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

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

#121

Post by rtx » Tue, Jul 18, 2017, 5:33 PM UTC

stouset wrote: post #82

rramdin wrote: post #65

Earlier quoted context omitted.

4) increased volatility 5) less efficient price discovery The HFT shops put millions of dollars into research to attempt to ascertain correct prices (e.g. ETF pricing, derivatives pricing, etc). If they are disincentivized from trading in the equities markets, they will no longer be a conduit of relevant pricing information from other global markets into the equities markets. That means investors (big Wall Street fir…

What is the value of trading at increasingly marginally more accurate prices? And more importantly, what is the cost ? You seem to take it at face value that trading at accurate prices is an unalloyed good. But for the extremely overwhelming majority of retail investors — whose only sane strategy is buy and hold — buying at a few tenths of a percentage points closer to the most-accurate possible price is worth nearly…

Whats wrong with them making money from their efforts.

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

#122

Post by harryh » Tue, Jul 18, 2017, 5:33 PM UTC

pishpash wrote: post #116

harryh wrote: post #24

Earlier quoted context omitted.

There is no good argument for this. The problems you think it might solve...it doesn't solve. Hint: if the minute long auction closes at precisely the minute boundary at what time do you want to put your orders in?

Sure there is. The idea isn't to quantize to arbitrarily long times, but to make it long enough compared to the time of information generation and more importantly, communication. Otherwise you may as well give up the notion of a common market. The number may not be a minute but it sure as hell ain't a nanosecond.

The real world is continuous. It cannot be quantized.

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

#123

Post by corporateslave3 » Tue, Jul 18, 2017, 5:34 PM UTC

stouset wrote: post #82

rramdin wrote: post #65

Earlier quoted context omitted.

4) increased volatility 5) less efficient price discovery The HFT shops put millions of dollars into research to attempt to ascertain correct prices (e.g. ETF pricing, derivatives pricing, etc). If they are disincentivized from trading in the equities markets, they will no longer be a conduit of relevant pricing information from other global markets into the equities markets. That means investors (big Wall Street fir…

What is the value of trading at increasingly marginally more accurate prices? And more importantly, what is the cost ? You seem to take it at face value that trading at accurate prices is an unalloyed good. But for the extremely overwhelming majority of retail investors — whose only sane strategy is buy and hold — buying at a few tenths of a percentage points closer to the most-accurate possible price is worth nearly…

Completely delusional about Hedge Fund profitability.

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

#124

Post by amelius » Tue, Jul 18, 2017, 5:35 PM UTC

ghostbrainalpha wrote: post #100

amelius wrote: post #60

Earlier quoted context omitted.

So you are saying these systems are bug-free by design/definition? That's quite a statement :)

That's so crazy far from what he is saying. If you enter a building through a front door, you are not "hacking", you are entering the building in the way the designer intended. If you enter a building through a window, you are "hacking" because you are exploiting an unintended ability that the designer did not intend to give you. Just because the comment you replied to said that "kickbacks" are a front door intention…

Yes, it's a door, but they told the regulators it was a window. That's a bug in the spec.

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

#125

Post by thanatropism » Tue, Jul 18, 2017, 5:36 PM UTC

jorjordandan wrote: post #34

stcredzero wrote: post #9

Earlier quoted context omitted.

would put a dent in the profits of some of the wealthiest, most powerful, This is most certainly factual. and most soulless people in the world. This is a factually unsupportable adhominem. Sentiment that contributes to outrage on social media is a form of cultural pollution. People use it for short term gain, but it's a kind of externality which is tearing society apart. (FWIW, I dislike this situation as well.) (Ye…

Outrage is a form of cultural pollution? So no one should ever be outraged by peoples actions? Or only in the right circumstances? Who gets to say when its justified, if ever?

All of those questions apply to air pollution.

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

#126

Post by cwkoss » Tue, Jul 18, 2017, 5:37 PM UTC

minimax wrote: post #78

harryh wrote: post #67

Earlier quoted context omitted.

It's a bit hard to say to be honest. The wider spreads should make a lot of HFT strategies more profitable. Profitable enough that they can successfully absorb the costs from the tax and not go out of business. You are probably right that this wouldn't be true in all cases though.

Here are some numbers. 0.5% of a $50 stock is $0.25. So to break even on the tax alone you need to sell $.50 higher than you buy. That alone will blow out the spread any market maker is able to quote at. The other problem is that now scratching (you buy at the bid and now it looks like the price is going the other way so you aggress and sell back into the bid for no profit) is also extremely expensive (you lose $.50…

Easy fix - only tax the takers. I agree the 0.5% is a bit steep on both sides. If only to takers and makers aren't taxed, seems like it could work. Would also probably add a ton of liquidity to the markets.

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

#127

Post by harryh » Tue, Jul 18, 2017, 5:37 PM UTC

cwkoss wrote: post #120

rramdin wrote: post #65

Earlier quoted context omitted.

4) increased volatility 5) less efficient price discovery The HFT shops put millions of dollars into research to attempt to ascertain correct prices (e.g. ETF pricing, derivatives pricing, etc). If they are disincentivized from trading in the equities markets, they will no longer be a conduit of relevant pricing information from other global markets into the equities markets. That means investors (big Wall Street fir…

How is mispriced markets a problem? If institutional investors are buying and selling at roughly the same rate, and the mis-pricing occurs in either direction, there will be more noise, but over time it would balance out. Sometimes you'll pay 1% too much, sometimes 1% too little, but it would balance itself out in the long run. Am I missing something here?

Your assumption about institutional investors buying and selling at roughly the same rate is wrong. When one firm decides that Microsoft is overprices, a lot of firms are probably going to decide the same thing. Then it's a race to see who can extract the most value out of the market before the price corrects.

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

#128

Post by minimax » Tue, Jul 18, 2017, 5:38 PM UTC

harryh wrote: post #83

minimax wrote: post #78

Earlier quoted context omitted.

Here are some numbers. 0.5% of a $50 stock is $0.25. So to break even on the tax alone you need to sell $.50 higher than you buy. That alone will blow out the spread any market maker is able to quote at. The other problem is that now scratching (you buy at the bid and now it looks like the price is going the other way so you aggress and sell back into the bid for no profit) is also extremely expensive (you lose $.50…

Are there really people proposing a 0.5% tax on trades? Jesus. That's 1-2 orders of magnitude bigger than I thought we were talking about. That's crazy!

0.5% on equities was the Bernie proposal. Here I'm assuming that both sides pay 0.5% but even if it's half that (each side paying 0.25% or only one side pays) the numbers are crazy.

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

#129

Post by ghostbrainalpha » Tue, Jul 18, 2017, 5:38 PM UTC

dsacco wrote: post #91

ghostbrainalpha wrote: post #79

Earlier quoted context omitted.

http://www.investopedia.com/articles/markets/012716/four-big... This article has a lot of the reasons. I think loss of confidence in Market Integrity is the most important one.

That article has two reasons, though it spreads "amplification" out among several factors. In fairness, I do agree with the problem of flash crashes, whether they are caused by algorithms moving too quickly or too similarly. I'll contest the "confidence in the market" hypothesis, however. As more investors move to index funds, I don't believe "confidence" as defined would have any significant impact by increasing or…

That's a good point about index funding.

I do think if confidence in the market gets low enough it is possible that people will stop investing all together or invest less than they would have. But that is me sidestepping the issue a bit.

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

#130

Post by dragonwriter » Tue, Jul 18, 2017, 5:39 PM UTC

harryh wrote: post #122

pishpash wrote: post #116

Earlier quoted context omitted.

Sure there is. The idea isn't to quantize to arbitrarily long times, but to make it long enough compared to the time of information generation and more importantly, communication. Otherwise you may as well give up the notion of a common market. The number may not be a minute but it sure as hell ain't a nanosecond.

The real world is continuous. It cannot be quantized.

> The real world is continuous. It cannot be quantized.

I thought modern physics leaned more toward “the real world is quantized, but the quanta are small enough that things usually seem continuous to human perception.”