The Risk Of High-Frequency Trading | Money Documentary

The Risk Of High-Frequency Trading – Should we believe big brands their ethical claims? Are big brands violating regional and international laws? The strategies and underhand tactics of global corporations are exposed in this unsparing documentary. High-frequency trading – a practice invented by Wall Street. Thousands of computers are linked together, buying and selling thousands of market shares.

The Risk Of High-Frequency Trading (2012)
Director: Irène Bénéfice, Olivier Toscer
Genre: Documentary
Country: France
Language: English
Also Known As: Cash Investigation: High-Frequency Trading

Synopsis:
Most of us have never heard of high-frequency trading. Yet, many experts predict that the next financial crisis will be caused by this new practice, invented by Wall Street. Thousands of computers are interconnected, buying and selling thousands of market shares every micro-second, with no human control or regulation. We delve into a mad financing world dominated by machines, or rather, by elaborate algorithms carefully developed by mathematicians. The ultimate goal? To reach maximum profit within a few seconds. But sometimes, software breaks down and creates, what experts call a “flash crack,” an instantaneous market collapse. We investigate the job of speed traders and expose the often shocking methods they use to reach their goals.

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in the old days if you wanted to become rich seriously rich in the space of just a few minutes the choices were somewhat limited you could trust to luck and win the jackpot in the lottery or you could get straight to the point and head for the bank but that was a lot riskier and then a new job came along the trader great work and all you needed was to shout and scream [Music] or to make some weird signs with your hands to become a millionaire but then something came along to ruin it all 2008 and our friends the Traders have been a little greedy and sold toxic products to the entire world the banks have a huge hangover their coffers are empty and lemon Brothers shuts up shop being a Trader was no longer the thing so the world of Finance decided to have fun a different way how exactly by replacing Traders with robots that can operate up to $1 million times faster than humans and can sell thousands of shares every few milliseconds and start earning big money again that’s it and may the fastest win fabulous in fact the technology is so powerful that the stock market police are totally incapable of keeping up this is science fiction you’re thinking but no it’s not say hello to your new Banker hello why do you have driverless metros in Paris because it’s safer computers tend to make less errors than [Music] humans the trouble is that the robots clear the humans out of the trading floors at a certain point the humans lose control and it can definitely be seen in the markets once the robots have been released it can’t see it’s heading straight for a brick wall you can’t read anything about High freeny trading or trading today without the word latency uh from the time I started talking 5 seconds ago there have been 5,000 transactions it’s all out of proportions in this business the worst is considered standard the stock market isn’t a video game or or at least it it shouldn’t be don’t you think the market resembles the wild west I’m not sure the market today is um I think the market today is more now hang on I need to rethink that one it’s an interesting question not just interesting essential what is the market today if like us you still thought the market was full of Frid Traders you’d be wrong the world of Finance is undergoing a revolution it happens far from the cameras as unobtrusive as it is fearsome the machines are simply taking over from humans powerful silent computer servers known too politely maybe as robot Traders in the making of the documentary it was far from easy to enter the technologically shifting world of Finance perseverance though unveiled a new world without controls a jungle and don’t go thinking this does not concern you the robots speculating so fast their Shadows can’t keep Pace can do major damage to the real economy what the robots do is to place orders in the order book they’ll say I a robot want to buy so many shares at such a price under these conditions I only want them at this price and this is how many I want what differs from what we had before is that they make a lot more orders and at a much higher frequency which explains its name than was ever thought possible it’s a matter of microsc a reminder 1 microc is 1 millionth of a second suffice to say that a flapping Wing in finance is an eternity welcome to the era of high-speed transaction high frequency trading high frequency trading is the ability to use technological superiority to overtake the competition and in the world financial markets if you can move faster than the others you’ll get the best prices and the best sales the race is about technology and it it’s like an arms race there are some who are in the 10,000th of a second range they’re at a disadvantage a thousandth of a second obviously you will miss the entire battle even if it was a thousandth of a second humans are on the way out in this field they no longer have a role to play even the super Traders don’t come up to scratch robots beating the humans and taking over the stock markets it’s beyond Frankenstein its [Music] Matrix they’re too smart men are out of their death and anyone who comes here will get shredded [Music] and most shredding takes place in the USA in the United States more than 2third of all trades are placed by standalone computers on Wall Street The High Frequency trading firms made 3 Bill 7,000 in profit last year as much as an entire ministry’s budget in a European [Applause] government playing The High Frequency stock market is now the new passion for financiers the amounts of money are colossal machines speculate and the humans cash in Mano narang is a star in this world in the United States he’s somehow become the mouthpiece for the robot Traders appearing before Senate committee’s broadcast on TV he says high frequency trading is the future the guru of speed training has his offices in a Chic suburb of New [Music] Jersey he agrees to be interviewed but it’s mainly to praise the virtues of robot trading we live in the age of Technology we live in the age of computers computers now do surgery on people okay forget about your life savings this is your life we’re talking about when doctors and surgeons operate on you this sort of thing is is happening all the time one can understand the health aspects but as far as the real economy there are some doubts no company has an interest in seeing their shares bought and sold in just milliseconds it might in fact lead to a catastrophe because you know it’s the market that sets the rules and when operating properly companies can find Investments growth [Music] but when it derails it can put thousands of people out of work and Destroy whole sections of the economy has almost happened on May the 6th 2010 what is happening in the financial markets it appears nothing can stop the speculation this was the day that for the first time in history man lost control of the machines once again markets are caught up in a spiral of nervousness after a disastrous session aggravated by possible Trader error at first nobody understands what’s happened but Wall Street will never forget May the 6th 2010 at precisely 2:42 p.m. and 44 seconds Wall Street seems to come apart but following a neverbe seen pattern and at a Breakneck speed even trading a even trading JP the stock exchange and the financial columnist crack faced with a new kind of Crash don’t touch the TV but also don’t touch your telephone and call your broker the market suddenly seems to collapse in a blink of an eye the Dow Jones registers a 10% drop total panic that we looked I was like wow what was that tnbc is saying it’s you know capitulation Market’s falling apart I mean it is classic capitulation there is fear in this market you can take a look in just a few minutes all the listed companies turn red this had never happened before the exchange had become unhooked with shares dropping from $45 to almost zero in a very short time there have been many stock market crashes over the years but this one’s different there’s something obviously wrong it all happened too quickly like a bug they say it’s a bug that’s something wrong my first reaction was that uh something horrible some horrible news had come out of Greece the Greek crisis of course at first glance it seems logical and tell our viewers how an incident like what’s happening in Greece and the austerity measures that the parliament agreed to today give our viewers a sense of how this in fact causes a ripple effect around the world there were riots in Athens and and three people were killed in a fire at a bank that was a dramatic situation on the political front and Financial drama too so the conditions were right for a crash but no the shock wve doesn’t come from Greece or even a flesh and Bone Trader who maybe pressed the wrong button for the first time in the history of Finance it’s a robot Trader a huge computer like this one that has derailed the system it belongs to wle and Reed a US pension fund a robot is instructed to sell a huge amount for billion dollar worth say in a very short time obviously it completely destabilizes the market somebody sold about 3,000 Futures contracts in a way to just didn’t care about the just sold them as fast as they could possibly sell them you know presumably a human would have reacted differently he wouldn’t have sold everything at once and would have seen what it was doing to the market but a robot it was programmed to do it and it did it the US pension funds robot Traer is not alone in destabilizing the market don’t forget 2/3 of orders placed on the stock exchange in the United States are made by robot Traders well all the other robots at hundreds of other highfrequency trading firms panicked that day like humans but much much faster they all sold off in bulk it was an instant epidemic we were in full Frankenstein mode the creature escapes from its creator the computer’s revved up and dealt with monstrous volumes impacting on the value of companies without anyone able to intervene by now it’s only the computers that can do the deals those who do high frequency trading see prices are collapsing and they’ll participate in the panic but not by managing it hour by hour but microsc by microsc the high regy Traders are the ones that cause the high quote rates so they weren’t intentionally trying to cause trouble it’s just that it’s like spam overwhelming this the email systems the dearle of May the 6th lasts just 14 minutes fortunately hence the nickname of a new type of Market collaps the flash crash it’s the Chicago Exchange that stops the Collapse by suspending business for 5 seconds 1 2 3 four five I’ve never seen him pause it until this day which tells I mean this is how unique it was how nobody was wanted to buy it um but when it came off of that pause it was as if the world had changed it was as if as if whoever was you know wanted this Market to go lower it was a signal okay that’s enough that’s that’s the best we’re going to do let’s turn around and bring it back after the break and in fact everything gets underway again as if nothing ever happened or almost there were those who had been very scared indeed this was about companies that sell real products the real economy as they say that day the 127,000 employees of industrial giant Proctor and Gamble could have found themselves on the Dole just went down 35% boom Proctor and Gamble make among other things aerial detergents Pampers diapers Gillette razors the crash of May the 6th nearly wiped the smile off the face of the blonde who features in their commercials in just a few minutes Proctor and Gamble shares lose half their value what might the consequences have been if it had gone on longer the multinational might have been forced to its knees with its factories closed for no good reason at all when the proon Gamble stock price Falls to 10 cents it in no way reflects the economic reality of the company between the morning and evening of May the 6th nothing happened at proor and gamble which would have Justified the change of its stock price which is precisely why it’s dangerous to leave robots alone to play traders in the stock market those who lost their shirts in the first flash crash in history are traditional investors very human investors 150 million e went up in smoke in 14 minutes they demand the US Stock Market Watchdog the SEC provide an explanation the SEC promises to investigate but as you’ll see it virtually buries the case instead it produces a 104 page report in which it blames no one not even waddle and re the company that triggered the flash crash it simply notes in perfect example of waffle automated execution programs and algorithmic trading strategies resulted in disorderly markets algorithmic trading is SEC jargon for robot Traders the formula has the Merit of not offending anyone it would be a shame to undermine high-speed speculation they triy to reassure the market their role was to say that it had nothing to do with a high frequency trading high frequency trading which is how the SEC instead of shedding light on the crash helps pass off the Speed Traders as the victims there’s been a lot of scapegoating in the Press uh and you know the authorities who have looked at this episode have concluded that high frequency trading had little or anything to do uh with what occurred when there are no real technical arguments it’s best to play the victim because the victim still attract some sympathy but to me victims who earn billions a year off the backs of small investors who get nothing I’m not sure of who the victim is or rather I have a relatively clear idea of who the real victim is now there is a before and after May the 6 2010 as a result of the flash crash in New York this is the first time that the general public hears about high frequency trading the first time it discovers machines have taken over the markets it’s enough to disturb the siestas of New Yorkers but you know what in France too lightning could strike the stock market in Paris a third of transactions are already being made by these high frequency traders who are the biggest players in the French financial market and to satisfy them the Paris bus has even moved having sent all of its servers to England to Basildon in the suburbs of [Music] London and this is what the new bis looks like a huge Warehouse of 5,000 square m a sort of block house no sign of the entrance but the site is under Constant [Music] Guard as soon as we arrive we’re asked to [Music] leave the Paris Stock Exchange came here to attract the speed Traders the Paris bus has relocated to London because its biggest customers high frequency Traders are almost all based in England geographical proximity is Paramount the closer one is to the financial Nerf Center the faster transaction orders pass through digital cables don’t forget every millisecond counts time is money since 2010 the French Stock Exchange houses all its speed trading customers in its bunker each is connected to the central server via cable of the same distance to prove there’s no favoritism it’s called collocation but it’s a secret euron next the company that manages the Paris bus hates to talk about it the more the investigation advances the more we run into a brick wall of Silence the first time we asked for an interview with uron next we were told that we neither want to comment nor associate our image to your investigation it’s rare to get such a Frank response still we insisted and they finally agreed to talk at their Monitoring Center in Paris and right from the outset they seem a little tense and to make it clear I don’t hesitate to start over the coach the little voice in the background is the press secretary in general one is enough but here there are two not a good sign that our interview is being [Music] controlled hello welcome to NYC Ur next thank you so first question what does urinex think of high frequency Traders we deal in markets that are electronic and have been developed by U let’s stop there it would have been better to ask about what he thought of the chairs the number of phones or whether his ring is solid silver because high frequency trading is obviously a bit tricky we don’t talk much about high frequency trading um we don’t want this to be interpreted well we persevere of all the incidents on the markets what does high frequency trading account for it’s minimal we can remind you it’s minimal is the man a ventriloquist no wait it’s The Press officer again seriously we have one last question that we’d like fais Perez to answer clearly could a flash crash happen here flash a flash crash such as the one in the United States cannot happen here because we have set up circuit breakers which are devices that allow you to stop the listing of a financial instrument in case of high volatility that’s a relief nothing serious can happen then cross heart safety procedures are Draconian and when the prices start yo-yoing urinex cuts the circuit and suspends the listing no more volatility and no crash flash sorry but we have evidence of just the opposite at any time your savings invested in shares could disappear in a puff of smoke that statement is from no less an organization than the AMF the French stock market Authority flash at any moment there could be a flash crash in Paris or London it’s quite possible everyone has in mind the flash crash in the US but you know that in France we had a few small flash crashes on certain shares last year not the same day as the United States there were mini flash crashes so it is a real risk ever heard of many flash crashes no well here’s a good example in August the Paris Market here in blue suffers a big [Music] fall that fall was a drop of 3% in just a few seconds this type of air pocket is is that a mini flash crash yes you could call it that it’s not very common and they last a very short time it may not last long but it can create a disaster going from zero to 100 and back again could cost a lot of people the shirts off their backs and you could also make improper profits if we told investors that the market could drop from 100 to zero in just a second it wouldn’t be very [Music] reassuring it’s actually downright disturbing remember that on the Paris bu onethird of transactions are carried out by highfrequency Traders we are clearly not immune from future Lightning Crashes which maybe explains why mums the word in French financial circles even in the few places where we are allowed to shoot the annual Trade Tech Conference in Paris for example financiers gather here and everyone’s out for a bite of the tech Apple debate revolves around the latest trends in high-tech Finance high-speed computer speculation is on everyone’s minds and on the posters but wo be tied anyone who says it obviously no one wants to say yes I’m doing High speed frequency trading whatever everyone will say he’s the villain if tomorrow it’s decided that all people who drive a red car are bad those with red cars will hide them in the garage and use their wife’s blue car instead to on stage the three people starting from the right are surely red car owners here we have a panel of three companies involved in high frequency trading high frequency trading of particular interest is John Philip bsh a physicist educated at the prestigious normal soup college and a convert to finance he’s well known in financial circles and at the end of the conference we approach him politely but he’s a bit elusive we tried to contact you to see if you could explain all of this but we were told that you didn’t have time well I don’t have time and we’re also in a politically sensitive period to talk talk about this kind of thing we heard that you were a big star in France no no no there’s a there’s a big misunderstanding it’s not true at all what’s annoying is that it’s not our job we when and yet we’re associated with it there’s a lot of bad press right now so it’s all a bit delicate so what is this University Professor doing in the corridors of a Trade Tech conf perhaps because he’s also the owner of management company CFM Capital fund management I’m quite happy to talk as a university Professor no problem I can explain how the market works but not so CFM is associated with high frequency trading because it’s not in high frequency trading why not but it arouses our curiosity and the strange thing is that on the CFM website there are job ads for high frequency trading Engineers there are also CVS of current employees of CFM who describe themselves as speed Traders and finally the magazine hedge fund Journal reports that CFM deals with 100,000 contracts per day for financial products and the company has invested in six data centers to improve its trading speed in fact CFM is one of the largest independent French hedge funds obviously with all this there are plenty of questions for Jean Philip bushu John Philip uh you’re a professor of statistical physics specializing in finance physics and economy is an unusual mix don’t you think yes and no the links between physics and finance go back a long time actually and over the past 30 years there’s been so much data the markets are spitting out so much information that we’ve been able to analyze it in the same way you’d study Physics [Music] you’re a professor but also the head of CFM which manages investment funds do you use highfrequency trading no we don’t we deal with high frequency Traders but your company doesn’t do it itself not at all right because we visited your website and saw that you’re actually advertising for high frequency Traders there you see high frequency trading so you’re hiring well without going into detail these aren’t highfrequency Traders but we interact with high frequency traders to execute the orders we make so we need to understand how it all works but you’re hiring them no no we don’t do high frequency trading in 2009 you claimed to carry out 100,000 transactions per day which is 4,000 an hour hour more than one a second and now it’s every microc but that’s not high frequency trading again we want just to be clear we don’t do high frequency trading so it’s embarrassing if an investment fund admits it’s involved in high frequency trading not at all but people get very confused by this it’s very technical it’s hard to explain but we simply don’t do the same work is those who are called high frequency Traders why is it so complicated to explain then it’s not easy to explain to people that in a speculative activity there’s actually a real ecology you have big fish small fish parasites and symbiosis and what are you a big fish I’m sure we are a big fish but we don’t lubricate the process that’s not our job there are shars amongst the big fish aren’t there there are shars amongst the big fish you can understand why people are scared when they’re told that computers now make decisions on their own without humans it’s using a computer for what it does best and humans for what they do best an excellent computer can perform certain tasks that humans can’t do well and the computer can do better so you’re saying that high frequency trading is a wonderful thing I’m saying that things are not that different from before if the technology works well it’s important to ensure there aren’t sudden brutal changes that all goes as it was planned and no reason to intervene as the computer can work better than humans so when Rob replace humans you would feel reassured in some cases yes talk about high frequency trading is always as they say on Wall Street touchy in this highly competitive sector algorithms are like gold and the firms protect them obsessively and what is an algorithm simply the senu of the high-speed Finance War without algorithms the computers wouldn’t know how to speculate Paul Jon is a finance specialist but not as far as it comes to pets an algorithm an algorithm is a written instruction in the form of computer code in a programming language and these are orders orders that are given to the computer do this do that and so on there are instructions instructions that look like this lines and lines of computer code the important thing is that these algorithms are used for robot traders to buy and sell on the stock market market and to anticipate fluctuations extremely difficult to design they are invaluable magic formulas and they cost several million euros alos as they’re known are the new Lethal Weapon of financers on Wall Street they’d go to any length to get them even theft witness Saturday June the 13th 2009 in New York at the headquarters of so General Bank the surveillance cameras record a unique scene a bank Trader Sam agrawal is in the act of [Music] stealing Mr agell is a young man who comes from Modest circumstances and an enormously powerful brain even a powerful brain can forget about the cameras agal worked for 2 years at societ genal he knows the company and is quite laidback about it all and what’s he doing in the office on the weekend oh not much really just stealing $8 million worth of algorithms from the bank his lawyer a Leading Light of the New York Bar who defended the bonano mafia family is familiar with big money business but even he has trouble defending his client Sam printed out out and as he’s printing out he’s using the printer that is in the trading room right in front of a camera a few hours later agal leaves with his backpack full of valuable documents stolen from the bank with them he hopes to become rich and for that zagal arranges a meeting in Chinatown in New York Tower research and investment fund and Rivals of societ General agrawal is here for an interview he wants to haggle the algorithms that he stole but he’s unaware that the man who’s interviewing him is recording the entire conversation for this I’ve made lots of notes which legally I I can share with you I have a lot of things uh actually in print whatever I can ask I’m asking and writing it agal hopes to quadruple his salary and it works a few months later Tower research takes him on for half a million dollars a year plus bonuses but the fly in the ointment is that the societ general smells a rat and when it discovers the surveillance video it calls the FBI who come knocking at the Trader’s [Music] door FBI agent visited Mr AR in his apartment and he um discussed the paper in his apartment and it was clear that he’d made these print outs and he had notes and he basically took the code because he wanted to make it easier in his new job samtha agal receives a three-year sentence banking secrecy is not to be messed with [Music] in Europe speed trading has been around for barely 5 years but already makes up a third of all stock trades and has caught up the Americans throughout the investigation the goal has been to film inside a room with robot Traders black boxes and the servers of speed trading but no French company agreed salvation comes from the other side of the channel in London the city the financial capital of Europe nearly 500 banks are located here with 300,000 employees in the financial sector London is the place to be to do business and it’s here that night Capital One of the three highfrequency heavyweights has its European headquarters this investment fund agrees to open up its doors how are you good to see you good to see you the CEO of night capital is one of the few to have the key the key to the room with the black boxes the IT service and the famous robot Traders this is it the holy of holies the brain of speed trading this room is very important and it’s really the core of our business because all of our intellectual property sits within this room the programs the data everything that we build around it sits within this room so that’s quite important that this room is secure obviously servers lined up one next to the other connected by miles of cables this is what highfrequency Finance looks like cold disembodied every day millions of orders are sent to the market in milliseconds from this room with the black boxes billions of Euros in transactions regularly circulate through these cables the vice president of KN capital a Frenchman is Keen to show us that there is still human life here but these employees are not in fact Traders they are the big brains who think and try to find the winning algorithms algorithms out of necessity need to be constantly improved to maintain the performance of robot Traders would you tell us on what your algorithm is based oh one thing I don’t know for example okay fine I I have the perfect the perfect example um Buy Low sell [Laughter] High that’s a good one is a dark screen yeah is it very secret um it depends on what you’re asking uh I’m sure you know all the letters that appear on that screen okay having fun are we but we haven’t leared much really we want to know how many algorithms a company is developing for its business can we say how how many um can we say how many algorithm do we have here or no just say that numerous no sorry we’re not allowed to tell you how many different strategies we have don’t forget this is all very confidential okay I think we understood that part you can’t have 50 people having access to this kind of algorithm it was very expensive to develop and to pay the quantitative researchers it’s a homemade and winning formula and not available to just whoever look at Coca-Cola the ingredients haven’t even been patented to stop them from falling in the public domain it’s the same principle the more questions we ask the more our presence seems to upset them if you don’t feel confident to mention this kind of information the staff have been briefed before the interview we can’t say more to be honest we can’t say more okay okay fine stop filming please not the name of the strategy we’re not keen on that I don’t want them to tell us for opening our doors too wide therefore no answers what can be said is that it’s a very competitive field but there is also a far less palatable reason speed trading has become a formidable fraud machine this means a speculation inspires many Crooks odly enough no one wants to talk about it on camera but eventually someone is willing to be interviewed on condition of anonymity of course it’s an employee of a high frequency trading firm for the first time here are the secrets as revealed by someone on the inside and it’s hardly reassuring the meeting is recorded with a hidden camera how are you this young engineer has worked for a large Bank in Paris for 2 years he develops algorithms for its servers he describes how the robots manipulate the market the stock market at the moment is a battle between robots a number of companies are sending a flood of high frequency orders to saturate the computers in the stock market and slow the flow for all the other Market participants so that they are the fastest so that they can take advantage of the opportunities a flood of orders to saturate the opponents it’s like driving you want to get there before everyone else and to hinder the others you put one-way street signs or stop lights after you’ve passed through the other cars slow down you however go through to the finished line in finance it means sending millions of orders quickly to clog up cable traffic and slow down the other Traders computers that’s saturation it’s illegal but there’s also another fraud that’s used and that’s jamming which is to mislead [Music] investors jamming means sending Ultra highspeed data it sends a command and then kills it within a millisecond it’s about hitting the bus with all orders that are rarely executed so is jamming becoming a classic strategy in high frequency trading it’s become that way over the past two years it’s now an Ultra Classic method of high frequency trading it’s playing dirty aimed at misleading other Traders and forcing them into making errors typical of the dirty strategies used in high frequency trading what’s hard to believe is that the stock market police have so much difficulty in stopping them they’re simply too fast nevertheless The Regulators do what they can every day to stop the frauders oh yes jamming here for example we had a succession at a rate of 1,000 messages per second there you see every graduation is 5 milliseconds 1,000 orders per second only computers can go so fast obviously it’s more difficult to detect than human Traders there it is down a a little this is impressive it’s difficult to understand there’s some prices that drop very low in the book we may not be sure what they’re talking about but they seem on top of it the trader expects a decline in the market uh but there are some aggression is expected in in the log which is really is worth a succession of disturbing Impressions actually we see it repeated so it’s not a coincidence of timing say that that makes the algorithm react like that it seems to be quite intentional jamming aggression footprint this is no longer about Finance it’s now a full-blown criminal investigation the culprit more often than not is the robot the variety of suspicious situations has increased in recent years with high frequency trading as high frequency strategies can be used to perform manipulations that not exist in the past when we were at normal speeds our informant confirms that nobody does without these fraudulent strategies without a strategy of manipulation nobody makes money manipulation allows us to be competitive as everyone does it not to do so would be like running with a ball and chain it’s pointless it’s not worth sprinting if you’re just going to attach weights to yourself as a result of this cheating some high frequency Traders are leading from the front and the market police are lagging far behind going far slower do you have a lot of ongoing investigations into high frequency trading I think we’ve got two or three maybe it’s technically a very difficult investigation but also relatively long because they can be very International the result is that the French Market Authority has virtually nothing to show for its efforts its only recent achievement is to have succeeded in getting a Dutch Trader convicted in May 2011 Kevin celt had been rampaging on the Paris bus from Amsterdam a flesh and blood Trader not a computer but the point is he managed his transactions amazingly quickly in just a few seconds and he was particularly inspired by another illegal method made widespread by the robot [Music] Traders they pretended to sell and then they bought pretended to buy and then sold it’s a bit like a bluff in poker here’s how it works I have 100 bicycles on the stock market I make a purchase order for 1,000 bicycles other buyers see my purchase order they believe the price will go up and they also begin to buy bicycles as the demand is high the price shoots up the price of a bike goes from 20 to €30 then I cancel my purchase order when the price is at its highest and then sell my 100 bicycles at the highest price so this is how the trader managed to pocket half a million euros in reality of course bicycles were not involved cryl targeted shares of companies such as the luxury brand Hermes the nexan electric cable or the Zodiac boat company his actions had an impact on the real economy the AMF investigation believes he distorted the rates of at least five French stocks you think he manipulated the rates of five French stocks yes was he punished for this no no he was sanctioned uh only for the value um of which a very accurate description and detailed information was produced in in the report how long did you investigate this case well given the delays related to International cooporation it took 18 months and in the end he was sentenced to what a 10,000 Euro fine for a profit on the five analyzed values of 5 85,000 he earns € 585,000 illegally and he was sentenced to a fine of €10,000 yes not exactly much is it no it’s not but on the other hand the sanctions for Price manipulation are quite recent the techniques are complicated did you transfer the case to the Dutch Market Authority yes what did they do not much I think you think Mr cral is still playing the market probably yes it’s time to check and go to Amsterdam in the [Music] Netherlands here in the 17th century the Dutch specul ated on tulips today they seem to be wholeheartedly throwing themselves into the stock market the Dutch are at the Forefront of high-speed [Music] trading at least a dozen major fast trading firms flourish on the banks of the [Music] canals we have an appointment with a senior member of the Dutch Stock Exchange Authority we want to know what they they did with Kevin celt the convicted Trader do you know Kevin pardon do you know Kevin how how do you spell that name ah I do not know him personally but you you you know this case I I I don’t know what what I what are you referring to I don’t know okay okay and and I I’m not I’m not going to enter into individual cases told that send the file to you and you did nothing I do not discuss any individual cases and they are disappointed about that but I don’t do not comment on individual cases all right and that’s all he will say on the matter it’ll be up to us to find the trader we decided to go visit his trading room bringing a hidden camera hello yes hello good morning um I would like to know if Mr Uh Kevin Ked is around yes yes um yes he’s here uh you can come in the French investigator was right at the end of the hallway Kevin kelt is still trading despite his conviction for fraud but he plays the victim card the case was full of full of stupid stuff from their side and it had nothing to do with reality so they had no clue what we’re talking about high frequency trading is is a pile of of of computers and not a tra behind a screen but as a Trader he did make a package by manipulating the rates and uh we dealt with it and it ended up all right so that’s it but this is the last thing I’m going to say about it but but again I I don’t see my advantage in talking to the Press so clear thank very much okay have a have a good journey you byebye the €10,000 fine is obviously not put celt off pursuing his career the authorities that monitor the markets don’t seem to scare the Pirates of finance and officially of course the speculators play the Innocence such as this Finance here with a perfect tan the president of the European highfrequency Traders Lobby Rock the basement we are more transparent than any other industry in the world is he joking apparently not there is no evidence whatsoever whatsoever to suggest that high frequency trading is uh subject to more Market Market abuse than other activities in the financial industry no whatsoever no there are no evidence no but because maybe because it’s because it’s very more difficult to investigate no everything we do is transparent a regulator could come in and ask us for all our records and they can see so it’s it’s very easy for them to spot if we are abusing the [Music] market and that’s the official version [Music] now how about the version without the hot air the truth emerges when the camera is [Music] hidden no one’s scared of the monitors the amf’s wasting its time investing money in computers storing all that information just to get those pathetic results why bother when we know we can’t in other words the cops will never catch up with the bad guys unless they use the same weapons high frequency trading certainly seems to upset a lot of people but how can their actions be limited surely more stringent laws are [Music] needed what is the professor who thinks speed trading is so wonderful think of this should these sort of practices be stopped saying we don’t have the means to control it and that anyone can just grab them like that maybe there should be a moratorium perhaps for two years so that it really sinks in yes I think in such cases the simple answers aren’t necessarily the right ones so what are the right ones slowing the markets might have even worse effects than what we’re trying to juggle with here one has to be careful that The Cure isn’t worse than the illness right now it could lead to distortions that are worse if we’re not careful we need to understand how the markets work so as not to slow up the markets nothing should be done in France it can’t be said legislators are exactly rushing to regulate high frequency trading in November 2011 the Senate approved legislation to tax Financial transactions at a rate of .1% to make them less profitable but the National Assembly then under the control of the center-right UMP party adjusted the bill and then the same ump party during the presidential election campaign in February 2012 finally introduced a law in which speed Traders would pay tax on their transactions of .0 1% a virtually symbolic amount and then in May another twist FR alarm the Socialist was elected president now in power the Socialist will likely take the bull by the horns after all Finance is opposed to franceand isn’t it the headline says my enemy is the world of Finance come on don’t string us along here yeah the time it takes for political decisions to be made is just a bit longer than high frequency trading where everything’s calculated in micros seconds so let’s get going but in the meantime by the time a law does exist that will cool the ardor of the machines and of their programmers too there won’t be any humans left on the floor of the stock exchanges and let’s hope no flash crash will have destroyed the stock markets by then either [Music]