In this presentation, Murray Priestley bares the truth about market manipulation and the use of technology to gain an unfair advantage in the global economy.

1. Man vs.
Machine
What is Auto-Trading?

2. Attention
Manipulation

3. “Goldman had engineered every
major market manipulation
since the Great Depression -
and they’re about to do it again”
Rolling Stone, May 2009

4. May 2009 a former computer programmer at their
Wall Street headquarters had been charged with
using sensitive computer codes to steal trade
secrets. The codes are core to Goldmans'
algorithmic trading systems.
The bank's lawyer made the statement that this
“raised the possibility that there is a danger
that somebody who knew how to use this
program could use it to manipulate markets in
unfair ways.”

5. “A computer-implemented system and method for
executing trades of financial securities according to a
combination passive/aggressive trading strategy that
reliably executes trades of lists of securities or blocks
of a single security within a desired time frame while
taking advantage of dynamic market movement to
realize price improvement for the trade within the
desired time frame. A passive trading agent executes
trades at advantageous prices by floating portions of
the order at the bid or ask to maximize exposure to the
inside market and attract market orders. An aggressive
agent opportunistically takes liquidity as it arises,
setting discretionary prices in accordance with
historical trading data of the specified security.”

8. FACTS
26% EXECUTED
BY NYSE
Exchange that doesn't have to report WHO
is trading and HOW MUCH they are trading
10 PUBLIC
EXCHANGES
30 Dark
Pools
200+internalising broker-
dealers

9. Is this BAD News for us?

11. Traders will lose
their account
within 1 year
Of People will
be profitable by
themselves
95% 5%
<

12. The Likely Conclusion for the Majority
YOU are the problem
★ YOU are holding you back
Remove YOU as the problem
★ YOU always will be
★ The industry is against you
★ YOU shouldn't be doing
the trading

13. How it Works
Investors connect their computers to trading systems
known as electronic communication networks (ECN).
‣ Electronic Broking Systems
‣ Multi-bank Trading system
‣ Single bank Trading systems
Once connected, a
computer algorithm
monitors price quotes
from different ECNs
and places orders - all
without immediate
manual interaction.

14. TERMS Algorithmic
Black Box
Program
Robot
QuantitativeHFT

15. WHAT AN
ALGORITHM DOES
TELLS the trader EXACLY when to enter a position
TELLS the TRADER how much to buy or sell
TELLS the TRADER whether to sell short or buy long
TELLS the TRADER when to exit the position
i
i
i
i

16. Auto-Hedging
A formula automatically
generates hedging orders for
managing risk levels
dynamically.
Statistical Trading
Orders are generated according
to algorithms designed around
macro portfolio models or
differentials to relative values.
Liquidity Access
Trading solutions are
designed to improve access
to multiple trading venues.
Algorithmic
Execution
Trading styles are automated to
keep execution controlled and
running smoothly.
1 2
3 4
Auto-Hedging
A formula automatically
generates hedging orders for
managing risk levels
dynamically.
Statistical Trading
Orders are generated according
to algorithms designed around
macro portfolio models or
differentials to relative values.
Liquidity Access
Trading solutions are
designed to improve access
to multiple trading venues.
Algorithmic
Execution
Trading styles are automated to
keep execution controlled and
running smoothly.
Four Categories of Algorithmic Trading

17. 0
15
30
45
60
Others High - Frequency Trading
Institutional Hedge Found
Retail
Prevalence
1%
56%
17%
15%
11%
%
%
%
%

18. ‣ Optimisation
‣ Robustness
TESTING

19. Systems
Infrastructure
Data
Markets

20. http://murraypriestley.com/