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There was a rather famous incident with a trader nicknamed "London Whale", who accumulated a massive position in the CDS market, which then led JPMorgan Chase t
by conistonwater 12y ago
There was a rather famous incident with a trader nicknamed "London Whale", who accumulated a massive position in the CDS market, which then led JPMorgan Chase to lose immense amounts of money on the trade. The money went to those people that correctly figured out what was going on in the market.
In general, if you know important information about someone else's positions, you can sometimes use that information to profitably trade against them.
- kasey_junk 12y agoThe London Whale did not involve HFT. In fact, it is a rather good example of how little HFT matters in the world of finance. One division at Chase (and if you believe them 1 man) cost the company more in 1 year than HFT makes in profits. The other sides of that trade were not HFT firms, but other human driven trading funds. So of course information advantages allow you to make money, that's the point of the market and it is no more unethical or illegal when an HFT makes money than it is when those human traders were on the other side of the London Whale.