|Broken Markets: How High Frequency Trading and Predatory Practices on Wall Street Are Destroying Investor Confidence and Your Portfolio||
Broken Markets: How High Frequency Trading and Predatory Practices on Wall Street Are Destroying Investor Confidence and Your Portfolio
|45.10||approx. 7-9 days|
The markets have evolved at breakneck speed during the past decade, and change has accelerated dramatically since 2007's disastrous regulatory "reforms." An unrelenting focus on technology, hyper-short-term trading, speed, and volume has eclipsed sanity: markets have been hijacked by high-powered interests at the expense of investors and the entire capital-raising process. A small consortium of players is making billions by skimming and scalping unaware investors -- and, in so doing, they've transformed our markets from the world's envy into a barren wasteland of terror. Since these events began, Themis Trading's Joe Saluzzi and Sal Arnuk have offered an unwavering voice of reasoned dissent. Their small brokerage has stood up against the hijackers in every venue: their daily writings are now followed by investors, regulators, the media, and "Main Street" investors worldwide. Saluzzi and Arnuk don't take prisoners! Now, in Broken Markets, they explain how all this happened, who did it, what it means, and what's coming next. You'll understand the true implications of events ranging from the crash of 1987 to the "Flash Crash" -- and discover what it all means to you and your future. Warning: you will get angry (if you aren't already). But you'll know exactly why you're angry, who you're angry at, and what needs to be done!
The truth about today's multibillion dollar rip-off of investors, the hijacking of global markets, and the impact of high frequency trading.
Foreword by Former U.S. Senator Ted Kaufman x
Chapter 1: Broken Markets 7
Chapter 2: The Curtain Pulled Back on High Frequency Trading 23
Chapter 3: Web of Chaos 45
Chapter 4: Regulatory Purgatory 67
Chapter 5: Regulatory Hangover 83
Chapter 6: The Arms Merchants 97
Chapter 7: It’s the Data, Stupid 111
Chapter 8: Heart of Darkness 125
Chapter 9: Dude, Where’s My Order? 141
Chapter 10: The Flash Crash 151
Chapter 11: The Aftermath 177
Chapter 12: Killing the Stock Market That Laid the Golden Eggs 195
Chapter 13: Call to Action 217
Appendix: Themis Trading Whitepapers 233
“Read this book before you invest a penny in the stock market.”
—Mark Cuban, Owner, Dallas Mavericks
“In one of the most memorable scenes in motion picture history, before giving him the red pill, Morpheus says to Neo, ‘You’re here because you know something. What you know, you can’t explain, but you feel it. You’ve felt it your entire life—that there’s something wrong with the world. You don’t know what it is, but it’s there, like a splinter in your mind, driving you mad.’ Although Arnuk and Saluzzi will not expose every dark corner of the ‘matrix’ that our capital markets have become, they will provide the clues to aid you in your quest to understanding just why more people withdraw from trading fully aware that ‘there’s something wrong.’ Morpheus also asks, ‘Do you want to know what it is?’ To all who answer yes and take the red pill, read this book.”
—Tyler Durden, Zero Hedge
“Markets now trade at the speed of light, apparently benefiting Wall Street ultra-short-term traders over long-term investors and causing more than a few ‘flash crashes’ along the way. Arnuk and Saluzzi intuitively piece together how High Frequency Trading, for-profit exchanges, fragmentation, regulatory changes, and a ‘need for speed’ over the past 20 years have dramatically shifted benefits from investors to short-term traders in our increasingly fragile markets. A must read for anyone concerned about investors, trading, and the long-term health of U.S. stock markets.”
—Professor Michael Goldstein, Professor, Finance, Babson College
“Arnuk and Saluzzi are the Woodward and Bernstein of the securities markets. Their gutsy, dogged sleuthing exposed the perverse market effects of robotic trading and predicted an event like the Flash Crash 2010, long before blinkered market regulators had a clue. The two crusaders deserve a medal for looking out for investors.”
—Jim McTague, Washington Editor, Barron’s
“Who broke the stock market? The NYSE and NASDAQ, that’s who. They sold the investing public down the river so colocated algo driven servers of high frequency traders could steal billions by front running grandma’s mutual fund. The horrific truth about this legalized theft is all here in black and white. Read it, and you will never so much as invest one thin dime in U.S. equities again.”
—Barry Ritholtz, CEO, FusionIQ; Author, Bailout Nation and The Big Picture website; Bloomberg personality
“The authors explain in wonderfully clear language how, instead of banning card counters as they do in Vegas, Wall Street has remade itself to not only stack the deck in the card counters’ favor, but to enable them to do so via ever-faster computer networks and algorithms, that leave not only ordinary investors but many sizable institutions, like pension funds, with worse odds than on a lottery ticket. There’s more, much more, in Arnuk and Saluzzi’s book; it’s quite simply a must read, if you care about your capital—or the future of our capitalist economy.”
—Kate Welling, Former Founder, Editor, and Publisher, Weeden & Co. LP, Welling@Weeden; Former Managing Editor, Barron’s
An eye-opening view on the way stocks are really traded today—and why the stock markets are broken and desperately need to be fixed. Written in an easily understandable style, the authors explain:
• The strategies and tactics high frequency traders use to scalp pennies off of nearly every retail and institutional share traded
• How the stock exchanges provides high frequency traders with powerful tools that give them an advantage over retail and institutional investors
• Why the stock markets no longer accurately price the values of the securities in your portfolio
• What you can do to prevent these and other problems from getting any worse
Authored by the Wall Street traders who figured out how high frequency traders were harming retail and institutional investors and explained how it all works on 60 Minutes, Bloomberg TV, CNBC, and Fox Business News
• Why retail investors are pulling their money out of stocks in unprecedented amounts
• How decades of regulation created the broken markets we have today
• Why there are more than 40 exchanges, sub-exchanges, and dark pools rife with conflicts of interest where stocks are traded today
• How the stock exchanges became for-profit companies and fundamentally changed market structure
• Why the Flash Crash happened—and why it will happen again
• How there are two markets—the fast, accurate one that high frequency traders see and the slower one that retail and institutional investors see
Sal Arnuk is partner, cofounder, and co-head of equity trading of Themis Trading, LLC, a leading independent agency brokerage firm that trades equities for institutional money managers and hedge funds. Arnuk has extensive experience in equities trading and is an expert in electronic trading and market structure. Prior to founding Themis in 2002, he was with Instinet Corporation, where he headed the team responsible for equity sales and trading for institutional money managers, for more than 10 years.
His opinions are sought by leaders, regulators, market partici-pants, and the media and are presented via white papers and Themis’ widely read blog. He is a frequent speaker at industry conferences, such as Trader Forum, Waters, National Organization of Investment Professionals (NOIP), and Fusion IQ’s Big Picture, on issues involving market access, algorithmic trading, and other sell- and buy-side concerns.
He also provides expert commentary for media outlets such as the Associated Press, BBC Radio, Bloomberg TV and Radio, BNN, CNBC, Fox Business, NPR, Barron’s, The New York Times, The Wall Street Journal, USA Today, Time, Los Angeles Times, Bloomberg News, Pensions & Investments, and Advanced Trading.
Arnuk earned an MBA in finance from New York University’s Stern School of Business and a Bachelor’s degree in finance from SUNY Binghamton University.
Joseph Saluzzi is partner, cofounder, and co-head of equity trading of Themis Trading, LLC. Saluzzi has extensive experience in equities trading and is an expert in electronic trading and market structure. Prior to Themis, he headed the team responsible for equity sales and trading for hedge fund accounts at Instinet Corporation for more than 9 years.
Saluzzi has provided analysis to regulators, including the Securities and Exchange Commission and as a member of the Commodity Futures Trading Commission’s new Subcommittee on Automated and High Frequency Trading.
He has appeared or been quoted on market structure issues by media outlets such as CBS’s 60 Minutes, BBC Radio, Bloomberg Television and Radio, CNBC, Fox Business, BNN, The New York Times, The Wall Street Journal, USA Today, Reuters, Associated Press, Los Angeles Times, and Bloomberg News. Saluzzi also has authored articles for Traders Magazine, Dow Jones, Journal of Investment Compliance, and Journal of Indexes.
He earned an MBA in finance from the University of North Caro- lina at Chapel Hill and a Bachelor’s degree in finance from New York University.