New stock market for long-term investors/reducing high-frequency trading

Actually, trading can and does increase the total value of the system. If I own $100 of Intel stock and you own $100 of AMD stock, exchanging half of our stock (so that we each own $50 of Intel and $50 of AMD) leaves us both better off, since we each have less risk.

Here are my opinions from when I was an academic (I've only been working in HFT since March 2010, full time since May 2010):

My opinion from 347 days ago: universities have vastly more problems than that. They are huge bloated organizations structured around funneling money to employees (from both students and the government) rather than educating students. The main reason people still go is for status signaling purposes, otherwise they would have been replaced long ago.

http://news.ycombinator.com/item?id=1087281

From 406 days ago: a $10 million grant; my university will take about $5 million off the top in "overhead" (to be spent on overpaid administrators, student stress counselors, the latino student center, and maybe even education).

http://news.ycombinator.com/item?id=969664

(This was roughly the period when I decided to leave academia.)

From 469 days ago: The job description of "professor" is certainly a strange beast: teacher/scientist. It makes about as much sense as actor/programmer...The perverse incentives this creates are massive. Universities hire scientists rather than teachers in order to get their hands on half the scientist's grants. Scientists waste their time masquerading as teachers... This is harmful both to science (I'm not doing research in class) and students...Actual teachers are squeezed out, since there is no room for them.

http://news.ycombinator.com/item?id=851218

From 999 days ago: Another part of the problem is that there is no incentive for cost control in the university...I'm currently teaching a "Quantitative Reasoning" class right now. Basically, take Weeks 1-2 of Prob&Stat and expand it to fill a whole semester (half a semester, due to poor planning and miscommunication). Some of this is my fault, some of it not...Plus, my students are all art/history/literature majors, and just don't need it. Everyone in the room would be better off keeping their $4,000 and not sitting through my class.

http://news.ycombinator.com/item?id=166307

From the report's punchline:

The combined selling pressure from the Sell Algorithm, HFTs and other traders drove the price of the E-Mini down approximately 3% in just four minutes from the beginning of 2:41 p.m. through the end of 2:44 p.m. ... HFTs began to quickly buy and then resell contracts to each other – generating a “hot-potato” volume effect as the same positions were rapidly passed back and forth. Between 2:45:13 and 2:45:27, HFTs traded over 27,000 contracts, which accounted for about 49 percent of the total trading volume, while buying only about 200 additional contracts net.

Take "e.g., buy blue chip stocks that have low PE) so that they don't ban you. .. Now you feed the information about displayed liquidity on high volatility stocks that you are interested in trading (e.g., small biotechs) from those exchanges.."

If you are trading blue chips at an illiquid (CSFB run) market center what information will that give you about "small biotechs"?

".. dark pools aren't obligated to conform to NBBO" : this is an incorrect understanding of how US stock markets work -- dark pools, with exceptions that don't count for too much volume, will have to print at the NBBO (Reg NMS, Rule 611, if you want chapter and verse http://taft.law.uc.edu/CCL/regNMS/rule611.html).

Also you don't need to trade at this venue to see what is being traded there: another provision of Reg NMS requires all ATSs to print within a short period of time into the tape, which is also by law disseminated nationwide as the last sale info in the name. By simply looking to see prints from this center, and which side of the midquote the prints are on (called the Lee-Ready test in the field, after a 1991 paper by those guys) will tell you if there are long duration buy orders or long duration sell orders active.

Turning to the merits of the proposal above, seems like a good idea, although the fact that csfb (or any big bank) is running it will cause most experienced traders to be skeptical of the exalted rationales being presented. If a broker that is handling flow runs a market center as well, without exception they wind up abusing the flow or the market center to make more $$. Have read a lot of good stuff here; keep up the good work, all.