Topic: Flash Trading

The New York Stock Exchange trading halt is attributed to a failed software upgrade rather than a nefarious actor. The hosts discuss the inherent unreliability of complex software, citing examples from short-URL generators to autonomous vehicle systems. They criticize the media's use of the word "glitch" to mask systemic engineering failures.

Dvorak discusses Michael Lewis's new book, "Flash Boys," with a banker friend in Austin. The banker claims the book's focus on fiber-optic speed is "bullshit" and that the real money in high-frequency trading is made by identifying small-cap stocks that will naturally follow the movement of large-cap leaders like Unilever. He also predicts American banks will double in size despite "too big to fail" concerns.

Godfrey Bloom and Nigel Farage of the UK Independence Party (UKIP) delivered fiery speeches in the European Parliament against the proposed Financial Transaction Tax (FTT). Bloom argued the tax would destroy the City of London and harm pensioners. The segment includes a heated exchange where Bloom calls a fellow parliamentarian a "scoundrel."

The New York Times reports on potential crackdowns on rapid computerized stock trading following the "flash crash." The hosts suggest that these high-frequency trading mechanisms, used by firms like Goldman Sachs, are currently propping up the market. They predict a market collapse if these systems are restricted.

The discussion turns to "crop circles" in market data caused by high-frequency trading algorithms. These programs execute thousands of bids per second to manipulate stock prices. The hosts question the legality of these practices under SEC rules and advise listeners to stay out of the traditional stock market.

New information suggests the May 2010 "Flash Crash" may have been caused by code written in Erlang, a language that allows for recompiling and reloading code while a server is operating. This supports a theory that a programmer, possibly linked to Sergei Aleynikov, ran a "beta test" that accidentally crashed the market. The Erlang virtual machine's ability to execute old and new code simultaneously is cited as a key factor.

The hosts allege that Goldman Sachs uses corrupt "flash trading" computer models to manipulate market directions. They argue that the current market decline is a result of the inter-bank war between the "Goldmans" and the "Chases." Listeners are advised to exit the stock market immediately, as the hosts believe the entire system is a fake, manipulated Ponzi scheme.