141–150 of 238 posts
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The real world is continuous. It cannot be quantized.
What a fatuous comment. The real world satisfies laws of physics. Your fantasy of a continuous single market doesn't exist. This (information coherency) problem has been solved many times in engineering and the solution is quantization.
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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…
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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?
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First off a trader with the results of all previous auctions should be able to make some educated estimates about what the auction contains. Secondly prices are formed by incorporating information into the price. Supply and demand information is only one type of information. Say that we have an auction expiring at 10AM. At 9:59:59.500 Goldman's equity research desk announces that it is downgrading a security. Our tra…
Sure, but this is combined with all other information over that minute/hour. Suppose you had exactly 1 price exchange per day, now yes you might gain incite waiting for that last millisecond, but you have to weigh all other information over the day, approximate it's changes in the price, and then make a bid. Further if the ticks are say every 15 minutes it's easy to not disclose information on a tick boundary. (Simpl…
This is not true. Lots of things are happening in the world all of the time. You can't tell everyone to stop what they are doing every 15 minutes and wait for the stock market auction to close.
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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…
You are drastically overestimating how much money HFT market makers earn. Virtu Financial (one of the biggest firms in this area) earns about 100 million a year. I think you are also underestimating the costs to retail investors to not getting accurate pricing. Shaving a few tents of a point off of every trade will have a huge effect on the lifetime earnings of an individuals.
They made 147M in the first quarter of this year. 197M in the first quarter of last year. They might only make 100M/year after costs, but that doesn't represent the 600-900M they take from the market.
> Although the harm suffered on each trade is minuscule — fractions of a cent per share — the aggregate kickbacks amount to billions of dollars a year. That's the money quote. 99% of retail investors should be buying stock infrequently, maybe once a month when the paycheck comes in. Ideally you're buying one or a few index funds, so the total number of transactions is small. If you're in that boat, this order-of-fulf…
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Or we can just ban anything insufficiently transparent and be done with it. After all, the point of a market transaction for pricing is its ability to convey transparent, accurate information to other market participants -- right?
In theory, sure. How's that working out for us? EDIT: Meta, I will never tire of hearing people be all, "But markets !" as if they aren't just as corruptible as any other human institution — if not more so.
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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.
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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.
http://www.thebigquestions.com/2014/04/21/high-frequency-ren... This seems pretty convincing to me. The argument is that, based on the amount that firms are willing to spend on fiberoptic cables to perform hft, they put an extremely high value on hft. On the other hand, reasonable back-of-the-envelope calculations show that the social benefit of making the trade slightly faster are much less than the private cost. Th…
Do we really measure the social good of Google by how much capital they put into their fancy server clock syncing (the exact name of the project escapes me)?
How did we get to a point where "reasonable back of the envelope calculations" are what people seriously consider when trying to develop economic policy for the biggest economy in the world?
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>Second, this is necessarily a regressive tax You're putting your own ideas into his mouth. Nobody said anything about the fee being a flat fee, or that it would apply to every single trade in existence.
I'm saying this as a Sanders supporter, but maybe he should have been more specific and detailed about his proposals then. My two biggest frustrations with Sanders were 1) his inability to understand that it was going to take more than just mere backbone and higher taxes to reform wall street and 2) his foreign policy
I'll agree with you there, his proposals were very similar to Trump's in that they did not have much substance, just broad ideas.