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Taking Stock: High-frequency trading casts shadow of distrust, disgust

Malcolm Berko: High-frequency trading has cast a long shadow of distrust and disgust; it’s segued into a craps game for high rollers, turning the NYSE into a semi-farce and three-ring circus.
Oklahoman Published: May 18, 2014

Dear Mr. Berko: I am 86 years old and have been investing in the stock market since finishing graduate school in 1952 and taking my first job at Zenith, which manufactured radios and TV sets.

Back in those days, the New York Stock Exchange only traded 2 million or 3 million shares a day. I have been reading about high-frequency trading and would like you to explain how it works. I have been reading you for almost 30 years and would like to know what you think about this. I wrote you once in 1989 and asked about Apple Inc., which you said “might be a good buy.”

JB, Moline, Ill.

Dear JB: And I remember your Apple letter for two reasons:

1) Your question was the first time I was ever asked to give an opinion on Apple, and 2) you told me that you owned a working 66-year-old Zenith radio and a working black-and-white TV that you’d had for 51 years. They might have some collector’s value.

I wrote about high-frequency trading four or so years ago.

The mobsters and banksters on Wall Street — Citigroup, Wells Fargo, Merrill Lynch, J.P. Morgan, UBS, the numerous hedge funds and the fraternity of hugely capitalized traders — are all members of this evil cabal and control about 93 percent (this is my educated guess) of the volume on the New York “Schlock” Exchange. These pirates are slick as ticks and trade hundreds and hundreds of millions of shares a day on a finger’s snap.

When you wrote me 25 years ago, the average number of executions on the NYSE was 105,000 trades, representing 160 million shares, with an average market value of about $4.8 trillion a day.

Today the average number of daily trades exceeds 1 million, and the average daily volume is about 1.5 billion shares, with a daily market value of $32 trillion. That’s a sevenfold increase, and those high-frequency traders are having glorious Champagne picnics raking in the slush of cash.

The Big Board makes it peachy easy for these daytime vampires to create seismic volatility that (for noneconomic reasons) changes market values and drains blood from our pension and retirement plan portfolios.

High-frequency trading was responsible for the flash crash in May 2010, when the wild market plunged 1,000 points and breathlessly recovered a few minutes later.

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