The New York Times has an excellent article on high frequency trading. Sergey Aleynikov, a man did something very right for the wrong reasons, even makes a cameo. Read the whole thing.
If you want to get a better feel for the issues, the Themis Trading blog shows how high frequency trading looks:
The three HFT horsemen are C, BAC and CIT. These three stocks traded 860 million shares today which is 10% of all US Equity volume.
Look at the intraday chart of all three of these stocks and you will see a something in common: an early morning move followed by a flatline with a very tight range (around .05). Meanwhile, while these stocks were flatlining the market was heading higher. The S&P 500 gained around 10 points in the afternoon (or 1%) but these 3 stocks did not move.
There was a constant bid to these stocks yet anytime they wanted to lift there seemed to be a constant offer just a few pennies higher. This is what HFT looks like. The HFT’s made a killing in these 3 names today – in addition to the .01-.02 spread, they collected about .005/share in liquidity rebates. Not a bad day for a supercomputer.
Aleynikov will be given a super-sweet plea bargain. If his case proceeds towards trial, the world will learn about Goldman Sach's high frequency trading program. Sure, AUSA Joseph Facciponti will try to keep the case under seal. Too many people are paying attention. Reporters and judges want to know what is up with Goldman Sachs.
Fortunately, C&F's post disclosing Facciponti's fraud in open court has made the rounds. Unless Facciponti finds a judge who is willing to serve as his co-counsel, it's unlikely that Facciponti will continue to get away with lying to federal judges.
The Southern District of New York is on notice: Facciponti is serving as Goldman Sachs' de facto lawyer. Facciponti, less than 48-hours after Goldmans' software code was reportedly stolen, worked all-nighters to get Aleynikov arrested. In a trade secret case. There is no other trade secrets case where a government lawyer moved so quickly to serve private interests.
Goldman Sachs has already downplayed the Aleynikov case. The code theft, which caused a man to be arrested less than 48 hours after the Department of Justice was called, was no big deal. That's what Goldman must say. To speak the truth would be to invite people more skeptical than AUSA Facciponti. Indeed, the New York Times is now covering high frequecy trading.
The case against Aleynikov needs to go away. Quietly. Keep an eye on PACER.