efficient market for some I think you’ll find.
Here’s what I currently know about CATV. Still a real company, with a real farm, with real products in stores.
They have a caveat emptor (CE) designation on OTC from some lawsuit that everybody believes is bullshit. They can petition OTC to remove the CE designation in February.
The CE designation means (in USA#1), trading platforms will let you sell, but not buy, the stock. Every now and then Schwab fucks something up and allows buys to happen. When the stock jumps, right now anyways, that’s the reason. A lot of people will stack a bunch of GTC orders when Schwab flips the switch and then put them through when the price is conducive.
I’m stuck enough in the stock that I don’t really have any outs but to wait and hope.
Payment for order flow is a practice in which market makers like Citadel Securities execute trades for customers of brokerages like Robinhood. The market maker makes a small profit on individual trades that add up to larger revenue streams, en masse, while the brokerage earns a fee for sending the trade its way.
Payment for order flow sounds gross at first, but it’s really hard to see why it’s ultimately worse than other methods of execution. Maybe I’m too influenced by Matt Levine.
Perhaps this is more for the LOL Democrats thread, but Powell has a confirmation hearing today? As in, one year after Biden took office?
I’ve been thinking lately about what equity markets would look like of Citadel et al. could implement this trading strategy:
- If an order is from a retail investor, fill it and earn the spread.
- If the order is from a hedge fund, don’t fill it. Instead, move your prices until the hedge fund doesn’t want to do the trade anymore.
PFOF is part of doing that, and I assume most of the advanced math people they hire are doing the same thing. What happens if it actually works?
Fed chairs serve 4 year terms that don’t necessarily line up with the Presidential Election cycle.
Mr. Gensler was a partner at Goldman Sachs before he started dabbling in pubic service. Everything he says should be read as “fox guarding the hen house” bullshit. No one makes partner at Goldman at age 30 if they have the public interest at heart.
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I’m not sure exactly what you have in mind, and this isn’t something I have any real knowledge about. But I think the real choice for Citadel upon receiving an order is to internalize the order vs. letting the order be filled by someone else on the national market.
I’m having a hard time imagining a process where Citadel publishes a bid and ask for a given stock, gets a transaction for that stock that hits the bid or ask, and then jacks the bid/ask around so they don’t have to fill it if it’s from a hedge fund. That seems illegal, but maybe isn’t what you had in mind.
This SEC settlement with Citadel involves something that I think is different, but in the same general area of using proprietary algorithms to determine how to handle different types of orders recieved.
Didn’t they essentially do 2 during GME, except with retail investors? That is, they just stopped filling orders. I don’t know if it was proven to a certainty but that’s sure what it looks like happened.
Yeah, maybe I described that overly confusingly for effect. You’re right that the current bid/offers are out there and there’s nothing you can do about them if they get accepted. But you can imagine more complicated strategies where, e.g., if your bid gets hit, you replace it immediately iff your bids on other exchanges aren’t all getting hit at the same time, but if a bunch of bids start getting hit, you pull everything to a lower price. Or some infinitely more complex and trickier variation on the same.
The motivation for this line of thinking is that when I was in law school, people would speculate about who is actually victimized by insider trading. It can’t really be retail investors, because they all buy and sell whatever they were going to buy and sell at market prices anyways. It really has to be somebody in the alpha-seeking sector who ends up taking the opposite position and losing. But consider two things:
- The sucker in this story probably thinks he’s making his investment based on P/E ratios or something, and if he knew his indirect counterparty was a hedge fund run by the CEO’s golf buddy, he’d run screaming.
- Once the insider trader closes his transaction, the alpha-seeking sector is stuck with the loss, and it’s just a game of hot potato to figure out who ends up holding the bag.
The market-maker business is basically about collecting as many spreads as possible from retail investors without ending up on the opposite side of a transaction from an insider or someone who figured out there was an accounting fraud or something. Assuming they asymptotically approach perfection at this game, you’d get sort of a quantum version of strong EMH, where prices reflect all information, public or not, but only if someone who knows the information is “observing” (strictly speaking, trying to trade at) the current market price.
An interesting thought experiment is to imagine that you’ve learned that Company A is going to buy Company B at a big premium, and you learned it in a way that you’re allowed to trade on it. If you have an infinite pool of capital, how much money can you make on this info? Making a small amount of money is very easy, but at some point, other market participants are going to notice that some rando has gone insane for Company B exposure and get out of the way until you don’t have any more opportunities for profit.
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I feel like you are re-discovering Kyle (1985):
A dynamic model of insider trading with sequential auctions, structured to resemble a sequential equilibrium, is used to examine the informational content of prices, the liquidity characteristics of a speculative market, and the value of private information to an insider. The model has three kinds of traders: a single risk neutral insider, random noise traders, and competitive risk neutral market makers. The insider makes positive profits by exploiting his monopoly power optimally in a dynamic context, where noise trading provides camouflage which conceals his trading from market makers. As the time interval between auctions goes to zero, a limiting model of continuous trading is obtained. In this equilibrium, prices follow Brownian motion, the depth of the market is constant over time, and all private information is incorporated into prices by the end of trading.
Kyle, A. S. 1985. Continuous Auctions and Insider Trading. Econometrica 53 (6): 1315–1335.
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I really struggle with the “insider trading has no victims” argument. Inevitably free market types will claim insider trading is good, actually, because price discovery, and also the buyer/seller contracted at an agreeable price so who cares. Here’s my counter-argument: it isn’t fair. Just because an investor willingly paid $100 doesn’t mean he didn’t prefer to pay the $99 he would have paid without insider trading.
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I think the best way to judge fairness is if you somehow modelled the situation and presented it to a five year old (or a chimp) how would they react? The kid would get super pissed at insider trading imo.
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I mean, say I live in Tony Soprano land and I own a pizza shop. I need my garbage taken away once a week. Does the fact that I willingly pay $100 more than I would without Tony’s violent stranglehold on the NJ waste management market mean there’s no issue?
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I’m 100% okay with looking at the people who are pro-insider trading and just not being on their team in general principal.
Property taxes in Chicago are truly insane.
City market isn’t nearly as insane as a lot of other big cities. A 3500-4k sqft house near the El with a yard probably goes for anywhere from $900k-1.5M depending on the neighborhood and how updated the interior is.
The places I was posting about are the far suburbs mostly, not many golf course houses in the city of Chicago.
There’s no issue for Tony, and he makes the rules. Welcome to America 2022.