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

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

#231

Post by consz » Wed, Jul 19, 2017, 7:52 AM UTC

keenerd wrote: post #225

gnaritas wrote: post #221

Earlier quoted context omitted.

Market efficiency means everyone gets cheaper trades with less slippage and less money going to middle men. All of society benefits from market efficiency. If you have a 401k or any stocks of any kind, you benefit from a more efficient market. Efficient means less money is lost in the transaction to middle men like traders. HFT make less per trade than old school manual traders did because they've out competed them a…

This is more specific and useful. But it is still fairly hand-wavy. How is this efficiency measured? Is "market efficiency" really nothing more than the average USD to conduct a trade? Or the number of microseconds? (In either case it isn't an efficiency, efficiency is always a unitless number between 0 and 1.) 401k is a great indicator, but I'm not sure it makes HFT look very good. The median trade time is more than…

If you want something more specific, how about something like the following -- for a fixed number of shares N that you want to buy (or sell), the average "cost" (as measured by the difference between the price you pay and the midpoint between the best bid and offer) of performing that transaction has gone down (true whether you buy all N shares in one order or across a block of time T).

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

#232

Post by neomantra » Wed, Jul 19, 2017, 10:47 AM UTC

hendzen wrote: post #210

neomantra wrote: post #204

Earlier quoted context omitted.

I worked at an HFT firm. We didn't cure cancer, but we tried hard to improve the technical ecosystems we were a part of. Many other firms do the same. We sponsored the x64 port of LuaJIT and kicked off a sponsorship system for it [1]. OpenResty took nginx and integrated it with LuaJIT. Ten years later, CloudFlare started using OpenResty and LuaJIT to protect massive swathes of the Internet. This kind of butterfly eff…

You worked at Athena? The guys who were fined for manipulating the NASDAQ closing auction? https://www.bloomberg.com/view/articles/2014-10-16/high-spee...

I did. Although I left years before that, Athena was not "fined". They settled without admitting any wrongdoing.

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

#233

Post by gnaritas » Wed, Jul 19, 2017, 3:13 PM UTC

keenerd wrote: post #225

gnaritas wrote: post #221

Earlier quoted context omitted.

Market efficiency means everyone gets cheaper trades with less slippage and less money going to middle men. All of society benefits from market efficiency. If you have a 401k or any stocks of any kind, you benefit from a more efficient market. Efficient means less money is lost in the transaction to middle men like traders. HFT make less per trade than old school manual traders did because they've out competed them a…

This is more specific and useful. But it is still fairly hand-wavy. How is this efficiency measured? Is "market efficiency" really nothing more than the average USD to conduct a trade? Or the number of microseconds? (In either case it isn't an efficiency, efficiency is always a unitless number between 0 and 1.) 401k is a great indicator, but I'm not sure it makes HFT look very good. The median trade time is more than…

You're asking all the wrong questions. HFT is just trading really fast, we live in a free country, some people want to trade really fast because they've found it profitable to take on the risk of doing so, it doesn't matter one bit if you or anyone else thinks it's pointless, you have no right to tell someone else they're trading too fast. They aren't hurting you, they're making your trades cheaper, they're making it easier for you to get into and out of any position you're in by being there to buy or sell exactly at the moment you want to buy or sell, and you're complaining about what? You don't even know.

You seem to have this backwards notion that they need to justify their existence, they don't, they're just traders executing their rights to buy and sell like everyone else. It's those like you seeking to regulate HFT that need to justify yourselves. You don't even understand what HFT is really as you're asking basic questions like what does market efficiency mean and does HFT help it, and you think you're in a position to question someone else's trading habits? Really? HFT doesn't need to look good, those of you trying to punish them need to show some actual evidence they're doing something bad, but they're not and you can't.

Efficiency in a market means things are priced accurately and you're not getting ripped off when you buy or sell; if you find that vague and hand wavy, well, sorry but that's what it means and you should be able to understand that without further explanation. HFT traders make the price more accurate benefiting you and everyone else, they don't need to justify themselves, you need to justify your witch hunt against them.

HFT is a form of electronic trading, I'm not conflating them, they're just different forms of using tech to trade and there's valid reason at all to single either of them out as bad. HFT are market makers, they're providing you and everyone else liquidity for a vastly smaller fee than you've been provided it ever before. So say thank you to HFT, enjoy your cheaper trades and increased liquidity, and go find a real problem to complain about instead of attacking those who make your life better.

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

#234

Post by jorjordandan » Wed, Jul 19, 2017, 4:06 PM UTC

stcredzero wrote: post #170

jorjordandan wrote: post #159

Earlier quoted context omitted.

That's true. I guess the difference is that outrage has a function, and can have a utility, so I don't think it's a good metaphor. Viewing it as just 'pollution' implies that it has no value. It's only 'pollution' to those who don't agree with the outrage.

That's true. I guess the difference is that outrage has a function, and can have a utility, so I don't think it's a good metaphor CO2 is the best analogy. There needs to be a certain amount for the utility. Too much and too little are detrimental. Viewing it as just 'pollution' implies that it has no value. This is an all-or-nothing fallacy. It's the amount produced which is the issue in the analogy. In reality, ther…

>This is an all-or-nothing fallacy

Not really. Pollution is uniformly unwanted by definition (without you changing the goalposts to CO2, which is naturally occurring, and the naturally occurring CO2 would not be considered as pollution, whereas human created CO2 would). In fact, let's stick with the wikipedia definition:

"Pollution is the introduction of contaminants into the natural environment that cause adverse change."

Outrage, on the other hand, may be very much wanted, or even required. I'm not defending ALL outrage. I'm defending that some outrage may occasionally be warranted. You saw an all or nothing fallacy where there was none. To recap -

Argument: Outrage is cultural pollution.

My Response: All pollution is unwanted, some outrage may be occasionally wanted or warranted.

Your response: Saying pollution has no value is an all-or-nothing fallacy!

The worst kind of bad reasoning is the false accusation of a fallacy. Because the person making that claim should know better.

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

#235

Post by stcredzero » Wed, Jul 19, 2017, 4:34 PM UTC

jorjordandan wrote: post #234

stcredzero wrote: post #170

Earlier quoted context omitted.

That's true. I guess the difference is that outrage has a function, and can have a utility, so I don't think it's a good metaphor CO2 is the best analogy. There needs to be a certain amount for the utility. Too much and too little are detrimental. Viewing it as just 'pollution' implies that it has no value. This is an all-or-nothing fallacy. It's the amount produced which is the issue in the analogy. In reality, ther…

>This is an all-or-nothing fallacy Not really. Pollution is uniformly unwanted by definition (without you changing the goalposts to CO2, which is naturally occurring, and the naturally occurring CO2 would not be considered as pollution, whereas human created CO2 would). In fact, let's stick with the wikipedia definition: "Pollution is the introduction of contaminants into the natural environment that cause adverse ch…

In fact, let's stick with the wikipedia definition:

"Pollution is the introduction of contaminants into the natural environment that cause adverse change."

This is either an honest mistake or a pedagogical trick you're pulling. In the general point, I mean pollution in the sense people mean when they say something like "noise pollution." "Pollution" in my analogy (which isn't the same referent as above) would be excess CO2 -- in large enough quantities this is a bad thing, and everyone should know that fact. The validity of the underlying point really has nothing to do with your nitpick. Just substitute "bad thing" for that word in your head. Your whole argument vanishes, and my point remains.

Your response: ... is an all-or-nothing fallacy!...The worst kind of bad reasoning is the false accusation of a fallacy.

You do have an all or nothing fallacy, and your falsely claimed refutation is actually an irrelevant language nitpick. However, I don't find that a quarter as disturbing as the seeming attachment you have to outrage as some kind of tool for convincing others. That's not convincing. That's coercing.

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

#236

Post by michaelwsherman » Wed, Jul 19, 2017, 7:34 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…

I did some regulatory work as well, for an upcoming regulation called Reg CAT. CAT will require all brokers, traders, exchanges, etc. to report essentially everything that happens--orders, cancellations, trade executions, etc. Right now the SEC really has no way to catch the majority of regulatory hijinx (look at the years-long attempt to track down the cause of the 2010 "flash crash").

Hopefully this will improve the ability to regulate in the future. But it probably won't result in significantly more enforcement--the regulation is written in such a way that the exchanges and FINRA will carry the primary regulatory burden rather the SEC itself. This means that despite there soon being a system that could, say, give you every reg NMS violation via a database query matched to a log of historical latencies, very little will likely change.

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

#237

Post by keenerd » Thu, Jul 20, 2017, 3:21 AM UTC

gnaritas wrote: post #233

keenerd wrote: post #225

Earlier quoted context omitted.

This is more specific and useful. But it is still fairly hand-wavy. How is this efficiency measured? Is "market efficiency" really nothing more than the average USD to conduct a trade? Or the number of microseconds? (In either case it isn't an efficiency, efficiency is always a unitless number between 0 and 1.) 401k is a great indicator, but I'm not sure it makes HFT look very good. The median trade time is more than…

You're asking all the wrong questions. HFT is just trading really fast, we live in a free country, some people want to trade really fast because they've found it profitable to take on the risk of doing so, it doesn't matter one bit if you or anyone else thinks it's pointless, you have no right to tell someone else they're trading too fast. They aren't hurting you, they're making your trades cheaper, they're making it…

I think you are misunderstanding my point. You say HFT is good and it does good things. Okay... how good? For the sheer amount of money and effort involved it had better be pretty good. (For things this big, yes, they do need to justify their existence.) So we should quantify how good it is. We should know the ROI for all speeds of trading. At what point do the improvements become lost in the noise and it is just a bunch of financial masturbation?

> Efficiency in a market means things are priced accurately and you're not getting ripped off when you buy or sell; if you find that vague and hand wavy, well, sorry but that's what it means and you should be able to understand that without further explanation.

I'm unable to find hard numbers and neither can you; by that metric we understand it equally well. You have a religious faith in finance. I don't. I need evidence. Would you buy my pill that helps you lose weight if I'm not going to tell you how much the pill costs or how much weight you lose? I've based my whole career on selling this pill and can spout endless platitudes, you should believe me.

> So say thank you to HFT, enjoy your cheaper trades and increased liquidity, and go find a real problem to complain about instead of attacking those who make your life better.

More platitudes. Finance lives and dies by numbers. If the most brilliant minds on the planet, moving trillions of dollars, can't nail down a metric for how good of a job they are doing, I'm inclined to suspect they aren't doing a good job.

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

#238

Post by corporateslave3 » Mon, Jul 31, 2017, 6:32 PM UTC

keenerd wrote: post #151

rtx wrote: post #131

Earlier quoted context omitted.

Increases market confidence, which in turn promotes economic activity.

Too vague! Since 1990, US population has increased 30% while the (inflation corrected) GDP has increased 90%. So something improved. I'm going to (arbitrarily) say it was computer literacy, since home PC ownership went from 15% of households to 85% of households in that time period. What can you counter with to say that the improvements were from market efficiency? If we never had HFT, how much lower would the GDP be…

To be completely honest with you, I think you are trying to back someone into a logical corner on something you dont understand. You are arguing one thing and missing the whole picture.