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

Insights into High Frequency Trading from the Virtu IPO [pdf]

online.wsj.com

Post reply on HN
Print view View original

11–20 of 132 posts

Re: Insights into High Frequency Trading from the Virtu IPO [pdf]

#11

Post by jandrese »

sfeng wrote: post #5
Kenji wrote: post #3

I don't know why HFT exists at all. I would just pass a law that forces a bit of random latency/noice in the market data, in the order of seconds (in a similar way as GPS has artificial inaccuracy). Normal people are not gonna notice and all this HFT garbage is completely eliminated. Win win.

People who are pro-HFT see it as a way of increasing the 'liquidity' of the market. In their eyes it makes it easier to move volume of stock, and moves the bid price of the stock closer to the ask price of the stock.

That argument still makes no sense to me. How does skimming off of the top of trades make the market more liquid? It's not like they're offering any new product for sale. If a market is moving slowly all they do is artificially inflate the number of transactions without increasing liquidity.

HFT is just abusing an information advantage to skim off of the market. Because they have a slightly more accurate view of the market, they can front run trades and make money. That's all it is. There is no benefit to the seller, to the buyer, or to the market. It's pure parasitism.

Re: Insights into High Frequency Trading from the Virtu IPO [pdf]

#12

Post by vostok »

Glyptodon wrote: post #9
Kenji wrote: post #3

I don't know why HFT exists at all. I would just pass a law that forces a bit of random latency/noice in the market data, in the order of seconds (in a similar way as GPS has artificial inaccuracy). Normal people are not gonna notice and all this HFT garbage is completely eliminated. Win win.

I agree that it's likely not particularly useful for the market to care about things in millisecond resolution.

It is useful if you start thinking about products whose prices depend on the prices of other things.

Suppose that I'm a SPY trader. I need to know where a bunch of other things are trading in order to figure out where I should be quoting SPY.

If I only know those prices on a second stale basis then I can't get my hedge off and so I can't quote SPY as tightly. I lose, investors lose, and investment banks win because they're better adapted to trading where prices aren't clear.

Re: Insights into High Frequency Trading from the Virtu IPO [pdf]

#13

Post by sidlls »

Glyptodon wrote: post #9
Kenji wrote: post #3

I don't know why HFT exists at all. I would just pass a law that forces a bit of random latency/noice in the market data, in the order of seconds (in a similar way as GPS has artificial inaccuracy). Normal people are not gonna notice and all this HFT garbage is completely eliminated. Win win.

I agree that it's likely not particularly useful for the market to care about things in millisecond resolution.

That's a very clever comment, but I think you should include something indicating why for those who don't know how HFT works.

Re: Insights into High Frequency Trading from the Virtu IPO [pdf]

#15

Post by the_cat_kittles »

to me this is a perfect example of how incredibly indifferent capitalism can be to creating value. no one is bad here, per se, but its useless as far as i can tell, and someone gets very very rich. nothing wrong with capitalism of course, but i feel the need to keep harping of the fact that it doesn't necessarily imply anything about value or desert.

edit: every time i make a comment along these lines, its interesting to see... it seems like HN is split about 50/50 on this. is it that this point is trite? or that you disagree?

Re: Insights into High Frequency Trading from the Virtu IPO [pdf]

#16

Post by SEJeff »

smallnamespace wrote: post #8

Note that the key assumption for why losses are unlikely is that they make many independent trades that are each likely to be profitable. But in real markets, outside events can suddenly make many trades all fail at the same time. This is the same reason AAA tranches of CDOs got those high ratings -- you only lose money if many obligations fail at once, but that is extremely unlikely if you think they have low correl…

Not exactly, a firm like Virtu makes money due to volume and volatility. If the market goes up, they make money, if it goes down, they make money. They don't make money when they break things, or when the volume (and volatility) is low.

Source: Worked at Madison Tyler / Virtu for over 4 years, but left before their IPO.

Re: Insights into High Frequency Trading from the Virtu IPO [pdf]

#17

Post by airza »

jandrese wrote: post #11
sfeng wrote: post #5

Earlier quoted context omitted.

People who are pro-HFT see it as a way of increasing the 'liquidity' of the market. In their eyes it makes it easier to move volume of stock, and moves the bid price of the stock closer to the ask price of the stock.

That argument still makes no sense to me. How does skimming off of the top of trades make the market more liquid? It's not like they're offering any new product for sale. If a market is moving slowly all they do is artificially inflate the number of transactions without increasing liquidity. HFT is just abusing an information advantage to skim off of the market. Because they have a slightly more accurate view of the…

before HFT these transactions were run by human market makers from giant banks who skimmed hundreds of times more profit off of them (this is the reason that you hear about it in the news all of the time)

Someone's job is going to be to sit between the people who just want to sell and those who want to buy- when we talk about liquidity it's just this. The fact that you're directing your anger towards some robots who are ruthlessly driving each other to the minimum possible gap between the buy price and the sell price on this is bizarre

Re: Insights into High Frequency Trading from the Virtu IPO [pdf]

#18

Post by SEJeff »

jandrese wrote: post #11
sfeng wrote: post #5

Earlier quoted context omitted.

People who are pro-HFT see it as a way of increasing the 'liquidity' of the market. In their eyes it makes it easier to move volume of stock, and moves the bid price of the stock closer to the ask price of the stock.

That argument still makes no sense to me. How does skimming off of the top of trades make the market more liquid? It's not like they're offering any new product for sale. If a market is moving slowly all they do is artificially inflate the number of transactions without increasing liquidity. HFT is just abusing an information advantage to skim off of the market. Because they have a slightly more accurate view of the…

aka pure capitalism, which is very darwinistic, by design.

Re: Insights into High Frequency Trading from the Virtu IPO [pdf]

#19

Post by lobster_johnson »

Kenji wrote: post #3

I don't know why HFT exists at all. I would just pass a law that forces a bit of random latency/noice in the market data, in the order of seconds (in a similar way as GPS has artificial inaccuracy). Normal people are not gonna notice and all this HFT garbage is completely eliminated. Win win.

Because the stock exchanges are private companies that profit from every trade. It's in their interest to keep making everyone trade as much as possible. I doubt anything is going to happen unless all exchanges agree to institute the same policy, or a law is passed to that effect.

I don't know why you're being downvoted. It's a legitimate concern.

Re: Insights into High Frequency Trading from the Virtu IPO [pdf]

#20

Post by robrenaud »

jandrese wrote: post #11
sfeng wrote: post #5

Earlier quoted context omitted.

People who are pro-HFT see it as a way of increasing the 'liquidity' of the market. In their eyes it makes it easier to move volume of stock, and moves the bid price of the stock closer to the ask price of the stock.

That argument still makes no sense to me. How does skimming off of the top of trades make the market more liquid? It's not like they're offering any new product for sale. If a market is moving slowly all they do is artificially inflate the number of transactions without increasing liquidity. HFT is just abusing an information advantage to skim off of the market. Because they have a slightly more accurate view of the…

The CEO of Vanguard likes HFTs.

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

"We actually have a really good perspective on this, and there's no question in our mind that the cost to investors through funds has come down," he said.

Post reply on HN