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Goldman Sachs is spending $100M to shave milliseconds off stock trades

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Re: Goldman Sachs is spending $100M to shave milliseconds off stock trades

#191

Post by pedrocr »

grenoire wrote: post #144
antientropic wrote: post #133

Earlier quoted context omitted.

Is there any empirical evidence that these perceived benefits to society actually ever materialize? It's clear that there is a benefit to a trader from knowing something milliseconds before the rest of the market (otherwise Goldman wouldn't be doing this), but it's not clear at all to me that it helps the rest of us.

We know, empirically, that a lack of liquidity increases trading costs, which in turn is directly channeled to the prices of goods and services that rely on this liquidity (more or less everything in the world, even more indirectly ones like education). It's difficult to say 'things would be X% more expensive' because of the interconnected complexity the GP was talking about, but there is definitely a very apparent b…

Not all liquidity is the same. I've seen calculations that stated that HFT doesn't actually add valuable liquidity to markets because the moments you need that extra liquidity are price uncertainty moments where HFT traders disappear. I don't have the reference on hand though.

Re: Goldman Sachs is spending $100M to shave milliseconds off stock trades

#192

Post by annabellish »

assblaster wrote: post #175
JDiculous wrote: post #148

Earlier quoted context omitted.

Because having homeless people lining our streets on our commutes to/from our jobs is a daily reminder that if we don't work hard enough to increase corporate profits, then our bosses might lay us off and we'll end up like them. That or moral apathy. At some point in the 80s we decided that markets driven by business profits should dictate every aspect of society. I imagine 100 years from now they'll look back at tod…

100 years after Communism burst on the scene, we currently look at that development with disgust. Right now most people have access to abundant food, cellphone in every pocket, access to a wealth of information, access to transportation, incredible medical advances. I can't imagine that the progress we've made would be scorned. Like other market driven forces, bad players will not be rewarded as information about the…

"What we have now is the bad kind of capitalism! There's a different, good kind of capitalism which in theory does all these great things!" is essentially the "communism works great in theory" argument.

100%, both systems are great theories. However, the last few hundred years of actually trying to implement capitalism has "most people have access to abundant food, cellphone in every pocket, access to a wealth of information, access to transportation, incredible medical advances.", if by "most people" you mean "possible a majority of people in the richest countries in the world". Unfortunately, the cost of that is that we've done irreparable damage to our environment, are causing the worst Great Extinction ever, and have caused a climate crisis that may cause us to go extinct.

Re: Goldman Sachs is spending $100M to shave milliseconds off stock trades

#193

Post by smolder »

kortilla wrote: post #165
reallydontask wrote: post #102

Earlier quoted context omitted.

My point is not that the financial sector is unnecessary, it's that the majority of the activities are not of benefit to society, which admittedly is something hard to define. Following on from that line of thought, it could be argued that a lot of companies don't provide any benefit to society, so the financial sector is just enabling these firms and thus of no benefit to society.

The sector exists because people willingly give it money in exchange for services. If you can’t imagine why that’s happening, maybe read up on why people pay for financial services rather than assuming something as stupid as most of financial services not providing benefit to society.

No one's confused why it's happening. It's legal to make money through financial services, and it reliably makes money. The investments into fintech that divert more cash one way or another until others catch up also provide very little and ever diminishing value, mostly just sideways and upward redistribution of wealth. The actual value generating sectors of the economy are always getting more anemic, and they're due for collapse because of how much everything depends on oil, cheap 3rd world labor, and creating external costs we've avoided facing.

Re: Goldman Sachs is spending $100M to shave milliseconds off stock trades

#194

Post by pedrocr »

1e-9 wrote: post #110

Markets around the world are determining prices on a massive variety of instruments that derive value from the current and future value of products such as currencies, interest rates, equities, grains, livestock, metals, oil, gasoline, natural gas, and electricity. These prices allow us to prioritize resources, make fair transactions, and manage risk (i.e. buy insurance on the value of critical products so that we ca…

I very seriously doubt you'd lose any of those benefits by just trading on 10 second or even 1 minute increments. Everyone has a bunch of time to submit orders, the auction is ran, and then everyone gets the result back. I'd really like to see a use case in any of those real-world markets for pricing with sub-second granularity. It seems much more likely that trading on sub-second granularity is just extracting money from the actual participants in those markets into the pockets of financial firms with no value returned.

Re: Goldman Sachs is spending $100M to shave milliseconds off stock trades

#195

Post by IanDrake »

ypcx wrote: post #139
1e-9 wrote: post #110

Markets around the world are determining prices on a massive variety of instruments that derive value from the current and future value of products such as currencies, interest rates, equities, grains, livestock, metals, oil, gasoline, natural gas, and electricity. These prices allow us to prioritize resources, make fair transactions, and manage risk (i.e. buy insurance on the value of critical products so that we ca…

The theory sounds great. But why then, our streets are lined with homeless, and our nations are stricken with poverty? Could it be that the only real aim and motivation of market traders is to earn money? One day, maybe.... when these are replaced with DAOs on the blockchain. But until then it's the Wolf of Wall Street.

Yes, the real aim and motivation of traders is to earn money and respect. What else should it be?

Why pick on traders? I know a lot of developers making well into six figures. I hear them talking about getting 3 new graphics cards for their gaming rigs instead of how they worked at a soup kitchen.

What is your point? That GS should be donating 100m to charity instead of reinvesting into their business?

Where do you think that money goes? Workers will be paid to implement their plan and taxes will be paid on those wages. In fact about 40% of that 100m will eventually end up being paid in taxes.

Re: Goldman Sachs is spending $100M to shave milliseconds off stock trades

#196

Post by growse »

pedrocr wrote: post #194
1e-9 wrote: post #110

Markets around the world are determining prices on a massive variety of instruments that derive value from the current and future value of products such as currencies, interest rates, equities, grains, livestock, metals, oil, gasoline, natural gas, and electricity. These prices allow us to prioritize resources, make fair transactions, and manage risk (i.e. buy insurance on the value of critical products so that we ca…

I very seriously doubt you'd lose any of those benefits by just trading on 10 second or even 1 minute increments. Everyone has a bunch of time to submit orders, the auction is ran, and then everyone gets the result back. I'd really like to see a use case in any of those real-world markets for pricing with sub-second granularity. It seems much more likely that trading on sub-second granularity is just extracting money…

All that'd happen if you did that would be to increase the risk of any market maker having the wrong price at execution time (they have less data to make an informed price discovery), so you'd get wider spreads to compensate.

Wider spreads just makes it more expensive for everyone. Personally, I'd like my pension money going towards the actual investment rather than paying for a wider spread, but I'm just strange.

Re: Goldman Sachs is spending $100M to shave milliseconds off stock trades

#197

Post by assblaster »

annabellish wrote: post #192
assblaster wrote: post #175

Earlier quoted context omitted.

100 years after Communism burst on the scene, we currently look at that development with disgust. Right now most people have access to abundant food, cellphone in every pocket, access to a wealth of information, access to transportation, incredible medical advances. I can't imagine that the progress we've made would be scorned. Like other market driven forces, bad players will not be rewarded as information about the…

"What we have now is the bad kind of capitalism! There's a different, good kind of capitalism which in theory does all these great things!" is essentially the "communism works great in theory" argument. 100%, both systems are great theories. However, the last few hundred years of actually trying to implement capitalism has "most people have access to abundant food, cellphone in every pocket, access to a wealth of inf…

Hundreds of millions of people have been brought out of poverty, outside the United States.

Re: Goldman Sachs is spending $100M to shave milliseconds off stock trades

#198

Post by Merrill »

jasode wrote: post #178
Merrill wrote: post #150

Earlier quoted context omitted.

Business produces goods and services. Finance is an online multiplayer game. They are two weakly-connected systems.

>Business produces goods and services. Finance is an online multiplayer game. But finance is also products & services . Think of a corn farmer. It's easier to think of him adding tangible value to society because "corn == food". In contrast, finance just seems like useless office workers copy pasting numbers around in Excel spreadsheets. (This is probably true in many cases.) But the farmer often wants to sell "futur…

Those are the weak connections I referred to. Last I looked, the volume of financial transactions was about two orders of magnitude larger than the volume of purchases of goods and services. So maybe a couple percent of futures transactions involve actual buyers and sellers of the commodity, while most trades are among financial system players.

Re: Goldman Sachs is spending $100M to shave milliseconds off stock trades

#199

Post by growse »

pedrocr wrote: post #191
grenoire wrote: post #144

Earlier quoted context omitted.

We know, empirically, that a lack of liquidity increases trading costs, which in turn is directly channeled to the prices of goods and services that rely on this liquidity (more or less everything in the world, even more indirectly ones like education). It's difficult to say 'things would be X% more expensive' because of the interconnected complexity the GP was talking about, but there is definitely a very apparent b…

Not all liquidity is the same. I've seen calculations that stated that HFT doesn't actually add valuable liquidity to markets because the moments you need that extra liquidity are price uncertainty moments where HFT traders disappear. I don't have the reference on hand though.

And yet Vanguard say that HFT helps lower their costs by adding market liquidity and therefore reducing spreads:

https://www.forbes.com/sites/timworstall/2014/04/28/bill-mcn...

Re: Goldman Sachs is spending $100M to shave milliseconds off stock trades

#200

Post by varjag »

saberdancer wrote: post #89
habnds wrote: post #78

Earlier quoted context omitted.

people aren't mad only because tons of money is made on hft. It's also because money is _wasterd_ on hft. That's $100 million dollars spent on something that has 0 use to society. It's just rich people playing weird games. Think about the social benefits of $100 million invested in nyc transit infrastructure. The economy's incentive structure is broken and this is a prime example.

Those 100m are not destroyed by burning them in an HFT furnace but rather used to pay developers, hardware, factory workers etc. Sure, it's not going directly into infrastructure but it is not lost. In fact, it's quite possible that if it wasn't invested into HFT it would be held as cash by the company or paid out as a dividend (which is fine as well).

Is this the finance edition of broken windows fallacy?
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