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

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

#191

Post by concede_pluto » Tue, Jul 18, 2017, 7:10 PM UTC

dsacco wrote: post #169

snark42 wrote: post #145

Earlier quoted context omitted.

> earns about 100 million a year. 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.

That's not the point. The point is that the industry is vanishingly small compared to Wall Street proper, yet it has an outsize target on its head due to FUD and emotional appeals like the ones presented in the article. Furthermore, in exchange for "taking" that money from the market, they enhance liquidity, which is directly helpful for price discovery and facilitating trading among both retail and institutional inv…

Liquidity is willingness to make a trade others aren't. To be useful, it has to linger in the order book for a long time. If you're winning a race by milliseconds, you are trying to interpose yourself into a trade that was already going to happen that day.

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

#192

Post by c3534l » Tue, Jul 18, 2017, 7:13 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…

> The real problem is that the traders are much smarter than the regulators

They're not smarter, they have massively more resources. The SEC investigates and takes to court the tiny, tiny portion of investors which are the most egregious and easy-to-prosecute criminals. This isn't like hackers fighting against security systems.

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

#193

Post by c3534l » Tue, Jul 18, 2017, 7:13 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…

> The real problem is that the traders are much smarter than the regulators

They're not smarter, they have massively more resources. The SEC investigates and takes to court the tiny, tiny portion of investors which are the most egregious and easy-to-prosecute criminals. This isn't like hackers fighting against security systems.

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

#194

Post by jerrylives » Tue, Jul 18, 2017, 7:13 PM UTC

nostrademons wrote: post #186

justadeveloper2 wrote: post #183

Earlier quoted context omitted.

I disagree that it works--it's just that it hasn't utterly failed yet. Big difference. If you look at failed states, the bandits won. Argentina comes to mind, maybe Venezuela. Brazil is headed there.

Having "not utterly failed" for 240 years is a fairly big accomplishment, precisely because the lifespan of many other societal organizing principles is about equal to a human lifespan (~80 years).

Uh it kinda failed big time in the '20s and '30s

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

#195

Post by gnaritas » Tue, Jul 18, 2017, 7:18 PM UTC

netcan wrote: post #158

harryh wrote: post #74

Earlier quoted context omitted.

For the record I do actually see a downside to a trading tax and do not think we should have one. Trading is a useful activity. There is no need to single it out separately from all other forms of economic activity for a special tax.

Trading is probably essential, it definitely is given our economic system which involves trading. In my opinion, HFT does easily merit singling out for evaluation. It is a relatively marginal economic activity, but accounts for a large portion of transactions, mostly in highly liquid markets purposely designed/evolved to be highly efficient like stock markets and other tradable securities markets. I don't think pure…

Your argument boils down to they're trading too much, it scares me, make them stop. That's not a logical argument. Whether they're economically beneficial or not is simply not relevant, people have a right to buy and sell stocks for whatever reason they want whether it's beneficial to the market or not. They shouldn't have to defend themselves for buying and selling stock. HFT'ers simply do this a lot, so any objection against them is an objection to the either the speed at which they do it or the volumes they do it in, neither of which should be relevant to you. You shouldn't be able to tell someone they can't trade because they're too fast at it.

Said proposed tax is nothing more than people who can't compete trying to punish those who can because they don't understand why they're losing.

HFT has improved the market for everyone involved, spreads are lower, liquidity is higher, everyone pays far less for trades than ever before. There's no reason at all to regulate it that isn't simply fear based.

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

#196

Post by gnaritas » Tue, Jul 18, 2017, 7:21 PM UTC

Jweb_Guru wrote: post #41

harryh wrote: post #15

Earlier quoted context omitted.

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.

Why is it challenging? What conceivable valuable function does front-running serve?

You don't know what front-running means, and HFT's aren't doing it.

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

#197

Post by theseatoms » Tue, Jul 18, 2017, 7:25 PM UTC

justadeveloper2 wrote: post #185

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…

That's such bs--as if the markets couldn't determine prices at anything but sub-microsecond velocity. No, HFT is the ultimate rent seeking.

> HFT is the ultimate rent seeking

It really isn't though. It's been maligned as part of a smear campaign by the actual rent-seekers, Wall Street proper, as other commenters have noted.

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

#198

Post by uiri » Tue, Jul 18, 2017, 7:28 PM UTC

harryh wrote: post #90

stouset wrote: post #82

Earlier quoted context omitted.

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.

If one is employing a buy and hold strategy, then it doesn't make sense to perform buy operations for every pay cheque. At the level of a retail investor, making buy trades once a quarter or once a year will do far more for a retail investor looking to have money on market making operations.

A few tenths of a percent is on the order of less than $100/year assuming that a retail investor invests the maximum amount allowed inside a 401k each year (ignoring for a second that typical 401k plans do not permit investing directly in individual stocks and also ignoring catch up contributions for older folks). It's just not a significant amount of money at the level of an individual retail investor.

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

#199

Post by gnaritas » Tue, Jul 18, 2017, 7:30 PM UTC

keenerd wrote: post #93

corporateslave3 wrote: post #57

Earlier quoted context omitted.

Source is I work in the industry. Look at the price of VirtuFinancial stock, who was at one time a premier HFT firm. The amount of disinformation surrounding HFT is staggering.

Unrelated, but I have a question for you. I've been unable to find a good answer for how exactly HFT benefits the average person. Stuff like antibiotics, electric lights, refrigeration, washing machines, phones, computers all have all led to direct and immediate quality of life improvements. Often on the order of a tenfold improvement for that activity, and they are easily within reach of the majority of the populati…

> Is there some quantifiable financial thing that would regress to whatever terrible situation we were in back in 1990 before HFT was substantial?

Yes, trades would cost a lot more. Every time your money was put into a stock, some middle men would take more of it than they do now. Trades would take longer, you might not get the price you thought you were getting when said buy or sell because the price might change in the time it took some dude to go manually buy or sell the shares you requested. That directly affects everyone with a 401k or stock. HFT has eliminated a large swath of useless middle men who were gouging you for money: those middle men are pissed they've been obsoleted and lost access to easily profit and are the now pushing to regular HFT, so they can go back to the good old days of bigger profits and more room for middle men taking a bigger bit of the average mans investment money.

HFT saves every market participant money, except the old school traders whom they've largely obsoleted.

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

#200

Post by minimax » Tue, Jul 18, 2017, 7:31 PM UTC

nostrademons wrote: post #168

Heh. My second project at my first employer out of college (back in 2006) was building a system to detect violations of this rule (Reg NMS, if you're curious). We found that there were trade-throughs happening on a daily basis, it was so common that it appeared to be just how the markets worked. Tried to sell it to the SEC and they weren't interested. Then we pivoted to try to sell to traders, so they could prove to…

The article isn't about trade throughs. It's an unconvincing argument that rebates bad and that IEX is good because it does not use rebates (while failing to mention any other exchanges that don't pay rebates).