this presidential election is not just about obama and romney there are also third party candidates on the ticket and they will influence its outcome see a debate among this nation's major third party candidates right here on our t.v. october twenty third. world. science technology innovation. developments around russia we've got the huge earth covered. mission three going to take three years for charges three arrangement three. three stooges free. download free

brochures videos for your media projects a freebie deodhar t. dot com. you know sometimes you see a story and it seems so you think you understand it and then he glimpse something else you hear or see some other part of it and realize that everything you thought you knew you don't know i'm tom hardy welcome to the big picture. good afternoon and welcome to capital account i'm lauren lyster here in washington d.c. these are your headlines for october eighteenth two thousand and twelve tomorrow marks the anniversary of black monday in one thousand nine hundred eighty seven when the new york stock exchange suffered if the largest single day percentage drop

in its entire history now one explanation was selling by program traders exacerbated by human fear and panic so with the rise of algorithmic and high frequency trading what you can see right there behind me how does the increase the robots change the equation at the crash polls speak to next founder that's where you came up with in just a moment air con sader plus a high frequency trading firm started by former citi group exact closed its doors this week reportedly because a lower volumes due to a drop in trading by retail and other investors have led to smaller profits for the speed demon this is according to the wall street journal did unchecked high frequency trading advantages drive other investors. out of the market and what effect will this have on the algo bots themselves will talk about what it might take to get these investors you and i the average folks and fairness back in the market plus newsweek shuttering its print edition is this part of

a larger trend we're seeing first hand in the media business the move of mainstream media online to compete with the growing blogosphere and alternative media is growing like wildfire we'll talk about it let's get to today's capital account. so today the c.e.o. of p. and c. financial services reportedly told c m d c that computer hackers pose an increasingly grave challenge to the u.s. banking system this comes of course after last week secretary of defense leon panetta said this about threats facing us in cyberspace and potential attacks the collective results. of these current. could be assured

pearl harbor. wow well false flag or not it underscores the increasing role and importance of computers and software everywhere but for our purposes we'll focus on the role in the banking system and the natural markets and perhaps there is no greater example than the rise of the quantum computer algorithm some executing at breakneck speeds now dominating the stock market in fact in the same time it took me to say that last sentence around a half a million orders were placed i'm told now if the algos had something to say to us mortal humans who dared to dabble in the same stock market we imagine it might sound a little like this. i know that you're. ready . for it. and maybe you were afraid of change for good reason thanks to the company known as manics we know too that this

is what the change looks like this jeff shows the rise of high frequency trading start of the beginning of two thousand and seven to two thousand and twelve right there you're seeing in kind of the height of it now this animation became very popular on the blogosphere around the time of night capital's high speed algo trading debacle over the summer here to tell us about it in person though the issues and the practices of high frequency traders from the front lines is next founder air con savior so first let me just say thank you so much for being on the show we're so excited to have you. because although i cannot tell you how many tweets i got from people from people in the industry saying this guy was ahead of everybody else he is a trailblazer in this industry and in this space so first just for our viewers i don't know you tell us what you do and briefly what your role is in this whole kind of high frequency trading space. well i like to process lots of data i've

been working with seriously since eighty six so. some question he's going to do this summer in this office. and so i've had a real time system of interest for us since then and. you know we're similar to. get it put it together package it and so to subserve. and then what about at the high frequency trading because you've really seen it from the frontline so what's been your role in monitoring that. part of what we do for a real sense of services markets are. looking at many different angles and examples of these changes is for example one example opened up within seconds something was wrong which is a lot less than it took knight capital to. people argue way too long to figure out what was going on now you watch markets very closely you've been watching high

frequency trading for a year or so when did you really see it take off because i know i've been told it kind of started to get its worth around eighty six but when did it really explode in july the seven words the first occurrence we started seeing these new hour as it were lasting lots of food orders in the morning and then when did you really see the volume any amount of high frequency trading take off. well that's pretty much was the birth. of the next. period was pretty linear from there i go up and down towards the general. trend. ok and i know because when we were talking you said that after the passage of reagan m.-s. you saw kind of an explosion go on why was that a pivotal turning point. as it was sort of regulations that industry goes in suits . and it was. good who plays sort of.

you know really change the structure of the market. so who wants to figure out how to sort. but then exploit a way they did right. that's exist so then let's talk about some of the issues and the concerns surrounding high frequency trading for market participants both for individual investor retail investor but also the impact on the market as a whole because it's hard for me to imagine that it's good for the ecosystem. well the story of the diversity of princess appearance is boils down to the chase the way everybody you can compete on speed the people who are willing to invest in millions of dollars worth of equipment i or stamp annoyance cetera et cetera we basically have to do that now to have the same informational on par that you do before we're going to mass what about for the average trader that you shouldn't

matter to them that they can't exploit a millisecond no not a lot and the problem is that with this of a couple problems one without the burst of diversity the curse of spreads whenever something unexpected happens like perhaps google safford him it could seriously impact the market in a way that. could cause prices based on some work because he promises to severely affect you. in so we that risk is there because people the diversity of persistence of different viewpoints on the market and maybe we're going to buy in more than ten percent there are are going to be there is because the information they're receiving is delayed or is untrusted or do the changes might select agree cancel some orders and others are going to be reluctant to pull the trigger and so you don't really have the buying power available it's

not appearing more and is there a problem to that without those folks in the market you have the algos that are all reacting that are providing the illusion of liquidity and that they're all programmed to pull out when they catch any signs that things there are i know yes. we saw the just evaporate up from google which was pretty surprising to see it impact the market like you did a minute from a pretty pretty moderate. absolute absolute. well we were yes it was long as long as no other bad news came out the rest of the day would be fine if the one they were going to get were not to be so lucky to get away from them. and if. the arabs in the us are going to say sounds that everyone sort of knew to go to bars so they're going to be facing the target of. like for example use murder which started the moment when the regular tells you

there is murderers and it's usually something that you don't have we're going to war but let's say he makes a mistake who is super computers and he's not. mistaken to produce so he's going to get. the premises it is. just. so right right so there are a lot of consequences there before we get further into them and also how we can kind of i do some of this i do want to ask you to clarify for everybody because since the flash crash and since knight capital we hear a lot about high frequency trading we hear a lot about algorithmic trading they're often lumped together but they're not the same thing so can you just differentiate for us how you think about algorithmic versus high frequency trading and any misconceptions you want to clear up. well there is no state again this is.

around he was discussing how to define. how do you define i frequency trading is trading that is based on. a book. you have there because. it's about. how you special order to be able to those kinds of the and that algorithmic is kind of the informational aspect right this software or the cognitive ability to execute these kind of trades yes yes that they can they can go where you are so that so there is overlap so one question for you is which is the more exploitative or or the edge really coming from is it coming from the algorithmic software or is it coming more from this speed you know it's not really . or however you can see or some kind of phony as are exploiting the regulations are now on the rules rather than

a sleaze are the rules you know we're really concerned with conservative how fast trudy goes we're concerned with those who broke the rules right so you're saying to me you know it's not understanding every technical thing it's about following the rules and just to give one example of how some of these tactics is manipulative tactics play out and can affect the whole market you were just telling me one example of ever rattling the beehive what does that do what's the impact there i mean to be going to be high. if you know if the workers i was in your positions with. because. there's definitely ways to extract value. and it's americans receive that see. you there on your stupidity somebody's sorghum hundreds of millions of dollars is where you have to do that. right and then how does this play out and market with exceptionally low

ball attila because right now the vix is that fifteen pretty much doesn't get lower than this one how does that work when volatility is this low. well it. is but it will be nobody wants to put their orders in the book any more we're just about to quit or you know what one of the police orders to buy are sort of the market was higher or lower because they find out if you don't have a speed advantage there will you feel when it's through there is a bit and so they change their strategies around you more and i want you to report last minute placing orders or you know aren't going to see that we're going to. what end up with as long as. they don't beat it we build a liquidity which means that somebody does need either you or in the know to really romas the more they can do it with in terms of their oh wow ok well eric i'm an old you're right there are kinds of founder of man x. is what that he'll be back in just a moment on the other side of this break still ahead we've talked before about

regulators being late to the party with high frequency trading so is there any hope that enforcing the rules will happen and even if they are is it enough to curb some of these problems we'll get to that but first your closing market numbers. thank. you download the official publication. choose your language stream quality

and enjoy your favorite. t.v. is not required to watch on t.v. all you need. mobile device for john t. any time.

welcome back as i mentioned at the top of the show to mars the twenty five year anniversary of what's known as black monday it's the day this stock market plunged in one thousand nine hundred seventy eight no trader will ever forget from those i've spoken to so fast forward and there are many many more algorithms that are that are responsible for executing that the trades are going on with the new york stock exchange so does that make a crash better or worse more or less likely let's us our ask our guest because he watches all of this so closely err consider founder of nan x. so financial markets mr hunter of always been volatile they've always had wild swings we have the anniversary of the crash of one thousand nine hundred seven to remind us of that now that so much of that is done by computers so much of the trading is that better because there is less of the human fear and panic or does it simply mean that there are more compounded by how fast they are and compressed by

the high frequency trading. well in order to go faster than your neighbor and that's really what this is all about you have to execute lesko means you have a pair of lights things checking the little video of you know is it ok to biomarkers up down ten percent well we don't care about us me other than to get out of korea so what happens is you going to dissolve clouds of algorithms if they were to become legal avenues and some people could figure out how to cause the lemmings to do things they don't want to do and individually the market and you've got a very complex system here and complex systems are no it's not run perfectly when things are massive for so all well it's going to take is a bad use of them when maybe a little worse than google's. because the algorithms just shut down and we're some of them just all the lettering on top of each other so do you think it's that crash

as if we if we had one that there's the potential for them to be worse than they used to be when with humans doing all that's. worse i don't know faster absolutely faster ok the problem now is it's not really. well when you have these can't come good rules and we're going to hold the stock and in whose orders of trees are going to be broke you know whose are not going to be. the solution still have confidence ok and that's those are a couple of issues that i want to get into because one of the things i often hear from from folks that watch this is that it's just gotten so fast and regulators are just so behind and so late to the party i want to know your view on that and especially since last month we did get a fine from the f.c.c. to the new york stock exchange for them getting information more quickly to proprietary the people that had their proprietary feed versus everyone else

so what do you think is the state of regulation of this industry well you know how to get to training to you know how to understand where things are going to you know it's really all over one class of people who are not following the rules is simple and the following. but yes you see what is simply enforcing the rules the first time since reagan is house you know what probably more important than the form is sort of the wording in the form which you can see this these things are not legal these things have become so commonplace you know my theory was that the f.c.c. was going to go full tilt and now storm forcing there's we're going to have a body work for you to wall street because they come wow but do you see an impact when you're looking at your screens after we have that enforcement action or there

was another against a firm for layering in knight capital mary shapiro wouldn't cancel the trades for night so what impact you see well yes well it's interesting sort of. i'm from the ship. number one to color of my triggers that come up if that garbage you can make a car well shows you there are two classes of. people. we haven't seen significant changes in curtains. in responding to you so. we suspect my suspicion is the reason that it seems some of these homes you train from suppose are it's because. they're not being see they're only on the war because they hear they can explore and exploit break the rule. here and that will not lead to profitability they're going to pull out and it's interesting you know they're

claiming you know not being profitable now when it wasn't very long ago some of them had known you days straight in a row or profitability was just unbelievable you were announced there would be they were on a couple of days and they were just on. just so people didn't raise their eyebrows right right so you think that these stories about frequency trading firms shutting because that they can't be as profitable anymore you think it's actually more tied to the fact that they're starting to be regulated yet think yes i'm sure i'm sure why and you actually do notice a difference in the manipulative processes on your screens since these enforcement actions absolutely crystal clear. wow so do you think there needs to be more actions that kill switch a transaction tax or do you just think the z. to be enforced what's on the books if the divorce is on the books we renew transactions and i was we were. going through. it of the things that they're

proposing really if they're going to try to pass new regulations or they're not words are important this thing regulations take you seriously i wouldn't take them seriously if you know it is of course with regulations your you have your new business i totally hear you there before we go then what's your best advice for the average investor if they want to have a fair market. you know the rules. are simple and i just want one more second before we go should occupy wall street be on the street protesting this you mentioned them this is how you can say trading is the poster child for wall street protesters are good looking people just don't know you you just don't know yeah well we know a lot more now after hearing from you thank you so much eric on seder founder of man x. for being with us today. ok

let's wrap up with a loose change demitra kofi anan us riddle me this what is going on in media as a story we hear many times but hey perhaps here is another sign of the times newsweek magazine announced today that it is ending its print edition moving to an all digital format once upon a time the magazine claimed it was the most efficient way to stay up today. now more than ever newsweek is what the news weekend was meant to be the most efficient way to stay up to date with the with the stories are comprehensive and timely the photography is dramatic the sky is unlike most of all there's news reached unbiased journalism. unbiased journalism is one way to gain

subscribers i guess and now it's not paying the bills if you're a print magazine like newsweek it cost forty two million dollars to print and distribute the magazine dimitri what do you think that this is symbolic in terms of what's coming up in the world the two things struck me how much things have changed since then a speed you can't possibly stay up to speed if you were to wait for you to be so far from the coming in with bias there's no way you're going to make any inroads in media today if you're not bias it's a whole like fox news literally change that paradigm and not the right so that everyone has to be biased so those two things straight out well not everybody but if i mean you know one has a point of view today that's going to say bye bye is right everyone's got a point of view and they make it very clear this is this is my point of view and i'm coming at you from this direction so i just invents interesting but i mean they've you know these things have changed so much i want to have what i would get a newsletter ninety nine from the daily reckoning that was extraordinarily rare

most people weren't getting there was a newsletter right now you have blogs people just go online in the river they want and it's democratized things as well but it's also created like you know talk about training before there's a high frequency information yeah i'm going to very much that much less fact checking so you get a lot of crap and a lot of stuff comes out as rumors and so i mean it's really interesting how you have to be more kind of. the arbiter of you know checking things out and what's true and what's false and whatever but i think that this speaks to too there are barriers to entry there are so many good sources of information that is the on the blogosphere or alternative media that i mean it only makes sense that like the big firms to compete they they need to be and to be gauging in the alternative ways yeah for sure they need to and i'm sure there are. a lot of people you know they still go to the york times as the guardian they still go to the financial times but we're. or more made for that comment are coming to sources on you tube but it's

going to go exactly it's really great because it does democracy information and your brain has your brain is there's the plasticity of the human brain so people have a vault over this very for pretty time to adjust the way they pore through information but it's interesting i don't like reading a hard copy but i mean i agree and you got to get i mean i don't get is really a newspaper. i can't part with them let's remember greg smith for a moment before we go remember he was the former goldman sachs executive director who resigned very publicly in his new york times op ed in his i quit letter greg smith a mid-level executive for goldman sachs said he was sick of a culture where clients were called muppets and employees were expected to hunt elephants by getting clients to make big trades that led to big profits for goldman . so we don't have much time dimitri but this is a war of the muppets because greg smith is publishing his tell all book it's coming out soon we're trying to get him on the show come on greg and goldman sachs is

firing back a head of the book saying that he wrote the op ed after being denied a raise to a million dollars in a promotion so they're totally taking the typical oh this is just a disgruntled employee kind of sneering attack what do you think i don't know the parts of the book that i have at least seen tease they don't really seem that and for all and if you could do that better job well you know what why aren't when i read the story of course i was at first right but you know goldman sachs is good at spinning spinning the truth within lies internally with the good out it's you know what i'm going to i'm going to hold a press judgment until you come on our show i'm going to wait until the till he comes on the show with the president's original greg i reached out to your publisher we want we want to get back to us we want you here to slay the new bosses . not all right and that's all we have time for there we're going to leave it there for today thanks for watching be sure to come back tomorrow in the meantime you

know you can follow me on twitter out lauren lyster or you can go like our facebook page right there tell us what you think about greg smith you can give us feedback catch any shows you missed you tube dot com slash capital account watch as the h.d.d. on hulu hulu dot com slash capital dash account of lou rockwell on tomorrow stay tuned but for now have a good night. free . free. free. free free. free. free. free board for you or your. c.e.o. don carty.