Front-Running is currently a legal tactic in trading. GS seems to be very efficient at it. And the 1/8th point higher you have to pay when you buy a stock isn't that much anyways.
This is complete nonsense. Front running your client's trades is completely illegal. Front running on an exchange is not even possible unless you hack the exchange computers (also illegal). The first person to place an order at a given price on a given exchange wins. The only sort of front running which is legal is guessing ahead of time what a third party might do and placing orders before they actually do it. I.e.,…
Goldman Sachs Has First Perfect Quarter With Zero Trading Loss
51–60 of 62 posts
Re: Goldman Sachs Has First Perfect Quarter With Zero Trading Loss
#52Earlier quoted context omitted.
not very reliable source, i know, but try http://www.google.com/search?q=goldman+sachs+front+running
The top link just links to a criticism of flash orders, which are not front running at all [1]. Could you be more specific in your links? [1] I'm undecided about whether I think front running is fair, but flash orders are a separate issue.
Intercepting flash orders is front running. I don't see how you could even be confused about this issue. That is why the SEC wants to ban it, and some exchanges have removed the feature. This corrupt business practice creates artificial information disparity which wouldn't normally exist.
I'm undecided about whether I think front running is fair
This is a red flag that no one here should be asking you for moral advice.
Re: Goldman Sachs Has First Perfect Quarter With Zero Trading Loss
#53Earlier quoted context omitted.
The top link just links to a criticism of flash orders, which are not front running at all [1]. Could you be more specific in your links? [1] I'm undecided about whether I think front running is fair, but flash orders are a separate issue.
Intercepting flash orders is front running. I don't see how you could even be confused about this issue. That is why the SEC wants to ban it, and some exchanges have removed the feature. This corrupt business practice creates artificial information disparity which wouldn't normally exist. I'm undecided about whether I think front running is fair This is a red flag that no one here should be asking you for moral advic…
Front running: Joe wants to buy shares. I buy ahead of Joe, driving up the price, let him buy, then I sell my shares, profiting off the price delta. This costs Joe money, since he buys at a high price and sells at a lower price.
Flash trading: Joe wants to buy shares at price 10 or better and places an order on NYSE. The best ask on ARCA is 9.99, but the best ask on NYSE is 10. NYSE gives me the option of filling Joe's order at price 9.99 (rather than routing the trade to ARCA), saving Joe the cost of routing.
Flash trading and front running are just not the same thing. Flash trading only happens to traders who chose for their orders to be flashed. All flash trading does is moves the trade from ARCA to NYSE.
Re: Goldman Sachs Has First Perfect Quarter With Zero Trading Loss
#54Earlier quoted context omitted.
Intercepting flash orders is front running. I don't see how you could even be confused about this issue. That is why the SEC wants to ban it, and some exchanges have removed the feature. This corrupt business practice creates artificial information disparity which wouldn't normally exist. I'm undecided about whether I think front running is fair This is a red flag that no one here should be asking you for moral advic…
Front running: Joe wants to buy shares. I buy ahead of Joe, driving up the price, let him buy, then I sell my shares, profiting off the price delta. This costs Joe money, since he buys at a high price and sells at a lower price. Flash trading: Joe wants to buy shares at price 10 or better and places an order on NYSE. The best ask on ARCA is 9.99, but the best ask on NYSE is 10. NYSE gives me the option of filling Joe…
Flash trading: Joe wants to buy shares at price 10 or better.
You are Goldman Sachs, you see Joe's order before anyone else.
You see shares costing 9.80, so you buy it up quickly, and sell it to Joe for 10, making a profit of 0.20 per share while driving up prices for Joe.
That is front running.
Re: Goldman Sachs Has First Perfect Quarter With Zero Trading Loss
#55Earlier quoted context omitted.
Front running: Joe wants to buy shares. I buy ahead of Joe, driving up the price, let him buy, then I sell my shares, profiting off the price delta. This costs Joe money, since he buys at a high price and sells at a lower price. Flash trading: Joe wants to buy shares at price 10 or better and places an order on NYSE. The best ask on ARCA is 9.99, but the best ask on NYSE is 10. NYSE gives me the option of filling Joe…
Flash trading: Joe wants to buy shares at price 10 or better. You are Goldman Sachs, you see Joe's order before anyone else. You see shares costing 9.80, so you buy it up quickly, and sell it to Joe for 10, making a profit of 0.20 per share while driving up prices for Joe. That is front running.
You apparently do not know what a flash trade is.
A flash trade gives Goldman the opportunity to fill Joe's order at the NBBO price before it is routed to another exchange. It does absolutely nothing else. The person receiving the flash is even prohibited from making offers on that security on other exchanges for a few milliseconds after receiving the flash.
This gives Goldman an advantage over other high frequency traders since it gives Goldman a higher fill rate, which is definitely unfair.
Re: Goldman Sachs Has First Perfect Quarter With Zero Trading Loss
#56Earlier quoted context omitted.
The joke is no longer amusing. Everyone is attacking GS, from utterly clueless uneducated morons to utterly devious dumb politicians with a private agenda. By attacking GS in such a gratuitous manner, one reminds others of such tragicomedy.
> Everyone is attacking GS, from utterly clueless uneducated morons to utterly devious dumb politicians with a private agenda. The above assumes that all attacks are baseless. The SEC charges appear to be trumped up but GS was a major beneficiary of the AIG bailout. GS should lose money when it's counter-party risk assessment is wrong, as it was in the AIG case.
I don't think the SEC charges are trumped up, myself, but as neither a professional economist, lawyer, or trader, my opinion is necessarily superficial.
You might be interested in some remarks from a friend of mine, whose identity I prefer to keep private but who has given me permission to repost. He is a senior VP of derivatives trading at another Wall Street firm, albeit a much smaller one than GS, so weight as you feel appropriate.
Goldman will settle the civil suit. The SEC has them bang to rights on Rule 10b-5 violations, and anyone familiar with securities regulations knows this. They will claim that they are going to settle because it's in their shareholders' interests.
They've been trying to spin this by saying that they're market-makers. The WSJ had an editorial on Wednesday arguing this (probably assisted in the writing by GS), the execs said as much in Washington, and a friend of mine who works there, probably repeating an internal memo, made the same argument. It goes like this - if you buy GE stock and it goes down, you can't sue the NYSE or the broker.
The reason it's crap is that there is a huge difference, both conceptually and from a regulatory standpoint, between origination/new issues/primary market on the one hand, and secondary market trading on the other. GS are arguing as though the former is part of the latter. It isn't.
Re: Goldman Sachs Has First Perfect Quarter With Zero Trading Loss
#57Earlier quoted context omitted.
So everyone who criticizes Goldman is stupid? Is that by definition, or is there an intelligent critique out there that hasn't yet been made? What, if anything, would cause you to criticize Goldman? What, if anything would cause you to laugh at Goldman? These aren't sarcastic rhetorical questions, I really want to know. From where I'm standing, it seems that Wall Street is deeply corrupt, and Goldman's success comes…
Reasonable and more knowledgeable people may disagree, and many do (eg, Warren Buffet). You do know that Buffet has a $5 billion investment with Goldman Sachs? Of course he would defend them.
Yes, I'm aware of his investment. But he seems pretty reasonable, and he's definitely more knowledgeable than I am.
What's interesting about Buffet's position is that - aside from the Goldman investment - his stated philosophy and track record are at odds with Wall Street. See, for example, his criticism of hedge funds, and his preference for investing rather than trading. Is his involvement with Goldman a departure from his usual MO?
Re: Goldman Sachs Has First Perfect Quarter With Zero Trading Loss
#58Earlier quoted context omitted.
Flash trading: Joe wants to buy shares at price 10 or better. You are Goldman Sachs, you see Joe's order before anyone else. You see shares costing 9.80, so you buy it up quickly, and sell it to Joe for 10, making a profit of 0.20 per share while driving up prices for Joe. That is front running.
You apparently do not know what a flash trade is. A flash trade gives Goldman the opportunity to fill Joe's order at the NBBO price before it is routed to another exchange. It does absolutely nothing else. The person receiving the flash is even prohibited from making offers on that security on other exchanges for a few milliseconds after receiving the flash. This gives Goldman an advantage over other high frequency t…
Apparently you don't. The allure behind flash trading is to avoid rule 602 in regulation NMS: you are not required to fill the order at the NBBO. You can use dark pools to fill orders.
Re: Goldman Sachs Has First Perfect Quarter With Zero Trading Loss
#59This means they aren't taking enough risks.
Seriously - the stock market is risk based. If you aren't taking risks then you're not going to be in those areas that make the most money. Sure, you want to make more than you lose, but if you never lose any money then you aren't taking enough risks to really strike it big by finding something nobody else thought would produce good returns.
Re: Goldman Sachs Has First Perfect Quarter With Zero Trading Loss
#60Earlier quoted context omitted.
Reasonable and more knowledgeable people may disagree, and many do (eg, Warren Buffet). You do know that Buffet has a $5 billion investment with Goldman Sachs? Of course he would defend them.
Yes, I'm aware of his investment. But he seems pretty reasonable, and he's definitely more knowledgeable than I am. What's interesting about Buffet's position is that - aside from the Goldman investment - his stated philosophy and track record are at odds with Wall Street. See, for example, his criticism of hedge funds, and his preference for investing rather than trading. Is his involvement with Goldman a departure…
you can drive a truck trough his usual MO as portrayed by his PR!
first he calls derivatives "weapons of mass destruction", next thing you know he's loading up on index options!