As a small investor (and yes, I’m very small, probably laughably small to some) nothing burns me up more than to learn about all these ways that the big guys get to manipulate things. Between the flash orders and the dark pools and the giant servers whose orders cut in line and drive up the price of stocks, basically the little woman investor is screwed. From MSN:
3. Dark pools
Technology gives privileged insiders an edge in another way — by connecting big players inside exclusive electronic trading venues. Because they are private and trading is anonymous, these secretive venues are known as “dark pools.”
Inside dark pools — like one called “Sigma X” run by Goldman Sachs and another run by Investment Technology Group — huge amounts of stock are bought and sold every day at prices that outsiders may know nothing about until well after the fact.
This gives big players two advantages: lower fees on the actual trades and secrecy. When you’re making big moves, you don’t want competitors to notice what you’re doing.
Apparently the SEC is trying to decide if the 7% of trading that is estimated to be going on in these dark pools is messing up the whole “free market.” If so, they may apply an extra dollar or two to investigating and prosecuting this manipulation. How reassuring.
If there isn’t a decent effort to ensure the average small investor that he or she is able to safely invest in the stock market, the market is only going to get more corrupt.
I really wish Sheldon Whitehouse or Jack Reed would lead the charge on prosecuting white-collar Wall Street crime.