Of computer code theft and high speed trading

CJR was on this weeks ago:

[Goldmann Sachs] has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways.

Which raises the obvious question of whether Goldman Sachs itself uses the program to manipulate markets in unfair ways. What controls are there on this? Who regulates it? I’ll look forward to some explanatory pieces on this in the days ahead.

but it looks like those explanatory pieces have started to arrive.

The NYT goes front and center with coverage of how the big trading firms use computer banks and top shelf algorithms to outmanuver the rank and file investors.

How does this work?

Goldmann's computers monitor oodles of trades and react instantly to price shifts. Okay, that seems tricky but they're essentially speed reading the market, so how is this a problem?

Quoth the NYT:

While markets are supposed to ensure transparency by showing orders to everyone simultaneously, a loophole in regulations allows marketplaces like Nasdaq to show traders some orders ahead of everyone else in exchange for a fee.

Oh, they bought better access for their hyperfast computers so they can bend the market.

Well, I guess I'm with Goldmann on this. Someone could use these tools to "manipulate markets in unfair ways."

They've been doing it for years.

(H/t emptywheel)