The process depends on speed. Transactions occur just fast enough to execute the "quant flush" trades before the real orders are executed.-
The better the connection to the server, the more quickly orders can be executed. An order originating on the periphery of the vast electronic trading network might take several seconds to bounce between servers. That data traffic can be read and its destination determined, providing the data miners along the web route sufficient opportunity to exploit the trade that will unwind at the exchange a scant few seconds later.
Exploiting the web architecture for gain is nothing new; what has changed is the sheer scale of the operation and its profits. Regulators don't stand a chance, unless of course they are given full access to Goldman's data resources, an unlikely event considering the massive influence it has over Washington and Congress.
For those who are only now waking up to this important story, you can see the original post-here, with limited commercial interruption or top-heavy television hosts spouting off in defense of hyper-capitalism.
Bloomberg also appears somewhat concerned when a company that took billions in government funds ends up making a vast profit just a quarter later. Unlike the people at CNBC, I'm guessing Bloomberg figured out that there is something to the allegations, and actually reported on it. See the post by Edward Harrison of Credit Writedowns here.
Now if Bloomberg were more like CNBC, I guess we'd see the credibility of the blogger attacked and the real issue--how much GS is making with its High Frequency Trading--ignored. To make matter worse, dissing the blogs is in itself evidence of how out-of-touch that entity, a subsidiary of GE, has become.
Blogs are a major source of information for anyone in the financial industry. Look no further than CNBC's own bloggingstocks.com blog. I guess some in the corporate media see bloggers as a threat.
Deriding the bloggers as CNBC anchors are prone to do might be a sign of progress, a tacit admission that the blogs are really making an impact. The impact on Charlie Gasparino reflects a blogger community and Americans beyond the centers of media control who are very eager to hold television personalities to account for the truth, or the absence of it they provide.
Mass media will of course look to diminish the relevance of bloggers any way they can. Challenging the media status quo is a healthy exercise, and should probably evoke derision. Gandhi said they--meaning the British in his quest for Indian independence--would first ignore you, than laugh at you, then start to fight you. The fact that the concerns of an anonymous Tyler Durden made it all the way to the mass media proves that dedication and persistence can pay off, even if the reward comes dressed as a package of on-air mockery.
Sooner or later the media moguls in control of their corporate news divisions will feel the heat of huge chunks of their audience lost to the Internet. Still, I've never said that the mass media model should be abandoned, just that the idea of relying on TV news exclusively in like so twentieth century, reflects an adolescent, condescending attitude with which TV personalities view their audiences, as passive, unthinking sheep who cling on their every word. How dare they make the unfiltered truth known to millions through their blogs, they must be thinking.
Big egos are common in that industry, just as the trend towards "conservatism" in reporting has accelerated to the point commentators on CNBC like Larry Kudlow constantly frame the good approach to business as anti-regulatory, and regulatory efforts as "anti-business."
This highly politicized worldview has led to an utter lack of objectivity in covering the news, and worse, deluded Americans into thinking deregulation is actually good for business. Nowhere has this been made clearer than by the financial credit implosion, an event that is continuing to unfold, one that will likely bear lasting effects for years to come.
Notice how little of the mass media's coverage has been concerned with regulatory lapses that led to the risky behaviors by major financial firms who were supposed to have been regulated. We all know enforcement drastically eroded under Bush, as industry representatives assumed control of numerous agencies throughout the federal government, overseeing industries on whose behalf they'd previously lobbied.
Are these mass media people so stupid as to assume Americans can't tie deregulation and the financial collapse together? And what of the credibility of entities like CNBC--can people truly say that their interests and risks to their financial futures will be brought up for honest and objective analysis by the mass media? No.
The purpose of the corporate media has been to follow the corporate interest, not the public's. Those working in the financial news media clearly work for their advertisers, who first and foremost want to avoid any negative publicity.
The death of investigative journalism has come largely because these corporate conglomerates don't want to risk alienating potential advertisers with exposes and other damaging information made public. So instead we're to blithely assume we can learn all we need to know from the mass media, and can trust them. Ridiculous. And the recent collapse of equity and mortgage markets proves that the corporate media will do very little to protect the interest of the public, or keep people informed.
