High Frequency Trading in the Silver Market - Unsustainable! CNBC 5/5/2011

High Frequency Trading in the silver market .The paper games days are numbered too fast and it's just unsustainable for the markets to even control



Separating speculation from supply and demand, with Daniel Fisher, MBF Trading. . Daniel Fisher : this is so fast and so ridiculous, it's -- i can't even fathom these markets because when you watch silver move during the day, even if you're on the right side of the trade, the speed at which it's going on, it's unfathomable. i mean, the truth is these moves down, the corrections are all so overexaggerated by all the high frequency trading that ifru just slowed down we wouldn't see oil down 10 bucks today, wouldn't see brent trading down, you know, down below. Daniel, it's joe. when you talk about high frequently trading in the commodities space, people know about high frequency trading and stocks. how does it work in the futures mark? i mean, it's a similar deal. you have computers that are running each other in essentially. bidding and offering at the same time and they know when the large orders are coming so when you see a big sale in oil coming in, 100 lots, computers know they are coming and they essentially front run the order, and they front run each other and just run each other in. it's too fast and it's just unsustainable for the markets to even control.






Related ETFs : Ishares Silver ETF (SLV), SPDR GOld ETF (GLD) , Powershares DB SPDR Gold ETF (GLD), Newmont Mining (NEM), Barrick Gold (ABX), GoldCorp (GG)

What is High Frequency Trading ?

High frequency traders took part of the blame for Wall Street's flash crash on May 6, 2010. Just what is high frequency trading. Nightly Business Report explains.


SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: From the second floor of this nondescript building in Red Bank, New Jersey, the high frequency trading firm Tradeworx buys and sells huge volumes of stocks in the blink of an eye. Tradeworx uses computers programmed to detect small price movements which can be exploited by nimble trading. Founder Manoj Narang says the strategy can be traced directly to decimalization, a rule change in 2000 requiring quotes in dollars and cents instead of fractions. That cut profits for market makers from several cents to a fraction of a penny per share. The only way to make money was to increase volume.

How Computers Have Transformed the Stock Market

Floor traders vs. the rise of computers

"This is an example of potential operational risk. Again how can one trade, or a series of trades, influence a global market?" says Williams, author of the just-published book, "Uncontrolled Risk: The Lessons of Lehman Brothers and How Systemic Risk Can Still Bring Down the World Financial System." "This speaks to weakness in this overall system," he says.