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HFT in My Backyard (2014)

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Re: HFT in My Backyard (2014)

#11

Post by harryh »

hendzen wrote: post #10
harryh wrote: post #7

Earlier quoted context omitted.

HFT has significantly lowered trading costs for all investors. Here's a statement from the CEO of Vanguard espousing this position: https://www.cnbc.com/2014/04/25/vanguard-chief-defends-high-... Because of automation, the amount of resources used for trading have actually decreased. Computers are a lot cheaper that the many many humans who used to be involved in the process.

I think it’s more nuanced in reality. There are liquidity providing HFT strategies that profit off the spread - this is good for people moving big size like Vanguard. Then there are liquidity taking strategies that profit by picking off quotes in anticipation of a probable price move. I don’t see how those strategies help Vanguard. Also, most HFT firms do a mix of both types strategies...

Ya, it's certainly more nuanced than I was going to get across in just a few sentences. Mainly I wanted to push back against:

"the field contributes nothing to society, and has only negative externalities"

Re: HFT in My Backyard (2014)

#12

Post by greenshackle2 »

amelius wrote: post #5
client4 wrote: post #3

This blog actually got me into HFT. It's a fascinating industry with a lot of fun bleeding edge tech challenges.

I could be totally wrong, and perhaps I should read that blog, but working in HFT doesn't sound very rewarding except perhaps in a pure financial sense. It seems to me that the field contributes nothing to society, and has only negative externalities like raising barriers of entry to markets and using insane amount of resources.

Can you explain how HFT raises the barrier to entry? Barriers to entry for who?

Arguably, payment for order flow has decreased the barrier to entry for retail investors by helping enable zero-commission brokerages.

Re: HFT in My Backyard (2014)

#13

Post by WJW »

dcolkitt wrote: post #8
amelius wrote: post #5

Earlier quoted context omitted.

I could be totally wrong, and perhaps I should read that blog, but working in HFT doesn't sound very rewarding except perhaps in a pure financial sense. It seems to me that the field contributes nothing to society, and has only negative externalities like raising barriers of entry to markets and using insane amount of resources.

I guess it depends on your underlying viewpoint towards markets and capitalism. I certainly don't think liquid financial markets and efficient asset prices qualify as "contributing nothing to society". Those components are extremely critical to the efficient allocation of investment capital, and overall functioning of the broader economy. But if you're generally skeptical of markets and capitalism then you may not ag…

Or even the $145 billion makeup industry.

Re: HFT in My Backyard (2014)

#14

Post by chiph »

harryh wrote: post #7
amelius wrote: post #5

Earlier quoted context omitted.

I could be totally wrong, and perhaps I should read that blog, but working in HFT doesn't sound very rewarding except perhaps in a pure financial sense. It seems to me that the field contributes nothing to society, and has only negative externalities like raising barriers of entry to markets and using insane amount of resources.

HFT has significantly lowered trading costs for all investors. Here's a statement from the CEO of Vanguard espousing this position: https://www.cnbc.com/2014/04/25/vanguard-chief-defends-high-... Because of automation, the amount of resources used for trading have actually decreased. Computers are a lot cheaper that the many many humans who used to be involved in the process.

I remember the days in the early 80's when Merrill Lynch would charge $70 for a trade. That's the equivalent to $190 today. And people paid it because the low-cost firms like Schwab weren't well-known and people thought "If they're that cheap, they can't be any good."

Re: HFT in My Backyard (2014)

#15

Post by tehjoker »

harryh wrote: post #7
amelius wrote: post #5

Earlier quoted context omitted.

I could be totally wrong, and perhaps I should read that blog, but working in HFT doesn't sound very rewarding except perhaps in a pure financial sense. It seems to me that the field contributes nothing to society, and has only negative externalities like raising barriers of entry to markets and using insane amount of resources.

HFT has significantly lowered trading costs for all investors. Here's a statement from the CEO of Vanguard espousing this position: https://www.cnbc.com/2014/04/25/vanguard-chief-defends-high-... Because of automation, the amount of resources used for trading have actually decreased. Computers are a lot cheaper that the many many humans who used to be involved in the process.

If you have to justify the contribution to society in terms of the stock market instead of some materially useful metric like meals served, people put in housing, technologies invented or some such thing, there are ways to provide retirement plans that have nothing to do with the stock market.

Re: HFT in My Backyard (2014)

#16

Post by 1e-9 »

amelius wrote: post #5
client4 wrote: post #3

This blog actually got me into HFT. It's a fascinating industry with a lot of fun bleeding edge tech challenges.

I could be totally wrong, and perhaps I should read that blog, but working in HFT doesn't sound very rewarding except perhaps in a pure financial sense. It seems to me that the field contributes nothing to society, and has only negative externalities like raising barriers of entry to markets and using insane amount of resources.

> It seems to me that the field contributes nothing to society,...

Better markets allow our economy to prioritize resources better and convert assets more efficiently. This increases prosperity.

Good HFT improves markets.

Of course, there is bad HFT, but such actors tend to not last long due to natural market dynamics and regulatory enforcement.

Re: HFT in My Backyard (2014)

#17

Post by harryh »

tehjoker wrote: post #15
harryh wrote: post #7

Earlier quoted context omitted.

HFT has significantly lowered trading costs for all investors. Here's a statement from the CEO of Vanguard espousing this position: https://www.cnbc.com/2014/04/25/vanguard-chief-defends-high-... Because of automation, the amount of resources used for trading have actually decreased. Computers are a lot cheaper that the many many humans who used to be involved in the process.

If you have to justify the contribution to society in terms of the stock market instead of some materially useful metric like meals served, people put in housing, technologies invented or some such thing, there are ways to provide retirement plans that have nothing to do with the stock market.

Thinking of the stock market as merely "a way to provide retirement plans" is wrong. It costs money to serve meals, put people in housing and invent technologies. Where does a lot of that money come from? Our financial system (of which the stock market is a key component). A better functioning financial system enables progress in lots of other industries.

Re: HFT in My Backyard (2014)

#18

Post by xwdv »

amelius wrote: post #5
client4 wrote: post #3

This blog actually got me into HFT. It's a fascinating industry with a lot of fun bleeding edge tech challenges.

I could be totally wrong, and perhaps I should read that blog, but working in HFT doesn't sound very rewarding except perhaps in a pure financial sense. It seems to me that the field contributes nothing to society, and has only negative externalities like raising barriers of entry to markets and using insane amount of resources.

It doesn’t “raise barrier to entry”, it lowers it. Before HFT spreads on stocks were hell, imagine a quarter size spread. Now it’s mere pennies, fractions.

Also, for people who love computers, HFT is very exciting. Imagine a job where no optimization is too premature, where everything must be done to get the fastest possible speeds and push machines and software to physical limits. Very challenging and very fun. And the rewards are great!

Re: HFT in My Backyard (2014)

#19

Post by [deleted] »

chiph wrote: post #14
harryh wrote: post #7

Earlier quoted context omitted.

HFT has significantly lowered trading costs for all investors. Here's a statement from the CEO of Vanguard espousing this position: https://www.cnbc.com/2014/04/25/vanguard-chief-defends-high-... Because of automation, the amount of resources used for trading have actually decreased. Computers are a lot cheaper that the many many humans who used to be involved in the process.

I remember the days in the early 80's when Merrill Lynch would charge $70 for a trade. That's the equivalent to $190 today. And people paid it because the low-cost firms like Schwab weren't well-known and people thought "If they're that cheap, they can't be any good."

[deleted]

Re: HFT in My Backyard (2014)

#20

Post by VRay »

harryh wrote: post #11
hendzen wrote: post #10

Earlier quoted context omitted.

I think it’s more nuanced in reality. There are liquidity providing HFT strategies that profit off the spread - this is good for people moving big size like Vanguard. Then there are liquidity taking strategies that profit by picking off quotes in anticipation of a probable price move. I don’t see how those strategies help Vanguard. Also, most HFT firms do a mix of both types strategies...

Ya, it's certainly more nuanced than I was going to get across in just a few sentences. Mainly I wanted to push back against: "the field contributes nothing to society, and has only negative externalities"

I think it's fair to say that someone is going to contribute less to society working on HFT than they would by using the same skills to work at NASA or SpaceX, though
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