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The Hilarity of the Efficient Market Theory in the Digital Age

MarketWatch  ( Original )
JAN 31, 2018

The next time you think the any tradable market is a constant and accurate gauge of underlying value, which is the ever-more-laughable Efficient Market Theory, read this recent electronic chat evidence from one of the six recently arrested gold market spoofers:

In another example, one UBS trader discussed trading activity with another UBS trader, writing, “u gotta be quick with spoofs cause everyone else knows the trick too ... except for smaller shops ... and a/gos of course.”

In English, that means that when faking huge market interest in buying or selling a position, you need to do it very quickly to try and fool the quantitative algorithms, since all the other banks engage in the same illegal practice, or as the UBS trader called it, "trick", too.

More and more, the stock market is a giant video game where those with the most money and access try, often illegally, to fool their counterparts, and vice versa. Humans placing fake orders to fool computer programs designed to scalp pennies from individual investors and lummox mutual funds.

Trader A then added: “i f..k the m[ar]k[e]t around a lot...not alot of people...had it figgied out...thats [sic] why i love electronic trading.”

Caring about the intrinsic and underlying value of something? How quaint.

Still and all, immutable reality always gets the last laugh. Trader trickery, Fed policy nonsense…it’s all temporary, all smoke and mirrors. Everything, without exception, is fairly valued eventually.

ORIGINAL SOURCE: Key to catching the traders charged with manipulating metals futures: electronic chatter by Francine McKenna at MarketWatch on 1/30/18