When old traders get together, they tell stories, laugh, joke, ask about old friends and spin conspiracy theories-especially after a few beers.
Here is your old trader conspiracy theory of the day.
HFT and electronic trading have taken over the business. Unscrupulous electronic traders have “hunter” programs that look for quicker connections, and then bury them with traffic-making it easier for their connection to be faster.
They have hunter orders that simply search the deck for stops, and try and see what traders are doing. For example, if I am a big position trader, and the market goes to where I want to get out, perhaps I am engaged in quite a bit of activity to try and get out of my position. The electronic robot will notice this activity, and try to screw me up.
Of course, electronic networks are supervised and watched by the National Security Agency. The NSA monitors trading networks, and phone calls.
Notice that the Congress and government haven’t banned insider trading for government yet.
What if, Congress used the NSA to monitor phone calls and traded on the information, and used a willing electronic trader to stuff all the traffic so they could get ahead of the rest of the market?
Stranger things have happened.