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What You To Know About Jeff Bezos and Amazon.com

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FUN FACTS ABOUT JEFF BEZOS:

  • Jeff Bezos always has an empty chair in his most important meetings to remind everyone of the most important person: the customer 
  • Jeff Bezos of Amazon.com has paid $42 million to carve a giant clock in a mountain. The clock is expected to run for 10,000 years.
  • Jeff Bezos founded Amazon.com in Washington so fewer of his customers would have to pay sales tax
  • Amazon.com CEO Jeff Bezos earned $80k in 2010 but the company paid 1.6 million for private security to keep him safe.
  • Amazon Founder Jeff Bezos owns a secretive space company called Blue Origin

JEFF BEZOS QUOTES:

  • “I believe you have to be willing to be misunderstood if you’re going to innovate”.
  • “I think frugality drives innovation, just like other constraints do. One of the only ways to get out of a tight box is to invent your way out”.
  • “The common question that gets asked in business is, ‘why?’ That’s a good question, but an equally valid question is, ‘why not?’”

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Russia To America: You Are Not The Only Walmart In The Neighborhood

Russia warned that it will redirect trade if there are any further economic sanctions. And that’s precisely why there won’t be any. Russia is not Cuba or Iran. For the EU to impose sanctions on Russia would be a form of financial suicide. Particularly, as global markets slip into the Bear Market of 2014-2017 and a severe global recession. 

Russia accounts for 7% of imports and 13% of exports in the European Union, making it the third most important partner, behind USA and China. What about US/Russia trade turnover? Only $38 Billion and that’s why the EU will never move forward with any real sanctions against Russia (if they stay out of Eastern Ukraine). 

Sorry Obama, you lose again. 

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Russia To America: You Are Not The Only Walmart In The Neighborhood Google

Russia to redirect trade elsewhere in case of EU-US sanctions

Russia will switch to other trade partners if economic sanctions are imposed by the US and the European Union, the Russian President’s Press Secretary Dmitry Peskov has said.

“If one economic partner on the one side of the globe impose sanctions, we will pay attention to new partners from the globe’s other side. The world is not monopolar, we will concentrate on other economic partners,” RIA news quotes Peskov.

According to him, possible economic sanctions by the US and EU on Russia are unacceptable, and the Russian Federation intends to offer further economic cooperation with the European Union.

“We want to keep good relations with the EU and with the US. Especially with the European Union as it is the main economic, investment and trade partner of the Russian Federation. Our mutual economic dependence assumes that we shall have good relations,” the Russian President’s Press Secretary declared. He also emphasized that discussion of global economic problems without involvement of Russia can’t be a complete discussion.

In a Tuesday telephone conversation between Russia’s Minister for Foreign Affairs Sergey Lavrov and the US Secretary of State John Kerry they discussed the situation in Ukraine, and Lavrov said sanctions imposed by the US and the European Union against the Russian Federation are absolutely unacceptable and won’t come without consequences.

According to data from the EU’s Eurostat, Russia accounts for 7 percent of imports and 12 percent of exports in the 28 European Union bloc, making it the region’s third most important trading partner, behind the USA and China.

In turn, the EU is Russia’s biggest trade and investment partner, with trade turnover estimated at $330 billion in 2012.

The introduction of sanctions may lead to a considerable financial losses for the EU. “The set of economic measures which the EU can apply is extremely limited”, says the deputy director of Institute of economic prediction of the Russian Academy of Sciences Alexander Shirov.

“The Russian economy is 3 percent of the world’s gross domestic product. We generate a considerable volume of demand for European products crucial to such countries as Germany, Italy and France. The absence of normal trade and economic relations with Russia essentially means losses for these countries,”the expert concludes.

The US is a much smaller trading partner for Russia, as its trade turnover with Russia was about about a tenth of that with the EU at $38.1 billion in 2012.In 2013, the value of its imports was $26.96 billion, more than double the value of its exports.

Boomerang effect

US based companies that have strong business ties with Russia, including General Electric and Boeing, are becoming increasingly concerned over US plans to harden sanctions against Russia after the association of the Crimea. Businesses are afraid of countermeasures from the Russian authorities, says Bloomberg.

“The CEOs are obviously very concerned about what is happening in Russia,” said John Engler, the president of the US Business Roundtable of major CEOs. “For some companies, it’s a substantial bit of their business. They are watching it very intently, trying to understand what will happen and what the next steps will be.”

The aviation subsidiary of General Electric, GE Capital Aviation Services, has a fleet of 54 airplanes in Russia. The largest aircraft leasing company in the world is watching closely the development of interrelations. Boeing is afraid the demand for airliners will fall if the dispute leads to a decrease in global economic growth.

Some of the world’s biggest companies in the West have already said they would run their businesses with Russia as usual and won’t be involved in the political conflict.

Rex Tillerson, CEO of Exxon Mobil, that has major exploration projects in Russia, said that the Texas-based company, wouldn’t take sides in the conflict between Russia and Ukraine.

On a country level, Latvia has so far voiced the biggest concern over sanctions against Russia, as the adverse effect would hit the country the hardest compared to all the EU member states. The country could lose up to 10 percent of its GDP, as the action against Russia could have a big adverse effect, according to the country’s Prime Minister Laimdota Straujuma. On Monday Latvia also said that the EU should compensate any countries hurt by sanctions against Russia.

On Wednesday the heads of nearly 100 companies from the Business Roundtable association will meet in Washington to discuss the question of sanctions.

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Time To Short Chinese and Hong Kong Developers?

I would stay out of this trade unless you are there on the ground, in either China or Hong Kong, involved in the industry and have a good pulse on timing. There is no doubt that China/HK are in a massive property development, credit and shadow banking bubble that will eventually blow sky high. Yet, to get the timing right is always incredibly hard. Especially, when you have the Chinese government willing to go to an extent that they have done thus far. Too much risk, very limited upside. 

Plus, there are plenty of short opportunities here in the US. As a matter of fact, it’s getting close to short sellers paradise. FB, GOOG, TSLA, TWTR and hundreds of other stocks are selling at incredibly high valuations. Not that dissimilar to 2000 top (Yeah, I know….it’s different this time). When the bear market of 2014-2017 starts, many of the speculative stocks will easily decline 50-80%. Much better than trying to squeeze 30-40% out of highly speculative Chinese developers.

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Time To Short Chinese and Hong Kong Developers?  Google

Short Sellers Target Chinese Developers as Rout Deepens

Stock traders have doubled bearish bets against some of the biggest Chinese developers amid growing concern that a weaker real-estate market will curb property sales just as borrowing costs surge.

Short interest in Evergrande Real Estate Group Ltd. (3333), the nation’s fourth-largest developer by market value, was at 8.4 percent of shares outstanding on March 17, up from 3.2 percent a year ago, according to data compiled by Bloomberg and Markit Group Ltd. It touched a record 8.6 percent on March 4. Wagers against Guangzhou R&F Properties Co. (2777) and Agile Property Holdings Ltd. (3383) have both reached the highest since December 2012.

Investors are bracing for losses as lenders pull back from the industry and local governments take steps to rein in home values in the second-largest economy. Yields on the dollar debt of Evergrande and Agile surged this week as a closely-held developer with 3.5 billion yuan ($566 million) of debt collapsed, while data showed property prices in some of China’s largest cities rose last month at the slowest pace since 2012.

“I see more downside in the share prices,” said Peter Elston, the Singapore-based head of Asia-Pacific strategy at Aberdeen Asset Management Plc, which oversees about $321 billion. “When property companies get into trouble, generally the weak companies start to get into trouble first. If property price weakness starts to become more pronounced, that’s going to impact the broader market.”

Defaults Spread

The Hang Seng China Enterprises Index added 0.2 percent at the close in Hong Kong. Evergrande shares fell 1.8 percent and Agile rose 0.2 percent. The Shanghai Composite Index slipped 0.2 percent. The Bloomberg China-US Equity Index of the most-traded Chinese stocks in the U.S. rose 1 percent to 98.18 yesterday.

The collapse of Zhejiang Xingrun Real Estate Co. emerged less than two weeks after the first on-shore bond default by a Chinese company. Shanghai Chaori Solar Energy Science & Technology Co.’s missed coupon payment on March 7 may have been China’s “Bear Stearns moment,” prompting investors to reassess credit risks as they did after the U.S. securities firm was rescued in 2008, according to Bank of America Corp.

Evergrande’s dollar bonds fell yesterday, sending the yield to 10.86 percent, the highest level on record, DBS Bank Ltd. prices show. Short interest in Guangzhou R&F, a developer based in the southern Chinese city, has surged to 7.3 percent from 3.3 percent a year ago. The company’s shares fell to their lowest level since October 2012 on March 17.

Bond Yields

Agile Property’s short interest increased to 2.3 percent from 1.3 percent a year ago. Shares have tumbled 55 percent from a high in January 2013. Yields on its February 2017 notes jumped 20 basis points to 7.46 percent yesterday, the highest since they were sold last month, according to Australia & New Zealand Banking Group Ltd. prices.

“The market is concerned about the financial risks of the property industry,” Chen Li, a China equity strategist at UBS AG who has an underweight rating on the property industry, said in a phone interview yesterday. “Some investors are betting that some developers would have credit defaults and financing difficulty as homes sales are slowing and mortgage rates are rising.”

An Evergrande spokesman said the company can’t comment before earnings. An Agile spokesman declined to comment. Two phone calls to Guangzhou R&F’s investment relations officer Vanessa Wang weren’t answered.

Stock Valuations

Recent declines mean Chinese property stocks are approaching attractive levels, according to Calibre Asset Management Ltd. The Shanghai Property Index fell 10 percent this year through yesterday, sending the gauge’s valuation to 1.1 times net assets, the lowest since Bloomberg began tracking the data in 1998.

“As we rely on fund managers to time the market in the long run, recent conversations indicate they are looking at buying,” Norman Chan, the Hong Kong-based head of investment at Calibre Asset Management, said by phone. “I suspect in a big down day, none of them will want to be a hero, but the current level seems to be the level they will start considering.”

History also shows mistiming bets on Chinese real-estate companies can burn short sellers, said John-Paul Smith, a global emerging-market equities strategist at Deutsche Bank AG.

Short interest in Guangzhou R&F reached a record 19.9 percent on July 30, 2012. Shares surged 48 percent in the next six months. Agile climbed 13 percent four months after bearish wagers rose to a record 9.5 percent on March 13, 2012.

Significant Downside

“If you remember in 2012, a lot of funds shorted those stocks and were very badly burnt,” Smith said by phone. “Fundamentally, I would be fairly negative. I would be very hesitant to recommend people to step in and short them as timing is always very difficult with these things.”

The default of Zhejiang Xingrun may signal difficult times ahead for smaller Chinese developers, which face a “rapidly deteriorating” credit environment, uncertain sales outlook and intensifying competition, Standard & Poor’s Ratings Services said yesterday.

“We think there’s a significant downside in this sector,” said Samuel Le Cornu, who helps oversee $1 billion at Macquarie Investment Management. “We haven’t bought anything for the last five years and I can’t see that changing.”

The Macquarie Asia New Stars Fund had an annualized return of 32.5 percent during the past five years, outperforming 99 percent of peers, according to data compiled by Bloomberg.

Second Homes

At least 10 Chinese cities stepped up measures to cool local property markets at the end of last year, with Shenzhen, Shanghai and Guangzhou raising the minimum down payments for second homes to 70 percent from 60 percent.

China’s households piled into real estate in recent years as they sought returns beyond the regulated caps on savings deposits. With the nation’s stock market failing to keep pace with economic growth, property offered an alternative, along with trusts that channeled credit to borrowers outside the official banking system.

The implications of falling home prices would be “enormous” because Chinese buyers see property as an investment, Aberdeen’s Elston said. “The prospect of them losing money is a pretty serious eventuality.”

 

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Is Putin Right About America?

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It’s a sad day for America when I actually agree with what Russian Mafia Cartel Leader Mr. Putin has to say about American Politics. How far down the shit hole have we fallen? 

Russian President Vladimir Putin accused the United States on Monday of being guided in its foreign policy not by international law but by the “rule of the gun.”

“Our Western partners headed by the United States prefer not to be guided by international law in their practical policies, but by the rule of the gun,” he told a joint session of parliament.

“They have come to believe in their exceptionalism and their sense of being the chosen ones. That they can decide the destinies of the world, that it is only them who can be right.”

What do you think guys? Is Putin right on the money. Have we become a nation of trigger happy warmongers who see no fault of our own? 

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Is Putin Right About America?  Google

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Fed Warns: Much Higher Interest Rates In 2016

I will give Janet Yellen one thing. She has been consistent with her haircut. 

As the article below indicates, a lot of people anticipate the FED to start raising interest rates around 2015-2016. Not going to happen. If anything, the FED will be cutting interest rates (if there is anything to cut) and flooding the market with cheap credit….again. Here is why. 

As I have already illustrated, a number of times, the FED is a reactionary force and not a market maker. For instance, Bernanke was worried about the housing acceleration and thought the economy was doing great as late as Q2 of 2008. Mind you, the recession was already in full swing at that juncture. What FEDs analysis of today’s market environment is rather simple. They see the continuation of today’s expansion for the foreseeable future. Even thought most of it has been driven by their own credit and speculation. 

As my mathematical and timing work indicates, we are on a verge of a severe Bear Market that will play out between 2014-2017. During this time the US Economy will slip back into a recession, leaving the FED with no option but to cut interest rates again. If you would like to know exactly when the bear market will start as well as it’s internal composition (all the ups/downs within the bear market) as well as where it’s going to complete….please CLICK HERE. 

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Fed Warns: Much Higher Interest Rates In 2016 Google

The Federal Reserve isn’t going to tell us when it expects to start raising interest rates. It isn’t going to draw a line in the sands of economic data – a minimum unemployment rate, a minimum rate of inflation. It’s done with all of that.

But the Fed is preserving another window on its plans. Since 2012, it has published the expectations of its senior officials about the year of the first Fed funds rate increase. It is scheduled to publish the latest batch of forecasts on Wednesday afternoon.

And those forecasts are likely to carry the same message as the latest round of changes in the Fed’s policy statement: Settle in. This is going to take a little explaining.

This chart from BNP Paribas shows the evolution of the forecasts. (There are 19 seats on the Federal Open Market Committee, but there have been vacancies at some meetings, so the chart gives percentages rather than counting heads.)

A majority of Fed officials has bet on 2015 since September 2012 — the month when the Fed changed its policy statement to read, “Exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015.”

When the Fed replaced that guidance just a few months later with an economic target – 6.5 percent unemployment – Ben S. Bernanke, who was then the chairman, was at pains to emphasize the timetable had not changed. And the dots did not move.

Lately, however, the number of Fed officials betting on 2016 has been rising, and it seems likely to rise again on Wednesday. Charles Evans, the president of the Federal Reserve Bank of Chicago, walked into the 2016 camp earlier this month.

The BNP chart reflects that move; other analysts say a larger shift is possible.

“We believe that Chair Yellen is probably one of the 2016 dots,” Sven Jari Stehn, a Goldman Sachs economist, wrote in a recent analysis. “If that is true, other participants, especially the governors, might decide to shift in her direction.”

The Fed is dismantling its stimulus campaign – arguably it has been retreating for almost a year now, since Mr. Bernanke roiled financial markets last summer – but the slow drift of the forecast is a reminder that it is moving very slowly.

The Fed may reinforce that message on Wednesday by emphasizing in its statement that even when it does start to raise rates, that too will happen very slowly.

Finally, it’s worth looking at one other part of the forecast. Fed officials are also asked to predict the long-run level of interest rates – basically, to define normal. Before the recession, normal was about 4 percent. But in recent forecasts, a growing number of officials – four in September, six in December – have predicted that interest rates will not return all the way to 4 percent. They’re basically saying this recovery won’t just take a very long time, but that it will remain incomplete.

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Stock Market Update. March 18th, 2014. InvestWithAlex.com

Daily Chart March 18, 2014 investwithalex

Another strong day with the Dow Jones up 87 points (0.54%) and the Nasdaq up 54 points (1.25%). 

The market opened up with another gap up today to continue it’s rally. Eventually the market will have to come down to close the gaps, possibly giving us a perfect trading setup. Allow me to explain. As you know, I have already outlined the exact DATE and TIME of the upcoming market TOP in our premium section. When the market tops out it will move fast to close the gaps opened up today and on Monday. Giving us a perfect trading opportunity. 

For the time being the market is doing exactly what it is supposed to do. Even thought market pundits, CNBC and most investors believe that Ukraine, Yellen, Unemployment, etc….have an impact on our markets, nothing could be further from the truth. The market is tracing it it’s exact mathematical structure. When it’s done, the bear market of 2014-2017 will start with the vengeance.

If you would like to know exactly when the bear market of 2014-2017 will start and its exact internal composition (upcoming turning points), please CLICK HERE. 

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Stock Market Update. March 18th, 2014. InvestWithAlex.com Google

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Obama Demands For Russian Stock Market To Collapse. Market Surges 14%.

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President Obama just can’t catch a break. After being played by Vladimir Putin like a cheap flute, President Obama had hopped that his sanctions “or threat of sanctions” would send a clear message to the Russian Economy and it’s stock market. Secretly hopping that the Russian market would collapse. That should teach those “god damn commies” a lesson. Instead, the Russian Index jumped 14% in 3 trading days. 

When we reached out to the White House for a comment, we got the following response. “You motherf*#(4, *#*^&%^ *$**** (Beep), if you ever #*#&@,  FBI *#&$( and NSA *#*&$….(Beep) *#&$…Got that?”.  Sounds like you need another vacation in Hawaii Mr. President. 

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Obama Demands For Russian Stock Market To Collapse. Market Surges 14%.  Google

z13

 

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Shocking News: 36% Of Americans Have Less Than $1,000 Saved Up

According to Employee Benefit Research Institute 36% of Americans have less than $1,000 in savings that can be used for retirement (excluding primary residence and benefit plans). See full story below. This is quite sad, yet it is indicative of the US Government who is hell bent on destroying the middle class and the American worker for the benefit of the Top 1%. By cutting interest rates into the negative territory and by flooding the market with money the FED shifted attention from productive economic growth to “paper shuffling” (aka..financial speculation). 

The result? Just as it should be. High unemployment, stagnating wages, speculative bubbles, no savings, massive debt, etc…. The worst part is, with the bear market of 2014-2017 just around the corner (according to our highly advanced mathematical and timing work) things are about to get a lot worse for an average American family. Unfortunately, 99.9% of American citizens can’t connect the dots. Hey, is American Idol on tonight? 

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Shocking News: 36% Of Americans Have Less Than $1,000 Saved Up Google

 

Retirement: A third have less than $1,000 put away

Most people have very little tucked away for retirement, and many aren’t even trying to figure out how much they’ll need later in life, a new national survey reveals.

About 36% of workers have less than $1,000 in savings and investments that could be used for retirement, not counting their primary residence or defined benefits plans such as traditional pensions, and 60% of workers have less than $25,000, according to a telephone survey of 1,000 workers and 501 retirees from the non-profit Employee Benefit Research Institute and Greenwald and Associates.

Only 44% say they or their spouses have tried to calculate how much money they’ll need to save by the time they retire so that they can live comfortably in their golden years, the survey shows. Workers who have done calculations on what they need to save tend to have higher levels of savings than those who haven’t crunched the numbers.

“There’s an incredible difference between those lucky enough to have a retirement plan and those who don’t,” says Jack VanDerhei, the institute’s research director and co-author of the 2014 Retirement Confidence Survey. “What’s really striking is that 73% of those without a retirement plan, such as an IRA, 401(k) or 403(b), have less than $1,000 in savings and investments.”

The reason defined benefits weren’t included in the total is most people don’t know how much those are worth, he says.

Many people realize that they are not on track in saving for retirement, and the two most important reasons they give for not saving more are cost of living and day-to-day expenses, VanDerhei says.

People’s confidence that they’ll have a comfortable retirement has risen slightly after record lows of the last five years, with 18% of workers in 2014 saying they are very confident they can retire comfortably, up from 13% who were very confident in 2013. Meanwhile, 24% are not at all confident they have enough saved for a comfortable retirement, about the same as 2013.

Retirement confidence is present mostly in people with higher incomes and in those with retirement plans, VanDerhei says.

The survey “highlights the impending retirement crisis that we will face over the next 20 years,” says Mark Fried, president of TFG Wealth Management in Newtown, Pa. “When I see these numbers I have ask the question: How did we get here? We need more financial education in the schools, in the media, in the workplace.”

If possible, people 40 and older should try to save up to 20% of their income, he says. “If you can’t afford to do that right now then set this as a target, and as you get annual raises put aside part of each raise until you reach the 20% number,” Fried says.

Invest in your company’s retirement account up to the match. One of the best ways to increase your retirement savings is to take advantage of your employer match if you have one, he says.

John Piershale, a certified financial planner at Piershale Financial Group of Crystal Lake, Ill., says: “Try to imagine how much you are going to need to have saved up to last you 20 to 30 years during retirement. The only way you can figure that out is do some retirement calculations. We help clients figure this out.”

If people are way behind in saving for retirement, they may need to work longer at their current job or get a second job to help fill the savings gap. Piershale says. “If you had the idea that you were going to retire at 62 or 65, and you don’t have enough saved up, then you have to keep working.”

Other survey findings:

• Debt is weighing heavily on many people, with 58% of workers and 44% of retirees saying they have a problem with their level of debt.

• Like workers, many retirees are also short on funds, with 58% of them having less than $25,000 in savings and investments, not counting their primary residence or defined benefits plans (traditional pensions); and 29% having less than $1,000.

• Although 65% of workers plan to work for pay in retirement, only 27% of retirees say they are working for pay during their golden years.

Total savings and investments reported by workers, not including value of primary residence or defined benefit plans such as a traditional pension.

Less than $1,000, 36%

$1,000 to $9,999, 16%

$10,000 to $24,999, 8%

$25,000 to $49,999, 9%

$50,000 to $99,999, 9%

$100,000 to $249,999, 11%

$250,000 or more, 11%

Total savings and investments reported by retirees, not including value of primary residence or defined benefit plans such as traditional pensions:

Less than $1,000, 29%

$1,000 to $9,999, 17%

$10,000 to $24,999, 12%

$25,000 to $49,999, 8%

$50,000 to $99,999, 7%

$100,000 to $249,999, 11%

$250,000 or more, 17%

Source: 

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What You Ought To Know About High Frequency Trading

This is a complex issues…….

Computer-driven trades can be executed in about 300 microseconds, according to one study. At that speed more than 1,000 trades can be made in the blink of a human eye, which lasts 400 milliseconds. At their peak, algorithms shot out about 323,000 stock-trading messages each second in the U.S. last year, compared with fewer than 50,000 for the busiest period in 2007, according to data compiled by the Financial Information Forum.

Not…..This should be illegal. Plain is simple. 

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What You Ought To Know About High Frequency Trading Google

High-Speed Trading Said to Face N.Y. Probe Into Fairness

New York’s top law enforcer has opened a broad investigation into whether U.S. stock exchanges and alternative venues provide high-frequency traders with improper advantages, a person with direct knowledge of the matter said.

Attorney General Eric Schneiderman is examining the sale of products and services that offer faster access to data and richer information on trades than what’s typically available to the public, according to the person. Wall Street banks and rapid-fire trading firms pay thousands of dollars a month for these services from firms including Nasdaq OMX Group Inc. and IntercontinentalExchange Group Inc.’s New York Stock Exchange.

More from Bloomberg.com: WWE Free-for-All Awaits If Founder Sets Sale: Real M&A

The attorney general’s staff has discussed his concerns with executives of Nasdaq and NYSE and requested more information, said the person, who asked not to be named because the inquiry hasn’t been announced. Schneiderman’s office is also looking into private trading venues, known as dark pools, and the strategies deployed by the high-speed traders themselves.

“This new breed of predatory behavior gives a small segment of the industry an enormous advantage over all other competitors and allows them to use new technologies to reap huge profits based on unfair advantages,” according to a draft of Schneiderman’s speech to be delivered today at New York Law School. A copy was obtained by Bloomberg News.

More from Bloomberg.com: Obama Says Putin Must Pull Back on Crimea Annexation

Disrupting Strategy

The investigation threatens to disrupt a model that market regulators have openly permitted for years as high-speed trading and concerns about its influence have grown. Trading firms pay to place their systems in the same data centers as the exchanges, a practice known as co-location that lets them directly plug in their companies’ servers and shave millionths of a second off transactions. They also purchase proprietary data feeds, which are faster and more detailed than the stock-trading information available on the public ticker.

“We publicly file with the SEC for each and every one of these services, and we’re always engaged with government officials around the world,” Robert Madden, a spokesman for New York-based Nasdaq, said in a phone interview, referring to the U.S. regulator. He and Eric Ryan, a spokesman for NYSE, declined to comment on Schneiderman’s investigation.

More from Bloomberg.com: Ocean Off Perth Called Diverted Malaysian Plane’s Most Likely Last Position

Dark pools, including Goldman Sachs Group Inc.’s Sigma X and Credit Suisse Group AG’s Crossfinder, operate without the same regulatory oversight as the public exchanges and disclose little about their trading or the participants. Michael DuVally, a spokesman for New York-based Goldman Sachs, declined to comment, as did Drew Benson, a spokesman for Zurich-based Credit Suisse.

Mounting Concern

Special services have helped fuel high-frequency trading, in which computer programs execute orders in a fraction of a second and take advantage of fleeting discrepancies in security prices across trading venues. High-frequency activity represented more than half of all U.S. stock trading in 2012, according to Rosenblatt Securities Inc.

Critics including some regulators and market participants say that such trading, which captured the spotlight in the May 2010 flash crash in U.S. equities, serves little purpose, may distort the market and may leave retail investors at a disadvantage.

Computer-driven trades can be executed in about 300 microseconds, according to one study. At that speed more than 1,000 trades can be made in the blink of a human eye, which lasts 400 milliseconds. At their peak, algorithms shot out about 323,000 stock-trading messages each second in the U.S. last year, compared with fewer than 50,000 for the busiest period in 2007, according to data compiled by the Financial Information Forum.

Some Advantages

Andrew Brooks, head of U.S. equity trading at Baltimore, Maryland-based T. Rowe Price Group Inc., told a Senate hearing in late 2012 that the quest for speed has threatened the market.

Proponents say that high-speed trading actually increases the availability of shares in the market and that interfering with such programs would lead to higher costs and be harmful to financial stability. Indeed, the rise of computers in stock trading has helped squeeze out specialists and market makers, who had long facilitated transactions.

The current market structure, which has led to more participants, has lowered the cost of trading for investors, said Peter Nabicht, a spokesman for Modern Markets Initiative, an industry group formed last year by firms including Quantlab Financial LLC, Hudson River Trading and Global Trading Systems.

“Speed of decision-making and execution, often associated with high-frequency trading, gives traders more confidence in their interaction with the market, which allows them to efficiently make more competitive prices” and better meet investor demands, Nabicht said.

‘Tremendous Victory’

Schneiderman has previously voiced disapproval of services that cater to high-speed traders and give them a potential edge. When Business Wire, the distributor of press releases owned by Warren Buffett’s Berkshire Hathaway Inc., said last month it would stop sending the statements directly to high-frequency firms, Schneiderman called it “a tremendous victory.”

Taking his concerns public may help Schneiderman push the exchanges to alter practices, as Business Wire did, even without enforcement action. Among the powerful tools at his disposal is the Martin Act, an almost century-old law that gives him broad powers to target financial fraud in the state.

Exchanges Vulnerable

Targeting the exchanges could be the most straightforward way to deal with any ill effects of speedy trading, said James D. Cox, a securities law professor at Duke University in Durham, North Carolina.

“The exchanges are much more vulnerable to state and federal regulatory enforcement than the market participants,” Cox said. “They have a broad statute to maintain orderly markets and to do so in an ethical manner.”

The 1934 securities law that set up regulatory oversight of the U.S. financial markets specifies that exchanges enact rules to protect investors and the public’s interest, to promote equitable practices and to prevent fraud and manipulation.

Regulators have signaled concerns in recent years on how U.S equity markets operate. After the Dow Jones Industrial Average briefly lost almost 1,000 points in the flash crash, the chairman of the Securities and Exchange Commission, Mary Schapiro, said she planned to increase scrutiny of high-frequency traders.

In an effort to avoid another flash crash, the SEC worked with exchanges to create price curbs designed to prevent losses in a single stock from snowballing into a marketwide rout. The current chairman, Mary Jo White, said in January the SEC would soon publish a review of research on high-frequency trading.

Regulator’s Dilemma

Cox, the Duke professor, said New York’s attorney general is the only law enforcement body or regulator likely to target the exchanges.

“The SEC wants to protect investors, but also strengthen and promote U.S. capital markets,” Cox said. “These twin functions conflict with each other, which is why they have so far turned a blind eye on this issue.”

Some in the trading business, like Joe Saluzzi, a partner and co-head of equity trading at Themis Trading LLC in Chatham, New Jersey, have called for restraining services. Saluzzi said he’s wary of the private feeds because they’re far more detailed than public data, showing when and how a stock order was changed or canceled, which can give an insight into a particular strategy.

“Inside these data feeds is information which allows folks to read it and re-engineer the behavior of others,” Saluzzi said. “A lot of high-frequency strategies are built on modeling the behaviors of someone else.”

Price Discrepancy

The private feeds also reach traders more quickly than the public-quote system because they are sent directly from each exchange to paying customers. Public feeds build in an additional step: Price data from dozens of venues where U.S. stocks change hands are sent to a central place for processing before that information is publicized. Bloomberg LP, the parent of Bloomberg News, provides its clients with access to some proprietary exchange feeds.

A study published in January co-authored by Terrence Hendershott, associate professor of finance at the University of California, Berkeley, found the average time difference was 1.5 milliseconds between calculating a stock’s price using the exchange’s proprietary data and waiting for the public information. That’s more than enough time for a speedy trader to recognize an advantageous price and execute a trade against someone using the slower feed.

Policing Profits

The draft of Schneiderman’s speech refers to an academic paper that suggests segmenting the trading day into thousands of auctions in an effort to prevent the quickest firms from jumping ahead of others.

The paper’s co-author, Eric Budish, associate professor of economics at the University of Chicago’s Booth School of Business, told Bloomberg News in February that non-stop markets create a race between speed traders.

Operating different data feeds has led to past disciplinary action. NYSE Euronext agreed to pay the SEC $5 million in September 2012 to resolve claims it violated rules by giving some customers a head start on trading information. NYSE sent data through proprietary feeds to paying customers before relaying the same information to the public feed, regulators said. The exchange said the incident was “not from intentional wrongdoing.”

The exchanges have a variety of duties and responsibilities not just to the public, but to members and shareholders. NYSE and Nasdaq are required to police their members’ activities. In the past decade, they have moved from member-owned utilities to publicly traded companies with an eye on generating returns for shareholders.

European Crackdown

Nasdaq said in an investor presentation last week that it had close to $40 million in revenue from U.S. proprietary market data in the fourth quarter last year. The company does not reveal how much it receives from co-location of servers.

The use of high-frequency trading strategies has come under scrutiny outside the U.S.

European Parliament lawmakers reached a draft deal with national governments to curb high-frequency trading as part of tougher rules for the bloc’s financial markets, said the chief legislator working on the plans in October. The draft requires algorithms to be tested and authorized by regulators and calls for circuit breakers, among other measures.

“The negotiation team achieved a significant breakthrough on this issue,” Markus Ferber, the lawmaker leading the measures, said in an e-mail at the time. “The area of high-frequency trading is lacking suitable regulation