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High-Frequency Programmers Revolt Over Pay

forbes.com

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Re: High-Frequency Programmers Revolt Over Pay

#41

Post by kiujhyghjkl »

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…

>b) is taking all the risks of running it

The bank's customers are taking the risk of running it not the traders - it's not the trader's money

Re: High-Frequency Programmers Revolt Over Pay

#43

Post by gruseom »

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.

It's just the rote journalistic trope of the twisty ending. How would the article end otherwise? "Only time will tell if their get-rich dreams work out?" Too flat. It's considered better to give the reader a little frisson at the end. Bonus points for confirming the reader's pre-existing beliefs, as this one does.

Count your blessings. At least the article didn't start with "Joe Schmoe, a programmer, is setting out to blah blah blah" and then end with "Back at blah blah, Joe Schmoe is still programming away, sure that millions are just around the corner."

Re: High-Frequency Programmers Revolt Over Pay

#44

Post by [deleted] »

yummyfajitas wrote: post #34
neilk wrote: post #26

Earlier quoted context omitted.

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 st…

[deleted]

Re: High-Frequency Programmers Revolt Over Pay

#45

Post by noname123 »

yummyfajitas wrote: post #34
neilk wrote: post #26

Earlier quoted context omitted.

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 st…

True for a small lot order for a retail investor. But for a large block order from a institutional investor that's been diced and prepared to be executed over a period of time, predatory HFT algo's could still anticipate you and buy up remaining liquidity and sell back to you at an artificially inflated price.

Re: High-Frequency Programmers Revolt Over Pay

#46

Post by SwellJoe »

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.

Exactly! My immediate thought was, "You smug bastard."

This is why I would never take a job as a programmer in the trading industry working for the big firms. I have dignity, and it would never cross my mind to put up with smug bastards taking this attitude with me all day, no matter how high the salary. It's not that the software is making people tons of money, it's that nobody respects that the software is making people tons of money (the side effect of respect, of course, would be fair compensation).

Re: High-Frequency Programmers Revolt Over Pay

#47

Post by noname123 »

yummyfajitas wrote: post #40
noname123 wrote: post #27

Earlier quoted context omitted.

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 par…

Ah, but your point is more philosophical than technical.

Who should SEC and public interests side with? Bob, the retail investors Bob trades with, or the HFT/professional broker-dealers that Bob trade with?

Bob would argue that public interests should ultimately place the highest priority with him, as he represents the "pension fund and 401(k) accounts of the hard working American public." (Never mind the fund fees, soft dollars & insider trading)

The retail investors argue that public interests should ultimately rest with them. What how do you define retail investors? The long-term investors that trade blue chips and the day-traders with IB accounts? How are the day-traders with IB accounts different from professional broker-dealer except that they are typically less sophisticated but both out for blood? Should you really let the inmates run the asylums.

The broker-dealers argue that public interests should side with them. Because they are the psychiatrists of the asylum that could orderly organize the inmates, make that the mental hospital is well-run and efficient place. But can you trust people when they have so much more leverage and power at a place? And but if you do away with them, wouldn't mental asylum collapse?

Re: High-Frequency Programmers Revolt Over Pay

#48

Post by SkyMarshal »

endtime wrote: post #8

>He says one group was generating $100,000 a day from his high-frequency trading software and paying him $150,000 a year. I'm not saying I don't want the guy to have a higher salary, but there's an implied fallacy here. It seems he should be paid relative not to how much value his code generates, but to how hard it would be to replace him.

And making 100k/day using the tens or hundreds of millions of principal an investment bank can provide is a far cry from making 100k/day trading one's own savings.

Re: High-Frequency Programmers Revolt Over Pay

#49

Post by SkyMarshal »

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".

I don't recall us having significant liquidity problems prior to HFT, except during crisis, and as the recent one shows, we had liquidity problems even with HFT then.

I'm not buying the argument that 'HFT' provides any meaningful additional liquidity.

Re: High-Frequency Programmers Revolt Over Pay

#50

Post by Nwallins »

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…

> However, the other counter argument against HFT is that it actually doesn't really provide liquidity to the market, as evident by the June flash-crash.

As far as I can tell, this is the only argument presented against HFT.

> But HFT dealers stopped trading that day, triggering a lot of people's stop-market orders

Are there other factors involved in this outcome, or is this a canonical HFT failure?

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