Money Bots: How the Performance and Value of Wall Street Corporations Became Irrelevant.

Money Bots: The Truth Behind High Frequency Trading

Al Jazeera (2021)

Film Review

With high frequency trading, the performance and value of a company becomes irrelevant – all that matters is competing trades faster than anyone else. With money bots, many stocks are held only a few seconds before being resold.

This documentary concerns the trading “bots” that are programmed to carry out complex high frequency stock trades without any human input. The bots are triggered when conventional traders (eg pension funds) issue large orders. Because they can consummate trades much faster, the bots buy the desired stocks and then sell them to the pension funds at a higher price. Because high frequency trading is totally unregulated, this is perfectly legal.

At times high frequency trading can have real time effects on the whole market, as in May 2010, when high frequency trading caused several stocks on the Mercantile Exchange to crash before the entire exchange was shut down. A second “flash crash” occurred in February 2018, when trading bots caused the Dow Jones to lose 1500 points in a few hours (the highest percentage loss in history)

The most interesting part of the film concerns the computer scientists who developed the algorithms (1991) allowing money bots to instantly capitalize on large orders submitted by human traders. The bots were based on an app they originally developed to predict the outcome of black jack and roulette games.

In all cases, success in high frequency trading depends more on location (as close as possible to the designated exchange) and access to the highest speed networks than on true predictive ability. According to whistleblowers interviewed in the film, the most successful high frequency traders have employed “cheats” of some type.

The film can be viewed free at https://www.msn.com/en-ca/video/movies/money-bots-the-truth-behind-high-frequency-trading-featured-documentary/vi-AAKbJXL

Wall Street: Never Give a Sucker an Even Break

The Wall Street Code

VPRO (2013)

Film Review

While the rest of us are busting our ass to earn an honest living, Wall Street traders are running around thinking up new ways to rip us off. And laughing all the way to the bank. I love the way they refer to ordinary investors with pension funds or retirement accounts as “dumb money.”

The Wall Street Code is all about whistleblower Haim Bodek and his discovery of a secret algorithm used by high frequency traders to rip off mutual and pension funds (aka “dumb money”).

As of 2013, when this documentary was made, 70% of Wall street trading was automated and 50% occurred within milliseconds. When large volume trades are made, they always drive the share price up. This means there’s a distinct advantage in getting your order in before a large volume trade by a pension or mutual fund.

Badek discovered a secret algorithm that alerted unscrupulous traders to large volume trades before they were made public and help them jump to the front of the queue (and purchase stocks before the share price started to rise).

Michael Lewis writes about a similar scam in his 2015 book Flash Boys. The book concerns whistleblower Brad Katsuyama’s discovery that high frequency traders were secretly exploiting minute differences in the speed of electronic transmissions (see Wall Street More Deeply Corrupt than We Thought).

Bodek believes that Lewis seriously underestimates the serious amount of fraud occurring on Wall Street. Bodek’s persistence has resulted in the prosecution of the New York Stock Exchange by the Security and Exchange Commission – resulting in unprecedented fines being imposed.

See http://blog.themistrading.com/2018/03/the-return-of-haim-bodek/