Mark Cuban: Wall Street Traders Are Hackers

Aug 12, 2011
J. Webster
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Mark Cuban writes a very interesting post, castigating day traders and high frequency traders. Cuban calls them just hackers that provide no benefit to the stock market or business as a whole. We’ve been hearing a lot about this lately, what with the market dropping 400 points one day and then going up 400 points the next and then dropping again the following day. There were four 400 point moves just this week. The extreme fluctuations in the market have been blamed on automated or computer based trading. And Cuban says this only sets us up for a bigger crash at some point.

The best analogy for traders? They are hackers. Just as hackers search for and exploit operating system and application shortcomings, traders do the same thing. A hacker wants to jump in front of your shopping cart and grab your credit card and then sell it. A high frequency trader wants to jump in front of your trade and then sell that stock to you. A hacker will tell you that they are serving a purpose by identifying the weak links in your system. A trader will tell you they deserve the pennies they are making on the trade because they provide liquidity to the market.

I recognize that one is illegal, the other is not. That isn’t the important issue.

The important issue is recognizing that Wall Street is no longer what it was designed to be. Wall Street was designed to be a market to which companies provide securities (stocks/bonds), from which they received capital that would help them start/grow/sell businesses. Investors made their money by recognizing value where others did not, or by simply committing to a company and growing with it as a shareholder, receiving dividends or appreciation in their holdings. What percentage of the market is driven by investors these days?

Cuban’s full blog post is here.

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