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High-Frequency Programmers Revolt Over Pay

forbes.com

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Re: High-Frequency Programmers Revolt Over Pay

#31

Post by robak »

neilk wrote: post #26
drx wrote: post #5

Earlier quoted context omitted.

Minute trading introduces very high levels of liquidity to the market. Your thinking represents a common fallacy: "I cannot immediately see any benefit to X, therefore X is pointless / should be abolished".

I'm not an expert, but how does HFT increase liquidity? One definition of liquidity is when you can sell something without affecting the price much. Most people on Wall Street will tell you their job somehow increases liquidity -- connecting buyers and sellers in more and more efficient ways. HFT seems different. It is comparable to front-running other people's orders. Someone tries to buy an item for $1.00, and the…

yep. It's just GS tax on the public that bailed them out. As shallow as it sounds, it is a fact. Only in America!

Re: High-Frequency Programmers Revolt Over Pay

#32

Post by huhtenberg »

noname123 wrote: post #23
beloch wrote: post #22

High frequency trading is under pretty high powered scrutiny at present. I fully expect legislation implementing trade reforms that will render the practice worthless in the very near future, whether it's frequency limits or per-transaction fees/taxes. If these guys want to spend money and time on start-ups that will likely be out of business before they come online, that's no skin off my nose. In fact, please excuse…

Nah. Not going to happen. They introduced a bunch of legislation already in congress trying to tax per per share per transaction, all got killed very quickly; offends the All-American capitalism sensibilities too much. While I agree with you that HFT is a scam, I disagree with you that it's a ponzi scheme. It's more like ticket-scalping, so the scheme is going to go on forever, as long as SEC allows it (which they wi…

A number of exchanges have already voluntarily dropped the 30ms preview. Just sayin'.

Re: High-Frequency Programmers Revolt Over Pay

#34

Post by yummyfajitas »

neilk wrote: post #26
drx wrote: post #5

Earlier quoted context omitted.

Minute trading introduces very high levels of liquidity to the market. Your thinking represents a common fallacy: "I cannot immediately see any benefit to X, therefore X is pointless / should be abolished".

I'm not an expert, but how does HFT increase liquidity? One definition of liquidity is when you can sell something without affecting the price much. Most people on Wall Street will tell you their job somehow increases liquidity -- connecting buyers and sellers in more and more efficient ways. HFT seems different. It is comparable to front-running other people's orders. Someone tries to buy an item for $1.00, and the…

Someone tries to buy an item for $1.00, and the HFT algorithm tries to grab the item first and resell it to our original buyer (and other people in the market) for just a tiny bit more.

No. The matching engine will match first the highest priced order, and in the case of orders at the same price, whichever order was placed first. You can't jump ahead in the queue, no matter how fast your algorithm is [1].

[1] This statement only applies to US equities/futures/derivatives markets. I think it might be possible in Canadian markets under some limited circumstances.

Re: High-Frequency Programmers Revolt Over Pay

#35

Post by yummyfajitas »

mailanay wrote: post #10
abstractbill wrote: post #6

Earlier quoted context omitted.

Is more liquidity always better? (It's an honest question - I have no idea myself).

Imagine liquidity as tank full of fuel in your car. The possibilities of going with a full tank are endless. More fuel than tank's holding capacity is pretty much useless.

No, imagine liquidity as a keg of beer. If you drink some, it tastes great. If you drink some more, you feel dizzy, and eventually you wake up with a really ugly girl in your bed.

When using analogies, some explanation is helpful.

Re: High-Frequency Programmers Revolt Over Pay

#36

Post by nradov »

drx wrote: post #5
parallax7d wrote: post #4

A market for trading perception of value should be regulated to increments of days or weeks, not minutes. The current structure for valuating securities does absolutely no good for our society. Not that it's overly evil or anything, it's just pointless, a massive waste of time and money, and is a cancer on our economic system. It's got to be a thrilling thing to code for though.

Minute trading introduces very high levels of liquidity to the market. Your thinking represents a common fallacy: "I cannot immediately see any benefit to X, therefore X is pointless / should be abolished".

Everyone understands that high liquidity is beneficial: it lowers the cost of capital thus allowing businesses to expand. But have researchers ever quantified the liquidity premium reduction provided by HFT versus the economic rents extracted by the traders? Depending on the ratio, society might actually be better off with a little less liquidity.

Re: High-Frequency Programmers Revolt Over Pay

#37

Post by [deleted] »

ryoshu wrote: post #29
jmillerinc wrote: post #17

I have a feeling this article confused the creators of the trading algorithms, which is what makes the money, with pure programmers, who are hired to implement someone else's pre-existing algorithms. Sometimes these are the same person, but in those cases that person almost always has a profit sharing contract, not only a base salary. (And if they don't, they're crazy.) The fact that the programmers in the article on…

That's an easy problem to solve. The people with the trading algorithms can just learn to program. No worries about programmers stealing trading secrets that way.

[deleted]

Re: High-Frequency Programmers Revolt Over Pay

#38

Post by Leon »

nphase wrote: post #28

When they do, the security of their old, relatively low-paying gigs might start to look pretty good. The condescending tone of this line really bugs me.

Yeah, that last part made the article sound like it was attempting to dissuade other programmers from choosing to strike out on their own, as if it had been written by management.

But listening to management about job security is absurd, at least these days it is.

Re: High-Frequency Programmers Revolt Over Pay

#39

Post by dman »

drx wrote: post #5
parallax7d wrote: post #4

A market for trading perception of value should be regulated to increments of days or weeks, not minutes. The current structure for valuating securities does absolutely no good for our society. Not that it's overly evil or anything, it's just pointless, a massive waste of time and money, and is a cancer on our economic system. It's got to be a thrilling thing to code for though.

Minute trading introduces very high levels of liquidity to the market. Your thinking represents a common fallacy: "I cannot immediately see any benefit to X, therefore X is pointless / should be abolished".

Except that when the liquidity is most needed it disappears. Example the market fall on May 6th of this year. http://www.minyanville.com/businessmarkets/articles/apple-mi...

Re: High-Frequency Programmers Revolt Over Pay

#40

Post by yummyfajitas »

noname123 wrote: post #27
patio11 wrote: post #20

Earlier quoted context omitted.

I would have agreed with you prior to hearing this argument: if someone's pension fund wants to trade 10,000 shares of a stock with a 2 cent spread, then in the next few seconds market makers are going to make $200, guaranteed. The only thing HFT changes is who the marketmaker that pockets the $200 is going to be: some day trader in the bathrobe, market maker at the exchange, automated proptrading strategy, or a sick…

Umm, yes and no. Example, I'm Fidelity Bob Fund Manager; after extensive research, I decide to make a decision to buy 200,000 shares of AAPL. So I enter my buy order into my OMS screen, which slices and dices these 200,000 shares into blocks of 100 shares (as for traders not to front-run me, because a naked buy order of 200,000 shares will drive the price up and I'll overpay long after my transaction is completed). H…

There are two sides to every trade.

The sophisticated Bob fund is trying to fool the markets into thinking that demand for AAPL has not increased. I.e., Bob is trying to keep inside information hidden and trade in such a way that he captures all the profits from this information himself. A predatory trader (algorithm or human) will bid up the prices, thereby capturing part of the gains of trade for themselves and part of it for the other market participants.

So basically, while Bob pays more, the retail investor Bob is buying from receives more (and of course, the predator takes a cut).

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