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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

#41

Post by tedunangst »

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.

If you think HFT is going to push up the buy price, set your limit a penny lower and wait a second for the "slow" traders to handle it. (If that's how you think markets work.)

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

#42

Post by phonon »

harryh wrote: post #40
imcqueen wrote: post #37

Earlier quoted context omitted.

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.

Maybe you should read "Flash Boys" then. They can and do. Orders start at one place, and by regulation then can get sent to many other markets. If you can go to those next markets a little faster, you can front run the order.

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

#43

Post by harryh »

tedunangst wrote: post #41
modoc wrote: post #34

Earlier quoted context omitted.

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.

If you think HFT is going to push up the buy price, set your limit a penny lower and wait a second for the "slow" traders to handle it. (If that's how you think markets work.)

Adverse selection! ;-)

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

#44

Post by 15155 »

esaym wrote: post #13

On the same topic, I've actually set aside a down payment for a house, but I probably won't be buying for another year or so. I'm wondering what is a good way to invest this money since leaving it in the bank at less than 1% interest really isn't doing much.

Ally has 1% APR savings accounts, American Express has 0.90% APR savings accounts.

This or relevant CDs would be your best bet.

Move your emergency fund there, too, if you like.

These are probably the best "riskless" places to keep the funds. If you can stomach more risk, you can certainly do better.

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

#45

Post by tedunangst »

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.

What's "exorbitant"?

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

#46

Post by harryh »

phonon wrote: post #42
harryh wrote: post #40

Earlier quoted context omitted.

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.

Maybe you should read "Flash Boys" then. They can and do. Orders start at one place, and by regulation then can get sent to many other markets. If you can go to those next markets a little faster, you can front run the order.

Maybe you should read "Flash Boys: Not So Fast" then. It highlights a lot of errors in Flash Boys (which I have, in fact, read).

https://www.amazon.com/Flash-Boys-Insiders-Perspective-High-...

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

#47

Post by whoops1122 »

harryh wrote: post #40
imcqueen wrote: post #37

Earlier quoted context omitted.

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.

Ohh there is a way to do it, and it is a show on 60/60. I think to be specific, there is a delay between NJ switch to Wall st, so some ppl tap in the switch in NJ, know what you plan on to order, then make their order use a different route to wall st... this was well documented. I dont know if it still exist though.

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

#48

Post by hm8 »

harryh wrote: post #40
imcqueen wrote: post #37

Earlier quoted context omitted.

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.

Well, there is in a matter of speaking. To take the analogy further, imagine not buying a gallon of milk but 100,000 1 gallon can of milk. The guy with the Ferrari wouldn't be able to get in front of you at the next door target but they'll loot the most convenient Walgreens, Safeway, Walmart, and Amazon Prime. Of course, the analogy no longer holds for numerous reasons (100000 gallons of milk, driving around, buying from the farms directly) but the point is the Flash Boys work on the likelihood of such an event happening which, believe it or not, is fairly common in the stock markets these days. Think, mutual funds, ETF managers, etc. This is now, largely, considered the cost of doing business.

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

#49

Post by tptacek »

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…

You don't do the kind of trading HFTs do. No matter whether trading is done with hand signals or in FPGAs, you were never going to be making markets.

Meanwhile, cost of trading for normal people like us has gone through the floor. And we're only really looking at the last 15 years when we think about trading costs, but even steeper reductions precede that, and it was all brought about by replacing human market makers --- who are crooked as a barrel of fishhooks --- with automated systems.

Respectfully --- I don't know you, and this isn't a personal comment --- but my guess is that you distrust HFT because you've been told to distrust it. If you do even the most superficial cui bono analysis, you'll see the people most interested in making you believe that are themselves major financial institutions, all of them far larger than the HFTs.

It wasn't HFTs that brought down the economy in '07-'08. It was their adversaries.

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

#50

Post by mmodahl »

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.

The technology put a lot of people out of work and at the same time eliminated a loophole that wealthy people had to take advantage of the markets.

That is a recipe for vilification.

Think of the wrath of the unemployed truck and taxi drivers that will be aimed at the evil computer programmers and engineers who perfect self-driving cars and trucks. The headlines will be amazing.

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