new book written by Michael Lewis entitled Flash Boys: A Wall Street Revolt, is exposing (in layman’s terms) one of the most pernicious schemes plaguing the U.S. stock market: HIGH FREQUENCY TRADING.

In the old days, trading on the stock exchanges involved lots of people shouting out buy and sell orders in a trading pit. But in today’s increasingly computerized world, financial trading has become highly sophisticated with more than half of the entire stock market controlled by computerized high frequency algorithmic trading.

According to author Michael Lewis, who has researched the practice of high frequency trading in-depth, the U.S. stock market is ‘rigged,’ thanks to the practices employed by these high frequency traders. Through collusion with stock exchanges and big Wall Street banks, high frequency traders have reportedly cost average retail investors and traders billions of dollars in lost profits.

The release of Lewis’ book, and his appearance on 60 Minutes, comes as the FBI has launched a probe into whether high frequency trading firms are guilty of insider trading, due to their use of fast-moving market information unavailable to other investors.

The FBI’s investigation comes on the heels of a similar probe by the SEC and the CFTC into the practice of high frequency trading.

As an active trader, the practice of high frequency trading is something that I have been keenly watching for many months. I plan on reading Lewis’ book this week and learning more of his findings. I’ll report my thoughts in an upcoming briefing.

Until tomorrow,
Jerry Robinson

http://ftmdaily.com/daily-briefing/040114/

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