Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Why Do High-Frequency Traders Cancel So Many Orders?

bloombergview.com

Post reply on HN
Print view View original

121–130 of 247 posts

Re: Why Do High-Frequency Traders Cancel So Many Orders?

#121

Post by gnaritas »

librvf wrote: post #97
kasey_junk wrote: post #76

Earlier quoted context omitted.

> None of which we get from HFT. No but we do get it from market makers. HFT has led to a dramatic decrease in the price of market making. Unless your claim is that market making is not something that should be allowed? > And risk management? Please. They're only managing their own risks. My point about risk management was about the aggregate benefits of the markets, not about HFT providing someone risk management. I…

> HFT has led to a dramatic decrease in the price of market making. How? It seems like this should not be that hard to explain.

> How? It seems like this should not be that hard to explain.

Decreased spreads; trading is much cheaper now than it was before HFT.

Re: Why Do High-Frequency Traders Cancel So Many Orders?

#122

Post by nick_dm »

djyaz1200 wrote: post #77
joosters wrote: post #69

Earlier quoted context omitted.

Even if we all accept that HFTs are 'stealing' fractions of a penny per trade, just how often do you trade your retirement funds?

Much more often than you might think. Every time we make a deposit (likely monthly/bi/weekly) that money needs to be deployed (aka stock purchased). If we are part of a big fund that fund may need to buy stocks in huge chunks and when the HFT sniffs out what they are buying they will raise the price.

The price has to go up anyway, that's what happens when demand increases, it's nothing to do with HFT. Large block trades like this will often be arrange over the counter (OTC) or on dark pools, so the fund purchasing the shares will get a fixed price and it's up to the market maker to deal with the execution risk in the open market.

Edit: As Harryh said, large mutual fund managers believe that HFT allows them to get better prices for their customers: http://www.cnbc.com/2014/04/25/vanguard-chief-defends-high-f...

Re: Why Do High-Frequency Traders Cancel So Many Orders?

#123

Post by harryh »

djyaz1200 wrote: post #77
joosters wrote: post #69

Earlier quoted context omitted.

Even if we all accept that HFTs are 'stealing' fractions of a penny per trade, just how often do you trade your retirement funds?

Much more often than you might think. Every time we make a deposit (likely monthly/bi/weekly) that money needs to be deployed (aka stock purchased). If we are part of a big fund that fund may need to buy stocks in huge chunks and when the HFT sniffs out what they are buying they will raise the price.

Vanguard (the manager of the world's biggest funds) has consistently stated that HFT market making has lowered their trading costs and increased returns for investors.

Re: Why Do High-Frequency Traders Cancel So Many Orders?

#124

Post by crdoconnor »

Mikeb85 wrote: post #119
crdoconnor wrote: post #107

Earlier quoted context omitted.

Electronic trading decreased them. HFT increased trading costs. This is why dark pools are now a thing.

Try trading in a market with low liquidity and no HFT. It's a nightmare. Anyhow, HFT affects execution, 'electronic trading' affects how you put in orders, both make the process of buying/selling securities cheaper.

>Try trading in a market with low liquidity and no HFT. It's a nightmare.

Such markets are created specifically for the purpose of avoiding HFT: https://en.wikipedia.org/wiki/Dark_liquidity

HFT hasn't been around that long, either. Before 2005 it basically didn't exist.

Re: Why Do High-Frequency Traders Cancel So Many Orders?

#125

Post by harryh »

astine wrote: post #95
kasey_junk wrote: post #59

Earlier quoted context omitted.

I think you are missing his point. HFT is not typically banks ripping each other off. Its a new outside entity that has made the service the banks and traditional market makers provided to their customers much cheaper at the expense of hedge funds and bank profits. In most industries we applaud this disruption.

But, in the mind of the populist masses that Mr Levine it criticizing it is. I don't work in finance and I'm not going to make any judgments on the industry, just to say that people who are opposed to it would be opposed to HFTs as well. Also, the people who applaud 'disruption' are not this sort of populist, they don't cheer because of the damage done to incumbents but because the disruption will hopefully mean bett…

When ignorant people don't like something we should strive to explain the benefits more clearly. Not give up and declare that thing bad just based on a vote.

Re: Why Do High-Frequency Traders Cancel So Many Orders?

#126

Post by kasey_junk »

gnaritas wrote: post #118
kasey_junk wrote: post #49

Earlier quoted context omitted.

> when the activity consumes a bunch of resources on zero sum activity The thing to remember about the markets is that each individual trade is always zero sum, but the value of the markets comes from the aggregate total. The behaviors that we want in our markets, price discovery, liquidity, easy risk management are all outcomes that are enabled by speculative market participants like market makers engaging in lots o…

> The thing to remember about the markets is that each individual trade is always zero sum That's simply not true; your premise is flawed.

I used zero sum here incorrectly but didn't want to change the comment. It would have been more correct to say that any trade regardless of hold time is any more or less zero sum than any other trade.

Re: Why Do High-Frequency Traders Cancel So Many Orders?

#127

Post by dragontamer »

kasey_junk wrote: post #55
Retric wrote: post #51

Earlier quoted context omitted.

Trading is not a zero sum activity, trades happen because each side want what the other person has more than what they have which is a net positive. aka I want lunch more than money. HFT trading is zero sum because the traders don't actually want or keep stock.

No one wants actual stock. They want to gain money on price differences in stock, or get the dividends that owning stock gives rights to, or I suppose they want to be able to have the voting rights stocks grant. The difference is all about timing. I may want something else more than you do but am willing to sell now. If at the time you close out your trade (that is sell the shares from me) the price may have risen or…

> get the dividends that owning stock gives rights to, or I suppose they want to be able to have the voting rights stocks grant.

IE: People want actual stock. The stock has innate value due to the potential for dividends or to influence the future of a company.

That is a significant amount of value.

Re: Why Do High-Frequency Traders Cancel So Many Orders?

#128

Post by tptacek »

crdoconnor wrote: post #106
kasey_junk wrote: post #100

Earlier quoted context omitted.

Link in the posted article: http://www.bloombergview.com/articles/2014-03-31/michael-lew... . Quote from the posted article: " it should be said that market makers have existed in the stock market for a long time and that electronic market makers do the job waaaaaaaaaay cheaper than their human predecessors."

I was wondering when some HFT shill was going to try and pretend that electronic market making and HFT were the same thing. Every damn time...

Do not accuse people on HN of being shills. And, remain civil.

https://hn.algolia.com/?query=author:dang%20shill&sort=byDat...

Re: Why Do High-Frequency Traders Cancel So Many Orders?

#129

Post by Mikeb85 »

crdoconnor wrote: post #124
Mikeb85 wrote: post #119

Earlier quoted context omitted.

Try trading in a market with low liquidity and no HFT. It's a nightmare. Anyhow, HFT affects execution, 'electronic trading' affects how you put in orders, both make the process of buying/selling securities cheaper.

>Try trading in a market with low liquidity and no HFT. It's a nightmare. Such markets are created specifically for the purpose of avoiding HFT: https://en.wikipedia.org/wiki/Dark_liquidity HFT hasn't been around that long, either. Before 2005 it basically didn't exist.

Read your link. Dark pools are created so institutions can trade large blocks without moving the price, or to hide transactions.

Dark pools are beneficial to institutions in some circumstances, not to individuals.

And yes HFT hasn't always existed, once upon a time you'd have a pit of screaming traders and brokers, and for an individual to buy/sell stocks you'd have to call your broker on the phone, who'd charge you an obscene amount for the privilege.

Anyhow, HFT is more or less just a euphemism for high-speed arbitrage/market making.

I look at the execution I get on my trades today, I couldn't imagine not having that service available.

Re: Why Do High-Frequency Traders Cancel So Many Orders?

#130

Post by shasta »

vasilipupkin wrote: post #63
shasta wrote: post #48

I guess I see why high frequency trades are necessary in the current trading framework, but looking at the situation from a high level, isn't it obvious that the resources being spent on microsecond level response improvements don't benefit anyone but the winners? Can someone argue otherwise?

It's the opposite. The resources being spent on microsecond speed race is a form of a tax imposed on HFT by society. If all big HFT firms spent on getting faster, they don't benefit in expectation, since all the competitors will be equally fast, but society benefits because that spending goes to wider economy outside HFT

Right, that's the obvious situation that I see. I'm wondering if anyone can argue otherwise?

If not, why isn't there a bigger push for market infrastructure that doesn't advantage high frequency trades?

I don't know that most high frequency microtrades are a real problem either way, since it seems mostly zero sum among the people playing that game. But whenever there is a macro change in a price that takes place over a tiny time scale, it seems that we shouldn't be advantaging speed in getting there first.

Post reply on HN