Fake Tweets and Broken Markets

smokingsaljoetwitter

 

 

 

 

 

 

 

 

 

 

Sal Arnuk @ThemisSal; Joe Saluzzi @JoeSaluzzi

Partners at Themis Trading, co-authors of Broken Markets: http://brokenmarkets.com/  RT’s not endorsements, and tweets may/may not represent the views of our employer.

Chatham, NJ · http://www.themistrading.com/

 

The @AP a fraud did hack. They fake-tweeted a White House Attack. News-algos did pounce, the Dow they did trounce, in a minute it came roaring right back.

Da issue not simple as seems. Our structure is prone to extremes. Fragmentation is a mess, with insane speeds we confess, all justified by “penny-spread” themes.

Can you stop a fraud from tweeting? Will liquidity always be fleeting? How to make it more stable, SEC are you able? It’s never HFT who end ups with the beating.

Who sells the machines these feeds? Are they to blame when the market bleeds? They take in the dough, new revenues Whoa! While investors they deal with the weeds.

An idea to make things safer… with liquidity not thin as a wafer. Diverse order books key. Heed our words and you’ll see. Don’t believes us just ask RT Leuchtkafer.

Is Twitter really to blame? Or a market structure chock full of shame? While this event is a blip, and we can afford to be flip, Dear REGS know this is not just a game..

Can Global regulators realistically expect to control news and social media flow, no matter how accurate or inaccurate, in a global setting? I think we all know the col hard answer to that question. However what they can do is recognize that the marginal benefits from speed over the last five, and yes – even ten years, at best can be measured by a fraction of a penny spread savings in larger capitalization names. They can recognize that those paltry marginal benefits have come with substantial cost to the industry:

1)      Increased buy-side TCA costs.

2)      Increased technology costs.

3)      Increased data costs.

4)      Increased incidence of systemic events

5)      A general loss in confidence of our market’s plumbing.

 

Investors’ hope now lies with a new SEC commissioner who needs to act boldly, and counter to the interests of lobbying conflicted insiders. The speed Race to Zero needs to be neutered. Maker-taker, which drives the race to the top of order books, needs to be neutered. And yes, perhaps the time has come to consider a slower speed limit for the marketplace in general. (For those who are against speed limits as anti-competitive, please note that there already exists one; the stock exchanges have inferred and created one when they decided that it was important to equalize cable lengths, and therefore speed, among their colocation-paying customers.)

Safe Tweeting everybody…err we mean Trading. Please insure your execution algos do not follow along on fraudulent moves.