This is the story all the current internalizer apologists want you to believe - "retail has never had it better." They neglect to mention the costs this has imposed on pension plans and mutual funds, or that the measurement is flawed because of artificially wider spreads.
Segmenting retail order flow harms markets, and widens spreads. Then those who champion this segmentation measure so-called "price improvement" against a wider spread, and claim "retail has never had it better." It's disingenuous, & of course those making the argument know that.
But Virtu, Citadel and the retail brokers are simply making too much money so they're desperate to maintain the system. They will fight the SEC tooth and nail on this, in order to preserve their annual bonuses.
But something is different this time - a huge set of retail investors has become informed, understands the corruption of the system and is fighting back. That's a force that hasn't been reckoned with before, and one that might actually make a difference this time.

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More from @dlauer

17 Sep
While this soundbite sounds good, it's not accurate. Using standard measures of market concentration, you can EASILY see that off-exchange trading is highly concentrated, and for large retail brokers it fits the DOJ definition for anti-trust enforcement.
The Herfindahl Index (HHI) is a standard measure of corporate concentration. Total OTC trading in July 2021 showed an index of nearly 2,000, but that doesn't tell the real story. Looking just at HOOD's 606, their HHI ranges from 2,500 (S&P 500) to over 3,000 for options.
This is the literal definition of corporate concentration, and it results in worse outcomes for everyone involved (except for the wholesalers and HOOD executives).
Read 5 tweets
15 Sep
You know what's terrible and sad? Earlier this year, Facebook's head of AI @ylecun told me, absurdly, that Facebook's "AI" "filter[s] things like ... bullying." All while he knew this to be untrue.
@ylecun Instead of responding rashly on Twitter, I wrote an extensively researched piece exploring Facebook's issues, including issues around harassment and bullying for the Journal of AI and Ethics:…
@ylecun Facebook's problems are not technology problems, as the WSJ article so clearly establishes. It's problems are that it is a deeply unethical organization from top to bottom, and its business model enforces and supports that.
Read 7 tweets
3 Jun
This is absolutely the right take.

Something is rotten in these highly shorted names.

The more the general public learns about short selling abuses, short sale mismarking, FTDs and the complete lack of regulatory enforcement and oversight, the angrier they're getting.
There is an informed and fascinating discussion and level of research taking place in a decentralized way on social media. I don't think the SEC & FINRA have any understanding of the public disgust and upheaval, and if they think it'll eventually go away they're sorely mistaken.
This is building on the disgust of the bailouts and lack of criminal charges in the wake of the GFC. Now they're seeing companies being shorted and attacked, and retail investors are organizing and fighting back.
Read 5 tweets
2 Jun
When I tweeted about AMC squeezing a few days ago, a lot of AMC fans disagreed (some of you disagreed it was the subject of naked shorting too).

1 month ago AMC was trading at $10, and it's now over $60. IMO any trading professional would call that a textbook short squeeze.
It had extremely high short interest, and likely a significant amount of naked shorting. There was no fundamental data that came out that would result in a 6x increase in market cap / valuation. I have no idea if this is just the beginning or if it's the end.
Another important point - this squeeze has taken place over the course of a week. Closing prices: from May 24:
$13.68, $16.41, $19.56, $26.52, $26.12, $32.04... where will it end today?
Read 6 tweets
18 May
I really enjoyed this paper by @MelMitchell1 - "Why AI is Harder Than We Think"…

It provided an excellent historical overview of efforts in AI, & why the current advances we have been witnessing are not really are impressive as they may seem on the surface
I found the paper to be very approachable & would recommend it even to those who aren't steeped in AI.

There may be some confirmation bias here, as I've written before about the fallacy of focusing on system accuracy and veneration of deep learning:…
Deep learning has become the bedrock of AI, & frankly has become the hammer that makes most AI scientists think each problem is a nail. As Mitchell points out, this is problematic because deep learning is a limited and brittle technique that has difficulty adapting to real world.
Read 11 tweets
3 Feb
There are some really great points in this writeup from @AlexanderGerko, much of which I agree with. Nearly all retail trading today is internalized by a duopoly whose incentives are not to ensure best execution for retail clients.
This does several things to markets, but one of those things is to take that flow away from lit markets and open competition. Markets should encourage open competition - how is that even controversial? Get retail flow on lit markets.
If Citadel and Virtu are truly providing best execution, they'll still be on the other side of the trade! If they're not, others will step in. Retail brokers SHOULD charge commissions, instead of hiding those costs in securities lending, PFOF and margin interest.
Read 7 tweets

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