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

'Flash Boys' IEX stock exchange opens for business

latimes.com

Post reply on HN
Print view View original

121–130 of 157 posts

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

#121

Post by prodigal_erik »

harryh wrote: post #80
patio11 wrote: post #70

Earlier quoted context omitted.

I'm not generally a fan of viewing the world in terms of an extended version of the social struggle from high school, but given that this actually does do a reasonably accurate caricature of human market makers versus HFT firms, this has always confused me regarding HN's reaction to HFT. In one corner, we have sweaty alpha male jocks [+]. In the other corner, we have geeks with computers. The geeks ran the table on t…

I thought about your question on my walk home from work today. I decided that as much as jocks vs geeks is a powerful force, a more powerful force is people's distrust of middlemen. People don't really understand that liquidity provisioning is a service that needs to be paid for. They think that if we could just wipe all middlemen off the face of the planet that buyers could just trade with sellers and we'd all save…

We're paying entirely too much for liquidity that value investors don't need. If my holding period was less than a day, that's a buyer and seller who would have found each other without my "help", and I didn't contribute any insight about the company's value, just about flaws in the marketplace.

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

#122

Post by [deleted] »

harryh wrote: post #80
patio11 wrote: post #70

Earlier quoted context omitted.

I'm not generally a fan of viewing the world in terms of an extended version of the social struggle from high school, but given that this actually does do a reasonably accurate caricature of human market makers versus HFT firms, this has always confused me regarding HN's reaction to HFT. In one corner, we have sweaty alpha male jocks [+]. In the other corner, we have geeks with computers. The geeks ran the table on t…

I thought about your question on my walk home from work today. I decided that as much as jocks vs geeks is a powerful force, a more powerful force is people's distrust of middlemen. People don't really understand that liquidity provisioning is a service that needs to be paid for. They think that if we could just wipe all middlemen off the face of the planet that buyers could just trade with sellers and we'd all save…

[deleted]

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

#123

Post by zhte415 »

wehadfun wrote: post #25

Was the 30 mile cable necessary to create a speed bump. Seems to me a few lines of code would have worked.

If I recall correctly, doing this through code would trip up on financial regulations. The idea for the 30 miles of cable came from hypothesising/imagining/being somewhere in New Jersey.

Rough recollection of a couple of paragraphs in the book. Someone else please add if recalled incorrectly.

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

#124

Post by kchoudhu »

rrrrsss99 wrote: post #118
kasey_junk wrote: post #108

Earlier quoted context omitted.

http://www.cnbc.com/2014/04/25/vanguard-chief-defends-high-f...

Vanguard runs etfs mostly, so I'm not sure why they care about support small spreads since they probably do a lot of efp trades (I'm not sure how the underlying prices are determined, but I think they can convert at a set price). The mutual funds and hedge funds who are more fundamental will try and buy or sell large blocks, so they're more affected by adverse market moves from trying to dump $1M of apple. I could se…

> Vanguard runs etfs mostly

Is there a socially acceptable way to call a person an ignoramus on HN?

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

#125

Post by kchoudhu »

patio11 wrote: post #67
tptacek wrote: post #49

Earlier quoted context omitted.

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…

The only disagreement I have with Thomas here is the last line. Securitization groups at the large banks and HFTs aren't adversaries -- they don't interact in any meaningful fashion. Large banks, taken as a whole, have some groups which are in competition with HFTs but have other groups which are their happy customers. (If you're a large bank, and you're taking liquidity, you are either astoundingly bad at your job o…

> It isn't even automated.

Yes. No. Maybe. There's a massive push towards exchange trading the more liquid products: traders are expensive, and if you can get a robot to do basic inventory management and market making for you (even with a human in the loop), that's savings for a desk manager looking to cut costs in a highly straightened FI environment.

The highly distressed and/or exotic stuff that people are talking about in the Big Short are still slung by salespeople, with the connivance/approval of traders.

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

#126

Post by eggy »

QuarterReptile wrote: post #99
eggy wrote: post #30

I've read both sides of the argument about the IEX delay, and my common sense tells me you cannot try and put the genie back in the bottle. If technology exists, has been discovered, you cannot thwart it by trying to mask it by retarding it. It think it is ironic that an exchange, IEX, founded with one of its aims being to level the playing field by calling out HFT as 'wrong' or 'unfair', and yet allow for their dyna…

In what way could this comment possibly be worthy of a down vote? It's complete and thought-provoking.

Didn't even realize I was down voted, but thanks.

I am not a trader, only an observer of technology. I do play with time series data processing, not networking, which is why I find HFT one of things I try to tap for tips and tricks. After all, a lot of very smart physicists and mathematicians being paid to work 40+ hours a week on it, does produce something worthy of study. A lot of optimizations that sometimes find use in other areas.

That was my comparison to the porn industry with online payment systems, and the military with DARPA projects and the early days of funding for what was the nascent Internet.

The crazy speculation that goes on in the minds of the 'quants' that work on these issues has no bounds, as brainstorming should before the realization stage. They are looking into quantum computing and using custom boards (FPGAs, ASICS and GPGPU) that find use eventually in things like bioinformatics, visualizations, big data processing and huge neural nets.

I program in J, and with Jd, which is similar to k in the APL family, you can process billion rows of data better than some of the systems built by the big money players in tech. k/qdb is mainly used in the financial sector, in which I have never worked.

My point was that it seemed kind of silly to put cable in a box to make a 'speed bump' to sort of negate something everyone already knows or has, and then still have to process their dynamic orders without the delay. I understand the intention, and I am not technical enough to suss it out, but it just seemed to go against common sense. That is all.

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

#127

Post by eggy »

rrrrsss99 wrote: post #114
tedunangst wrote: post #103

Earlier quoted context omitted.

Called HFT innovative. Can't say that here.

I think it's inaccurate to put hft in the future tech division with darpa or porn. Maybe it will lead to fpga's/c++/microwaves being widely used for ML, but it seems unlikely that the low latency and minimal cross country transmission has has much value. If you're building a system to process lots of data quickly transmitting a few bytes between the UK and Belgium slightly faster than a wire won't be a constraint. Ma…

Algorithms are also worked on, not just transmission or switching. And speed is always needed by some field or another, so I would argue it has its fruits beyond what you may have posited.

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

#128

Post by harryh »

prodigal_erik wrote: post #121
harryh wrote: post #80

Earlier quoted context omitted.

I thought about your question on my walk home from work today. I decided that as much as jocks vs geeks is a powerful force, a more powerful force is people's distrust of middlemen. People don't really understand that liquidity provisioning is a service that needs to be paid for. They think that if we could just wipe all middlemen off the face of the planet that buyers could just trade with sellers and we'd all save…

We're paying entirely too much for liquidity that value investors don't need. If my holding period was less than a day, that's a buyer and seller who would have found each other without my "help", and I didn't contribute any insight about the company's value, just about flaws in the marketplace.

Thank you for demonstrating my point!

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

#129

Post by harryh »

hm8 wrote: post #117
harryh wrote: post #57

Earlier quoted context omitted.

Once the grocers raise their prices, there's no margin left for the Ferrari owner to capture.

There is still a margin if the intended buyer was willing to pay more or would just want to buy the milk at whatever price offered. Of course, the grocers could keep raising the price arbitrarily but there is still a delta that the guy in the Ferrari could overcharge. I think you understand the point we are trying to get across but just trolling it. I'd have appreciated an honest discussion rather than a trolling att…

I'm not trolling.

The situation I'm describing is literally what happens in the real world. If a large trader wants to buy a big block of stock such that he can't fulfill the order on a single exchange he has to be pretty careful about how he executes the trade or the market will move against him. As soon as he purchases all the stock at the market price on a single exchange those selling stock on other exchanges will raise their prices.

It's very important to understand this. The price doesn't (generally) rise on other exchanges because someone swoops in and buys up all the supply. It rises because the people who were selling in the first place change their offers.

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

#130

Post by chrisbennet »

mjfl wrote: post #60
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…

That analogy is tempting but inaccurate. Pretty popular with the Mike Lewis "the market is RIGGED against the LITTLE GUY and we're all MAD AS HELL" crowd, but in the end it's hyperbole. IEX is not for the little guy. IEX is for the really big guy. Institutional investors. They are tired of having the market run away from them on large orders. A closer analogy would be that the neighbor is the owner of the local super…

Very helpful explanation!

That said, it should be mentioned that the "rich guy"/"institutional investor" includes various pension funds.

"In a letter urging the SEC to approve IEX as a full exchange, the Teacher Retirement System of Texas, a pension fund that manages more than $125 billion, suggested that trading through IEX could save the system millions of dollars a year."

Post reply on HN