Forum Post: Snippet of a Conversation from an Investment Bank Trader
Posted 12 years ago on Oct. 26, 2011, noon EST by enough
(587)
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The following is a snippet of a conversation of a high-frequency trader at one of the investment banks near Zuccotti Park:
"We are safe. There is no fucking way the regulators are going to admit they allowed nuanced high-frequency algorithmic trading to go on for years and then suddenly decide it is illegal. The public would be outraged and take to the streets, especially after that Madoff fiasco. If they haven't banned flash trading yet, which is out-and-out cheating, why does anyone think the SEC is going to ban our bread-and-butter pump-and-dump, front-running trading strategies? No fucking way. Besides, high-frequency trading is 70% of market volume. If it dries up, the market crashes. That's exactly what the government does not want. We have them by the short hairs. Besides, we kick over a nice piece of our easy profits to fund politicians of both parties. We are fucking golden. We are untouchable. We are too-fucking-big-to-fail. The dirt bags protesting in the streets can smack it their ass."
Did you actually overhear this? Not that I'd be all that surprised if you did; a couple of hedge funds and a high-frequency trader recruiting agency swing by MIT every year to try to pick up a bunch of our people in departments like math, econ, and computer science people, and their enticements remind me of a better-spoken version of this: Come work for us, enjoy bonuses of up to 10 times your base pay depending on the profit of your desk, and now that the Volcker Rule is going to ban proprietary trading by banks we have a whole new market share to gobble up!
Essentially this trader, whoever he is, is the most honest of all the Wall Street people I've ever heard speaking about the state of the industry. The whole point of the movement is to deal with Mr.Too-Fucking-Big-To-Fail and remind him that he's not too fucking big to be unwound and put into receivership. Nor, for that matter, is he too fucking big to be regulated or to do time if caught violating the law. There are steps we can take to deal with industries that think this way, and it's about time we start to take those steps.
Take the case of Charlie Rangel: Despite voicing public support for OWS, Charlie Rangel turned around and voted for a free trade agreement which is most likely going to ship even more jobs overseas and runs contrary to the founding principles of the movement. This is despicable, and a fair number of people on here ought to be pretty pissed. Here's my question to those of you who don't want to see this sort of behavior continue: When's the next round of Democratic primaries, then? And which OWS organizers are in Harlem and willing to locate and get behind a challenger for Rangel's seat? This is why we need our own slate of people running for office. If we want to get real change then we're going to need to offer real people willing to run for office and able to win; we can't trust people like Rangel to vote with their constituents and the general election offers us a choice between lip service and outright hostility. If, however, we unseat Rangel in the primaries, then we can probably put our man through the general election with little opposition and we'll have our very first OWS'er in DC.
Rangel's also the perfect one to start with; there's little or no danger of a GOP candidate taking the district, but Rangel himself has been publicly called out on the House floor for corruption and I don't think people are going to forget that any time soon.
The thing is, if we try this for Rangel and succeed then it sends a message to the rest of DC that they have to start taking us into account if they want to keep their jobs. The Tea Party did it, the Populists did it, the Green Party does it on occasion, and generally speaking it works. Citizens United allows us to build and fund an OWS superPAC, partially from all that donation money nobody can seem to figure out what to do with, and use it as a war chest that we can spend on our candidates across the country. Now, we'd obviously not start soliciting corporate funding for it because that goes against everything we stand for, but imagine the power that an independently aligned national coalition of small donors would have to influence this country during elections season. We could throw our people (actual OWS'ers with community organization/activism/legal backgrounds or OWS sympathizers in that category) into Democratic and Republican primaries across the country, and even if we only take one or two seats most legislators will think of what happened to the Republican establishment post-Tea Party and will be willing to listen.
Incidentally, this is not about letting ourselves get co-opted by different political parties; in fact, it's quite the opposite. By injecting our people into their primaries (especially if you have a historically uncontested seat that you can generally keep until you decide to retire) we force the incumbents to take positions on the issues that we consider important, particularly corruption and campaign finance/lobbying reforms. It's a win-win for us. If we win we get to call the shots instead of partisan hacks and Wall Street shills, and even if we lose we will have co-opted the national debate. He said it himself; the scheme only works if they continue to kick over chunks of their profit to enough politicians that they let things slide and hamstring the regulators. If we can put in politicians who won't be bought, we have a shot at winning.
Yeah, a friend of mine at the University of Pennsylvania is studying doctorate-level advanced probability theory with an eye toward working on Wall Street as a quant. He said there a big bucks to be made doing quantitative trading versus working as an engineer. There are two basic groups of high-frequency algorithmic traders: the quantitative probabilistic traders who try to apply the principles of probability to make make money through use of high-frequency computer algorithms and then there are the cheaters who use simple high-frequency algorithms to illegally manipulate the market to front-run and pump-and-dump honest investors. The latter group is the sand box the big boys play in and the results show it as the investment banks and trading firms make millions almost every single trading day, which is statistically impossible unless you are cheating.
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