11–20 of 328 posts
Most exchanges have an auction process that sets opening and closing prices. They let everyone get their orders in and then run an algorithm to find the price that will execute the most volume. They could do the same process every 5 minutes and only allow stocks to trade in the auction. Then all of the resources used on pointless HFT could be used on something economically productive.
It seems like we could save a lot of pointless expenditure on an ultimately meaningless arms race in flash trading if we imposed reasonable limits on the time required to hold an equity in order for a trade to be legally recognized.
What about price discovery is pointless? Would you prefer that prices update only once a day? Once a week? Once a month? Realtime pricing of securities and derivatives is critical for an efficiently functioning economy.
> if we imposed reasonable limits on the time required to hold an equity in order for a trade to be legally recognized
This would damage the ability of market makers to function, ultimately driving up the cost of offering pensions, 401k plans, retail investing, low fee ETFs, etc. If these companies are willing to spend their money competing for the ability to offer you a better, faster price, why is this upsetting?
If you're opposed to the emphasis on latency in equity markets, focus on rule 612 of Reg NMS, which prohibits showing more competitive prices.
Most exchanges have an auction process that sets opening and closing prices. They let everyone get their orders in and then run an algorithm to find the price that will execute the most volume. They could do the same process every 5 minutes and only allow stocks to trade in the auction. Then all of the resources used on pointless HFT could be used on something economically productive.
Tangentially related, but I wonder how long before HFT harnesses neutrino transmission to send market data directly through the earth? The MINOS [1] project is underway to send neutrinos from Fermilab in Illinois to detectors in northern Minnesota. Straight through the earth's crust. Detecting neutrinos is hard, and modulating data on them will probably be even more difficult, but if it shaves a few micro/millisecond…
I'm sure there are smarter schemes, like also varying the neutrino beam density, but at 20 neutrinos per detection there's not much channel capacity in the amplitude either.
It looks like the main bottleneck is in the neutrino generation though, you can use more accelerator beams without needing to build more detectors right away.
Note also that the 'far' detector is only 500 miles away, so depending on how collimated the neutrino beam is you may be losing a lot of signal to get all the way through the Earth.
Tangentially related, but I wonder how long before HFT harnesses neutrino transmission to send market data directly through the earth? The MINOS [1] project is underway to send neutrinos from Fermilab in Illinois to detectors in northern Minnesota. Straight through the earth's crust. Detecting neutrinos is hard, and modulating data on them will probably be even more difficult, but if it shaves a few micro/millisecond…
Very interesting. Physical wars brought pointless spending that prompted innovation. I wonder if the mini-financial wars being waged will result in some cool tech coming out of all the craziness. I had never though of this when thinking about the rent seeking nature of many parts of the financial industry.
Most exchanges have an auction process that sets opening and closing prices. They let everyone get their orders in and then run an algorithm to find the price that will execute the most volume. They could do the same process every 5 minutes and only allow stocks to trade in the auction. Then all of the resources used on pointless HFT could be used on something economically productive.
even every 1s. If we can do auctions for web ads, we can do auctions for the stock exchange.
There was ~$107 billion in online advertising in 2018. There was ~$145 billion traded in Nasdaq listed equities yesterday.
Global financial markets and online advertising have different requirements.
[0] https://www.marketingcharts.com/advertising-trends/spending-...
[1] http://www.nasdaqtrader.com/Trader.aspx?id=DailyMarketSummar...
It seems like we could save a lot of pointless expenditure on an ultimately meaningless arms race in flash trading if we imposed reasonable limits on the time required to hold an equity in order for a trade to be legally recognized.
> pointless expenditure on an ultimately meaningless arms race What about price discovery is pointless? Would you prefer that prices update only once a day? Once a week? Once a month? Realtime pricing of securities and derivatives is critical for an efficiently functioning economy. > if we imposed reasonable limits on the time required to hold an equity in order for a trade to be legally recognized This would damage…
It seems like we could save a lot of pointless expenditure on an ultimately meaningless arms race in flash trading if we imposed reasonable limits on the time required to hold an equity in order for a trade to be legally recognized.
> pointless expenditure on an ultimately meaningless arms race What about price discovery is pointless? Would you prefer that prices update only once a day? Once a week? Once a month? Realtime pricing of securities and derivatives is critical for an efficiently functioning economy. > if we imposed reasonable limits on the time required to hold an equity in order for a trade to be legally recognized This would damage…
Earlier quoted context omitted.
> pointless expenditure on an ultimately meaningless arms race What about price discovery is pointless? Would you prefer that prices update only once a day? Once a week? Once a month? Realtime pricing of securities and derivatives is critical for an efficiently functioning economy. > if we imposed reasonable limits on the time required to hold an equity in order for a trade to be legally recognized This would damage…
Most of these efforts are aimed at taking advantage of lags in information flow, often within the very trading systems on which the trades are occurring. They are exploits, not essential market-making. Noise, not signal. What's the right timeframe? Something based on the time it takes for humans to reason about a price. Not a day, but certainly not milliseconds, either.