Wall Street Profits by Putting Investors in the Slow Lane • Hacker News Board

Re: Wall Street Profits by Putting Investors in the Slow Lane

#11

Post by jstanley » Tue, Jul 18, 2017, 3:57 PM UTC

Pxtl wrote: post #2

Remember when Sanders proposed a small fee on every trade on Wall Street to discourage high frequency trading and to recoup some value from the market? Remember how he was widely pronounced deranged for suggesting that there should be a fee associated with trades? How it would destroy the market? Funny, that.

What you call "recouping some value from the market", others call "stealing some value from the market".

Re: Wall Street Profits by Putting Investors in the Slow Lane

#12

Post by dm3 » Tue, Jul 18, 2017, 3:59 PM UTC

harryh wrote: post #8

Pxtl wrote: post #2

Remember when Sanders proposed a small fee on every trade on Wall Street to discourage high frequency trading and to recoup some value from the market? Remember how he was widely pronounced deranged for suggesting that there should be a fee associated with trades? How it would destroy the market? Funny, that.

Fees on trading would not meaningfully discourage high frequency trading and would just be passed on to buyers and sellers of stock in the form of larger bid/ask spreads.

Something like a minimum holding time is a more reasonable approach. However, there's not a clear cut answer in any case.

Re: Wall Street Profits by Putting Investors in the Slow Lane

#13

Post by osrec » Tue, Jul 18, 2017, 3:59 PM UTC

I think this is well known. The real problem is that the traders are much smarter than the regulators, and their ability to obscure far exceeds the regulators' ability to untangle. Incentivise your regulators better and you might end up attracting some real talent who can unearth the tricks the crafty traders pull every day (I am an ex trader, from a bulge bracket IB, and trust me, what some of these guys do is not at all kosher).

Re: Wall Street Profits by Putting Investors in the Slow Lane

#14

Post by netcan » Tue, Jul 18, 2017, 4:01 PM UTC

This is a quasi-inevitable side issue. Generally, investors eat transaction costs and aren’t party to decisions that affect them. There are related issues in many 3-party systems. In medicine, doctors, insurers and other people tend to decide on (prescribe) products and services. The consumer eats the costs (sometimes it’s a 4th party) and decision makers have an incentive to take kickbacks.

The regulator could do stricter rules/policing, for a partial fix.

Re: Wall Street Profits by Putting Investors in the Slow Lane

#15

Post by harryh » Tue, Jul 18, 2017, 4:01 PM UTC

dm3 wrote: post #12

harryh wrote: post #8

Earlier quoted context omitted.

Fees on trading would not meaningfully discourage high frequency trading and would just be passed on to buyers and sellers of stock in the form of larger bid/ask spreads.

Something like a minimum holding time is a more reasonable approach. However, there's not a clear cut answer in any case.

Before you start talking about what would be effective in reducing the amount of high frequency trading you have to make the case that reducing HFT is a good goal in the first place. This is a challenging case to make.

Re: Wall Street Profits by Putting Investors in the Slow Lane

#16

Post by bradleyjg » Tue, Jul 18, 2017, 4:01 PM UTC

I realize this in the op-ed section of the paper, but where the issues are complex and most people are totally unfamiliar with them, printing one side of the story feels a lot like endorsement.

When Flash Boys came out there was extensive discussion here on HN about IEX's claims. I was convinced that Lewis at the very least exaggerated the benefits of thier speedbump model.

On the issue of rebates, I'd keep on eye out for other takes (especially from Matt Levine at Bloomberg) before forming any firm opinions.

Re: Wall Street Profits by Putting Investors in the Slow Lane

#17

Post by javajosh » Tue, Jul 18, 2017, 4:02 PM UTC

Pxtl wrote: post #2

Remember when Sanders proposed a small fee on every trade on Wall Street to discourage high frequency trading and to recoup some value from the market? Remember how he was widely pronounced deranged for suggesting that there should be a fee associated with trades? How it would destroy the market? Funny, that.

I've always thought a better solution would be a voluntary market "quantization" at some reasonable human-scale time frame. It would be a little random (to avoid gaming), so all put and asks get resolved "about every hour".

There would probably have to be a law to prevent people from running markets at faster time-scales on top of this.

Re: Wall Street Profits by Putting Investors in the Slow Lane

#18

Post by netcan » Tue, Jul 18, 2017, 4:04 PM UTC

harryh wrote: post #8

Pxtl wrote: post #2

Remember when Sanders proposed a small fee on every trade on Wall Street to discourage high frequency trading and to recoup some value from the market? Remember how he was widely pronounced deranged for suggesting that there should be a fee associated with trades? How it would destroy the market? Funny, that.

Fees on trading would not meaningfully discourage high frequency trading and would just be passed on to buyers and sellers of stock in the form of larger bid/ask spreads.

I think higher spreads would “slow” highest frequency trading. They cross the spread many more times per dollar than regular investors to it costs them more.

High frequency trading only works inasmuch as transaction costs are low, at least that’s my understanding.

Re: Wall Street Profits by Putting Investors in the Slow Lane

#19

Post by osrec » Tue, Jul 18, 2017, 4:04 PM UTC

osrec wrote: post #13

I think this is well known. The real problem is that the traders are much smarter than the regulators, and their ability to obscure far exceeds the regulators' ability to untangle. Incentivise your regulators better and you might end up attracting some real talent who can unearth the tricks the crafty traders pull every day (I am an ex trader, from a bulge bracket IB, and trust me, what some of these guys do is not a…

Also, there is an argument for more time controlled auctions rather than giving everyone a continuous look at the order book. Much like the start of day auction, you could have something similar every minute, where traders submit prices but matching only occurs at the end of each minute. This would certainly put an end to the annoying high/low ticking that happens all too often.

Re: Wall Street Profits by Putting Investors in the Slow Lane

#20

Post by wbl » Tue, Jul 18, 2017, 4:04 PM UTC

harryh wrote: post #10

chollida1 wrote: post #6

Someone will call this a submarine article for IEX but I don't think this is far, it was written as an oped by Dave Swensen, the famous head of Yale's endowment fund. Just so the issue is clear, almost all hedge funds don't do active/passive also called maker/taker, but rather they pay a flat fee per share traded to their sell side broker. The sell side broker will then collect/pay the exchange fees. This means that…

Worth noting that the head of Yale's endowment fund and IEX's interests are aligned. The business model of IEX is to convince naive investors that high frequency trading is somehow screwing them and that they should choose to route their orders to IEX in order to avoid it. They then facilitate trading between these naive investors and large institutional investors (like Yale) who want to move large blocks of shares b…

Parent is correct. Uninformed order flow is what HFT wants to trade against: people buying because they have cash and selling because they need it. HFT doesn't want to trade with people moving prices at the old prices.