How to Make a Risk-Free Fortune on Wall Street

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Redline Trading Solutions recently allowed Berkeley professor Terrence Hendershott to conduct a study with its high-speed trading technology, which gave him access to stock prices a few milliseconds before everyone else. This meant that Hendershott knew, before he bought the stock, which way the price would move a fraction of a second later. As you might expect, this is a risk-free license to mint money:

According to his study, in one day (May 9), playing one stock (Apple), Hendershott walked away with almost $377,000 in theoretical profits by picking off quotes on various exchanges that were fractions of a second out of date. Extrapolate that number to reflect the thousands of stocks trading electronically in the U.S., and it’s clear that high-frequency traders are making billions of dollars a year on a simple quirk in the electronic stock market.

One way or another, that money is coming out of your retirement account. Think of it like the old movie The Sting. High-speed traders already know who has won the horse race when your mutual fund manager lays his bet. You’re guaranteed to come out a loser. You’re losing in small increments, but every mickle makes a muckle — especially in a tough market.

“It’s clear to us these guys are just raping, pillaging, and plundering the market,” as Joe Saluzzi, co-founder of agency brokerage Themis Trading put it.

Click the link for more details, along with a simple and interesting idea for putting an end to this. In practice, stock markets are never going to be fair to every participant, but at the very least, their rules are supposed to make them theoretically fair to all comers. High-speed trading makes a mockery of this.

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Which is also a pretty great way to describe Mother Jones' mission: People coming together around the truth to hold power accountable.

And right now, we need to raise about $400,000 from our online readers over the next two months to hit our annual goal and make good on that mission. Read more about the information war we find ourselves in and how people-powered, independent reporting can and must rise to the challenge—and please support our team's truth-telling journalism with a donation if you can right now.

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