Welcome back! Ate enough?

So if you follow me on Twitter, you recognize my avatar above. The avatar is a nod to all the bought and paid for studies (by Big Tobacco) that originally stated that there was no proof that cigarette smoking was harmful. Kind of like the sponsored HFT studies that hammer how HFT has increased liquidity, narrowed spreads, and made trading cheaper for everyone. But enough about my Tweets! Let’s talk about your Tweets!

Wall Street & Technology has an article titled “High Frequency Traders Prowl the Web For Even More Data” which highlights how the latest “trading-evolved” is modeling Twitter feeds and StockTwits feeds for an edge in directional trading. A company called Gnip is providing this social media data via its Gnip MarketStream product to hedge fund clients. According to the article:

“The amount of market data high frequency traders are using as trading indicators continues to grow more rapidly than Facebook can add users or change
its privacy policies, and vendors are scrambling to offer new technology that can help firms – and algos – find the data, sort it and leverage it.”

We draw attention to this latest development to highlight the latest ridiculousness of how are capital markets have lost their way, and how they are increasingly more divorced from their original purpose –  a means to raise capital for growing companies, and more oriented to casino parlor games. Yet again, the markets are innovating by figuring out how to use data to hyper-trade. Whether data is coming from exchange data feeds, or data from your algos that feed dark pools that model your trades, or from Twitter feed data of participants, Wall Street has become all about using your data to trade against you.

Is this a good development? We are sure it will be spun that way, as the increased volume from these trades surely must mean sumptuous liquidity for us all to bathe in. Or not. You decide.

But allow us to remind you that the even “the good HFT” – the market makers, is just the evolution of the automated trading scalpers and SOES bandits that ran ahead of your orders in Instinet in the 1990’s. Back then when you bid an eighth, they bid ahead of you by 1/64^th automatically. Back then many of you were outraged. Today the same activity is called “market making” and according to a decade of a masterful PR campaign, is providing you all with narrow spreads and increased liquidity.

Liquidity. Pshaw. I don’t think I have ever wanted to be dirty so badly in my whole life.