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'Flash Boys' IEX stock exchange opens for business

latimes.com

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Re: 'Flash Boys' IEX stock exchange opens for business

#31

Post by physguy1123 »

modoc wrote: post #24
tuna-piano wrote: post #12

Earlier quoted context omitted.

This is the thing when I see wall street, and specifically high frequency trading vilified. Income inequality, the plight of the middle class, etc has almost nothing to do with that kind of financial maneuvering. Getting rid of high speed trading won't affect the average person really at all - but yet it's constantly vilified.

As a mostly lay person, for me it's vilified because my understanding of it is that HFT has a significant advantage over my own personal trading, and that through this advantage HFTs are able to make "more" profits than would be possible without HFT. My brain tells me that some of these profits are likely at my own trades' expense, and that while markets and economies rise and fall, my own profits are negatively impa…

Short story:

HFT is generally considered good for retail traders because spreads tend to be lower. You trade both more cheaply and more quickly.

However, it's generally not good for large institutions (which are more than just 'big evil hedge funds') because markets react very quickly to movements caused by this big firms. If they decide that something is priced wrong, they won't be able to make many trades taking advantage of that.

https://www.bloomberg.com/view/articles/2016-02-25/-flash-bo...

Re: 'Flash Boys' IEX stock exchange opens for business

#32

Post by murbard2 »

eru wrote: post #8
murbard2 wrote: post #6

Earlier quoted context omitted.

Markets do not allocate capital, they provide liquidity for investors making them more likely to invest during stock offerings in the first place.

Those are just different faces of the same coin.

No, well functioning exchanges affect the amount of capital that gets invested in ventures not how well it is allocated.

Re: 'Flash Boys' IEX stock exchange opens for business

#34

Post by modoc »

harryh wrote: post #26
modoc wrote: post #24

Earlier quoted context omitted.

As a mostly lay person, for me it's vilified because my understanding of it is that HFT has a significant advantage over my own personal trading, and that through this advantage HFTs are able to make "more" profits than would be possible without HFT. My brain tells me that some of these profits are likely at my own trades' expense, and that while markets and economies rise and fall, my own profits are negatively impa…

Rather than seeing HFTs as competing against you, a more accurate model is to see various firms competing against each other to service your needs at the lowest possible cost. These firms used to be staffed with expensive and slow humans, but by automating they are able to deliver a service to you at a much lower cost than was previously possible. The story of automation in the financial markets is similar to the sto…

How does that really help me if I'm buying/selling a specific stock (vs. being in a larger fund, etc...)? My, again very lay, understanding is that the HFT is likely to push my buy price up slightly and make money in the middle of me a non-HFT seller, and push down the price slightly on the sale side, again making money as a very fast middleman.

I may have that completely wrong though.

Re: 'Flash Boys' IEX stock exchange opens for business

#35

Post by CyberDildonics »

tuna-piano wrote: post #12
chollida1 wrote: post #4

If you're wondering what IEX becoming a full blown exchange means to you, well it probably doesn't matter at all. They have been operating for some time already as an ATS, today they are now part of the RegNMS protected quote, meaning that up until today, brokers did not have to route orders to them. it also allows them to have companies "list" on their exchange, though I don't know of any companies that are planning…

This is the thing when I see wall street, and specifically high frequency trading vilified. Income inequality, the plight of the middle class, etc has almost nothing to do with that kind of financial maneuvering. Getting rid of high speed trading won't affect the average person really at all - but yet it's constantly vilified.

> Getting rid of high speed trading won't affect the average person really at all - but yet it's constantly vilified.

You could say the same thing about ebola.

Re: 'Flash Boys' IEX stock exchange opens for business

#36

Post by mmodahl »

lbotos wrote: post #16
tuna-piano wrote: post #12

Earlier quoted context omitted.

This is the thing when I see wall street, and specifically high frequency trading vilified. Income inequality, the plight of the middle class, etc has almost nothing to do with that kind of financial maneuvering. Getting rid of high speed trading won't affect the average person really at all - but yet it's constantly vilified.

I think it's vilified because for some reason people think that the HFTraders are "stealing" from them in the form of tax avoidance and their exorbitant incomes.

Nerds making money and people gunna hate.

Re: 'Flash Boys' IEX stock exchange opens for business

#37

Post by imcqueen »

tuna-piano wrote: post #12
chollida1 wrote: post #4

If you're wondering what IEX becoming a full blown exchange means to you, well it probably doesn't matter at all. They have been operating for some time already as an ATS, today they are now part of the RegNMS protected quote, meaning that up until today, brokers did not have to route orders to them. it also allows them to have companies "list" on their exchange, though I don't know of any companies that are planning…

This is the thing when I see wall street, and specifically high frequency trading vilified. Income inequality, the plight of the middle class, etc has almost nothing to do with that kind of financial maneuvering. Getting rid of high speed trading won't affect the average person really at all - but yet it's constantly vilified.

You're probably correct here. The part people find a little unsavory is not that it's somehow eroding the middle class. It's the idea that HFT can act as an unnecessary intermediary, essentially taxing a transaction that otherwise didn't need to be disrupted and at scale the amount extracted becomes material.

Imagine your neighbor owned a Ferrari and you told him one day you were going to buy a gallon of milk at the store. "On sale for $3.99!" you say to him. Now imagine he sped past you on your way to the store and when you arrived there he had bought all the milk at $3.99 and was selling it in the parking lot for $4.01.

You wouldn't necessarily be ruined financially paying $4.01 instead of $3.99. The cost is negligible. But you would probably think he was kind of a jerk.

Re: 'Flash Boys' IEX stock exchange opens for business

#38

Post by harryh »

modoc wrote: post #34
harryh wrote: post #26

Earlier quoted context omitted.

Rather than seeing HFTs as competing against you, a more accurate model is to see various firms competing against each other to service your needs at the lowest possible cost. These firms used to be staffed with expensive and slow humans, but by automating they are able to deliver a service to you at a much lower cost than was previously possible. The story of automation in the financial markets is similar to the sto…

How does that really help me if I'm buying/selling a specific stock (vs. being in a larger fund, etc...)? My, again very lay, understanding is that the HFT is likely to push my buy price up slightly and make money in the middle of me a non-HFT seller, and push down the price slightly on the sale side, again making money as a very fast middleman. I may have that completely wrong though.

It helps you in 2 ways:

1) It reduces the bid/ask spread. There isn't just one price for a stock, there are two. The price at which you can buy and the price at which you can sell. The price at which you can sell is lower. So when you buy a share of stock you are immediately down a little bit. This amount is called the spread. By automating firms can reduce this spread which does the opposite of what your intuition told you. It will bring buy prices down slightly and sell prices up slightly.

2) It helps make sure that prices are as accurate and up to date as possible. When you go to buy a share of $GOOG you probably aren't really sure if it should cost 775.40 or 775.45 or 775.50. You just figure it's a good company and likely to go up in the future. But because there are all these firms working really hard and acting really fast you can be pretty confident that whatever price you buy at at any given time contains the total available knowledge currently available in the world about Google's future potential.

Re: 'Flash Boys' IEX stock exchange opens for business

#39

Post by Retric »

tuna-piano wrote: post #12
chollida1 wrote: post #4

If you're wondering what IEX becoming a full blown exchange means to you, well it probably doesn't matter at all. They have been operating for some time already as an ATS, today they are now part of the RegNMS protected quote, meaning that up until today, brokers did not have to route orders to them. it also allows them to have companies "list" on their exchange, though I don't know of any companies that are planning…

This is the thing when I see wall street, and specifically high frequency trading vilified. Income inequality, the plight of the middle class, etc has almost nothing to do with that kind of financial maneuvering. Getting rid of high speed trading won't affect the average person really at all - but yet it's constantly vilified.

HFT costs 'everyone' that uses the stock market though an intermediary money so it really does cause income inequality. To suggest otherwise is to suggest they can somehow increase the value of stocks on average when they don't increase dividends and profit from the stock market. AKA money magically appears from nothing without costing anyone anything.

Which is not to say every single person is worse off just that this does not increase the long term value created by the companies who's profit makes the stock market a positive sum game.

Re: 'Flash Boys' IEX stock exchange opens for business

#40

Post by harryh »

imcqueen wrote: post #37
tuna-piano wrote: post #12

Earlier quoted context omitted.

This is the thing when I see wall street, and specifically high frequency trading vilified. Income inequality, the plight of the middle class, etc has almost nothing to do with that kind of financial maneuvering. Getting rid of high speed trading won't affect the average person really at all - but yet it's constantly vilified.

You're probably correct here. The part people find a little unsavory is not that it's somehow eroding the middle class. It's the idea that HFT can act as an unnecessary intermediary, essentially taxing a transaction that otherwise didn't need to be disrupted and at scale the amount extracted becomes material. Imagine your neighbor owned a Ferrari and you told him one day you were going to buy a gallon of milk at the…

Your intuition about financial markets does not match reality. In financial markets no one knows that you want to buy a gallon of milk (or a share of stock) until your bid has already been submitted. No matter how fast their Ferrari, there is no way for them to get in line ahead of you at the store.
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