I have a question about the legality of a stock trade....

[cbdo2007]

Let's say you bought 10,000 shares today of Sirius radio stock for $1.40 per share.

After you buy it for $1.40, then the new "ask" price would be $1.41, so could you then buy 100 shares for $1.41? Then, the new "ask" price would be $1.42 so you buy another hundred shares for $1.42. Then, so on and so on - $1.43, then $1.44, then $1.45.

So you've got a total of 10,500 shares for a total investment of $14,715.

Then, while the price is up at $1.45 you sell ALL of your current shares for a net of $15,225 for a profit of approx. $510.

Is this legal??? Or is this something the SEC would/should look into? It seems like you're just following the rules by artificially bidding the stock price up to profit on your initial investment. Just curious.

[sinkingfeeling]

1. You're making an assumption that the price of the stock would increase a single point with

each 100 shares purchased, which probably wouldn't happen. But as far as your purchasing strategy goes, it's legal.

[FSogol]

3. You are also assuming that someone wants your 10,500 shares at that higher price.

:shrug:

[cbdo2007]

4. Yep, you're right.....thanks

Sorry, my brain stem must have gotten unplugged for a minute there or something.

Because even after I bought 100 shares, there might still be 50,000 shares that need to be sold at the new price before it moves up to the next price again. Then, same thing - you would need to buy all of the available shares selling in each price group in order to move the price.

Thanks, just thinking about the high frequency trading and how they're profiting off of these small moves. They can probably see though how many are for sale at each price range above where it currently is, so they could theoretically buy each of those price levels in between and still see a profit.

Hmmmm, just trying to figure out how everything works. Thanks!

[Nite Owl]

2. Yes

but in the interim someone could be selling shares, no guarantee that they selling price would be at a profit unless you specifically set the price you are willing to sell at.

[jmowreader]

5. The pricing thing isn't the biggest problem with HFT

How high-frequency trading works: you use an EXTREMELY fast computer system to receive "flash orders." A flash order allows you to see a trade 30 milliseconds (this is no shit) before anyone who's not subscribed to flash orders can. You then trade on that information using the same ultra-high-end computer system.

The biggest problem with high-frequency trading is, it is front-running order flow, which is a form of illegal insider trading. Senator Schumer has apparently started the work on banning it.