Here is the Game Goldman Wins. Not Because It is smarter, But it is richer. Rich Always win the games, Especially where the Money talks not the brains. So Do not confuse the high salaries at Goldman with brains, they are lucky to have the money to play the game the way , few people can.
So, how do the Goldman's play the game?
Here is how. Typical user is set up to trade the way the picture shows in above portion. Individual's trade orders must go through layers of network/router and processing machine(s) ( especially at the brokers) to reach the destination. That is the same for either initiated query or order placement. Even the query done by the software without users request must go via the same/similar path. This means that information is delayed at every step of the path. Even though each one of these steps is small time for human EYE, it is eternity for computers. Even if individual is really a programmed computer(many individual platforms now offer scripted/programmed trading) the time delay , especially compared to the GOLDMAN's set up is enormous. This translates into following: Goldman computers can see the depth of the exchange offerings very fast and then react in a way that almost guarantees the picture is frozen and same as "last seen" by Goldman computer. Individual user is , practically , guaranteed that they see a changing picture, especially in high volume, fast moving markets and/or securities. Why do you think, you see millions of C/SIRI/AIG etc. shares of bankrupt/almost stocks is seen daily? . Yes, Goldman is a volume consumer! Please understand, there is nothing illegal about any of what is described above. People that had the ticker tapes in Great Depression made lot of money, while the rest lost everything. Goldman is using BRUTE POWER to make money. Yes, there is some smarts in in what they do, but nothing you and I could not do for few hundred thousand dollars. Stay tuned as we will get into more details of protocols and parsers as we will illustrate how much further Goldman types can enhance their advantages over others. Let me also point out that besides stupid day traders(most of them) the targets of Goldman types are institutions. Remember the example of the CANCEL/REPLACE mentioned in previous installment. Ok Reread again. You already know, you and I do not place orders for 100000 IBM shares. Institutions ( funds, pensions etc) do.
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