The entire population is so addicted to fame and fortune that it looks like a bunch of mindless zombies marching to a beat which they follow, but they have no idea they are following it. They are out-of-control of their minds.

“The unfortunate reality is that there is no mechanism available to prevent computers from exploiting asymmetric information.”

!!!!! Bingo !!!!!

This is what DARPA started funding CEP-type studies to mitigate, the exploitation of asymmetric information capabilities in cyberspace.

No wonder Colin says his financial services colleagues had all decided long ago to boycott my blog, LOL. I keep trying to point out that that instead of creating a technology for “the greater good” folks are using the technology ideas created “for the great good”, for “evil” for a lack of a better word.

This “ain’t Kansas anymore”… it is a Frankestein’s Monster for the people the stock market was created to serve.

Unfortunately, America is the best government business can buy, so I have doubts about effective regulation getting past the lobbyist.

http://market-ticker.denninger.net/archives/1259-High-Frequency-Trading-Is-A-Scam.html

Excellent commentary on this problem.

Richard’s sports analogy has a logical flaw, as you mention. From my comment on LinkedIn (double posted here):

Richard’s model, in my view, was mistaken because he compares sports directly with the stock market. The proper analogy, it appears, is to compare the stock market to the parimutuel betting and gambling associated with sports. The reason for this is that, just like the stock market, gambling and betting permits individuals who are not directly “in the sport” to participate in the sporting events. These “passive-participants” win-or-lose based on the actions of the players and teams in the actual sport. At the “playing field” level, the direct comparison for a F1 racing team (or a horse racing team) would be companies, like Nokia or Apple, who compete head-to-head.

As we know, sports betting and gambling is highly regulated.

Of course, the stock market is generally broader in scope than betting, since the market is used to raise money for company operations and other business fundamentals. However, the analogy to compare the markets directly to sports is flawed, in my view, and if we were to create an analogy, it would need to be to compare the stock market to sports betting and gambling, a highly regulated, and often illegal activity, where insiders who use their insider skills and knowledge to profit from others without the knowledge or skills are generally banned from the sports.

One could argue a significant percent of the world population has been negatively affected by unethical behavior at some of the top financial institutions. I get the feeling some people in the financial industry think of it as a game, but it’s not. Real money is lost and real people are hurt by it. I’m not against high frequency trading, I just think it should be open and affordable to everyone or to no one. Clearly that’s never going to happen, so we have to live with the fact that people with the power and money to do HFT are also the people most likely to abuse it.

“The regulators and the major exchanges have drifted from their original duty: to run a market that gives small companies a way to raise capital and mom-and-pop stock buyers a way to invest for the future on fair terms.”

which goes on to say:

“Instead, they have created a Frankenstein’s monster that churns away for the sake of volume itself, lining the pockets of nimble, technologically savvy hedge funds, giant investment banks and other players – at the expense of market stability.”

@Richard Veryard, it really does not matter very much how we split-hairs semantically about what is “market integrity”…. Your logic is similar to saying, “I did not have sex with that woman…” because the perp defines sex differently than other people to keep out of trouble. Loophole surfing, me thinks!

Yes, of course it is good to have better definitions; but clearly it is wrong to have a market where average mom-and-pops can lose their life savings to the whims of trading robots who are situationed next to the exchanges (closer than the others) with clear advantages over the rest of the “players”. Of course, murderers also tend to justify their crimes, so what difference should we expect out of white collar criminals?

You talk about “some sports are so expensive that only well funded people can complete”…. What in the world does that have to do with the stock market?? The stock market is not a game like F1 racing, yacht racing or anything to do with horses. Where did you get that idea?

Fortune calls it “Frankenstein’s monster that churns away for the sake of volume itself” in other words, an evil beast.

Bravo Fortune!

Cheers.