A STUNNER: GOLDMAN TO ABANDON HFT!?April 13, 2014
This one is a stunner; there's no other way to put it folks, and it is such a stunner that one simply cannot avoid some High Octane Speculation concerning it, and I suspect, that it may venture even beyond that, into Oxygen Deprived Speculation. Zero Hedge has reported on a story that Goldman Sachs may be abandoning the HFT(high frequency trading) which has served it so well in the past:
The heart of the matter, as far as Goldman is concerned, and as far as Zero Hedge is reporting, is that the high frequency trading that has now become the bread-and-butter of the American securities markets is in danger of a "Flash crash times ten":
"And if Goldman is willing to exit not only HFT, not only legacy lit markets entirely, but also its dark pool, then something truly big and transformational is coming to not only the existing market structure, but something that will be so disruptive, that for once we can't wait to find out just what Goldman has up its sleeves, sleeves which also happen to house the key lawmakers in the Beltway.
"Why is Goldman doing this now? We don't know. It is worth noting however that on page 234 of Flash Boys, Michael Lewis cites Ron Morgan and Brian Levine, Goldman Partners and co-heads of Goldman's global stock markets, who said that 'Unless there are some changes, there's going to be a massive crash, a flash crash times ten.'"
For those unaware of the story, the Flash Crash being referred to is the 2010 "flash crash" when Proctor and Gamble stocks suddenly - and I mean very suddenly - started to plummet within a matter of seconds, then, just as suddenly, began to right itself, in a computer-driven high frequency trading crash. The ability to use computers to execute several buy and sell orders in a matter of microseconds, trading vast volumes of stocks, has now become the norm, and Goldman's apparent exit from this practice is not only huge news, it is, as Zero Hedge avers, a "triple whammy," or a "whopper doozie" as my friend George Ann Hughes would put it. As Zero Hedge indicates, it is a sign that Goldman knows something is coming (a flash crash times ten?) or something else.
The question is, what?
Here I indulge in some very high octane speculation, that what Goldman may know and suspect, perhaps even by a careful consideration of all aspects of the 2010 "Flash Crash", is that the HFT networks - the "dark pools" that have now cropped up in and around the securities markets - are as secure as human invention and intelligence can make them, and that, in spite of built-in safeguards against such sudden losses of market value via high frequency trading, the system can still be "hacked". Goldman is saying, in effect, that this particular casino is "not in compliance" and is walking away from the table. The dice are loaded; the wheel is fixed; the cards are shaved and marked.
Let's add another consideration here: I've been maintaining all along - along with Catherine Austin Fitts and a few others - that the NSA electronic snooping is as much about financial spying as it is about terrorism. It is the ultimate insider trading mechanism, which raises the stakes of Goldman's actions even higher, for it means that the banks and brokerage houses have some serious competition and indeed may have lost their control and influence in the casino; another faction in the form of the national security apparatus has muscled its way into the game, and no one's electronic money is safe, not even the banksters'.
Perhaps - venturing way out to the end of the speculation twig here, and far beyond the ability of that twig to support the weight now put upon it - perhaps Goldman, in its investigations of that 2010 Flash Crash discovered something, some strange and curious fact or event hovering on the edge of the events of the day, that made it think that there may be not just one, but perhaps even two players on the block with the ability to enter supposedly secure systems, and alter the trading target algorithms remotely, and at will. If they did, for the moment, they're not talking.
See you on the flip side.