Traders Profit With Computers Set at High Speed:
Soon, thousands of orders began flooding the markets as high-frequency software went into high gear. Automatic programs began issuing and canceling tiny orders within milliseconds to determine how much the slower traders were willing to pay. The high-frequency computers quickly determined that some investors’ upper limit was $26.40. The price shot to $26.39, and high-frequency programs began offering to sell hundreds of thousands of shares.
The result is that the slower-moving investors paid $1.4 million for about 56,000 shares, or $7,800 more than if they had been able to move as quickly as the high-frequency traders.
A scene from Office Space comes to mind:
Joanna: “Hey, what were you guys celebrating last night?”
Peter: “Oh, uh, I’m not really at liberty to talk about it. (She looks at him) I really can’t. (Still looking) Alright, so when the sub routine compounds the interest, right, it uses all these extra decimal places that get rounded off. So we simplified the whole thing and we just– we round ‘em all down and drop the remainder into an account that we opened.”
Joanna: “So, you’re stealing.”
Peter: “Uh, no. No, you don’t understand. It’s uh– it’s very complicated. It’s uh– it’s aggregate, so I’m talking about fractions of a penny here. And, uh, over time they add up to a lot.”
Joanna: “Oh, okay. So, you’re gonna make a lot of money, right?”
Peter: “Yeah.”
Joanna: “Right? That’s not yours?”
Peter: “Uh, well, it becomes ours.”
Joanna: “How is that not stealing?”
What’s being described is theft, plain and simple.