Why apologize? Noone's robbing anyone here. If it's legal, it's legal.
It's an apologia rather than an apology.
A High Frequency Trader's Apology, Pt 2
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Re: A High Frequency Trader's Apology, Pt 2
#12One point that is bothering me is this: how much of the existence of HFTs is an artifact of the rules of the exchange? In particular, the rule that the first bid gets priority in executing the trade. It strikes me that the entire existence of HFTs seems to be taking advantage of this failure of mechanism design.
How else would you do it? At random? Why would that be better?
Re: A High Frequency Trader's Apology, Pt 2
#13Thanks for following up on this. Nothing irks me more than "Pt. 1" posts, never to hear from the OP again. As an undergraduate scheduled to be doing HFT systems development at a major bank this summer, I find these posts very useful!
Re: A High Frequency Trader's Apology, Pt 2
#14Why apologize? Noone's robbing anyone here. If it's legal, it's legal.
I can't speak for everyone, but you are probably being downvoted for two reasons:
1) Apologia does not meet "I'm sorry". Read the first few sentences of the article for an explanation.
2) I shudder to think of a world where everyone felt the only criteria for whether it was all right to do something was legality. We should all be grateful that most people don't go through life with that mindset.
Re: A High Frequency Trader's Apology, Pt 2
#15Loving this series of articles!
Does any of this low-latency work make it back upstream into Linux or other parts of the software stack? As a latency-obsessed person I would love to know that the fruits of all this labor were available to me for my own low-latency systems. To me, that alone would be enough to feel that the latency-race is providing value to the world.
Also, one thing that was not clear to me is how electronic market makers make decisions. The article clearly states that they "have no opinion or information on whether Apple is a valuable company." So what do they have information about? The price history of the stock? The current contents of the book? And on what basis do they make decisions? I guess answering that question in too much detail would be giving up the "secret sauce," but I'd love to know even in broad strokes how an agent that knows so little can so consistently make money.
Re: A High Frequency Trader's Apology, Pt 2
#16What's the social and economical value of precisely discovering the price of casino tokens?
Stock market is economically important only when company issues new stock. Apart from that it's just a huge casino where people like to play with their or other peoples money.
Re: A High Frequency Trader's Apology, Pt 2
#17One point that is bothering me is this: how much of the existence of HFTs is an artifact of the rules of the exchange? In particular, the rule that the first bid gets priority in executing the trade. It strikes me that the entire existence of HFTs seems to be taking advantage of this failure of mechanism design.
How else would you do it? At random? Why would that be better?
Possibly. It would stop the arms race that adds little value to the economy. The same arms race happened in the pits, except it was height, not latency. It seems a bit ridiculous that a taller trader would make more money that a smarter one, and that a faster algorithm makes more money than a smarter one.
Re: A High Frequency Trader's Apology, Pt 2
#18As a programmer with an economics degree, I'm thrilled to see articles like these on HN ... popular media outlets do a terrible job of explaining how these systems work and usually devolve into generalizations like "HFT is evil and you should hate it" because they don't understand basic economic principles.
Re: A High Frequency Trader's Apology, Pt 2
#19One point that is bothering me is this: how much of the existence of HFTs is an artifact of the rules of the exchange? In particular, the rule that the first bid gets priority in executing the trade. It strikes me that the entire existence of HFTs seems to be taking advantage of this failure of mechanism design.
Not all exchanges have time priority. NASDAQ PSX and most of the derivatives exchanges use a pro-rata allocation based on how large the quote size is. Also, NYSE gives "parity" to their floor brokers and designated market makers, effectively letting them jump the queue over other liquidity providers.
See this discussion on the Quant Finance Stack Exchange:
Re: A High Frequency Trader's Apology, Pt 2
#20What's the social and economical value of precisely discovering the price of casino tokens? Stock market is economically important only when company issues new stock. Apart from that it's just a huge casino where people like to play with their or other peoples money.
The stock market is economically important every time someone wants to invest in a company, while someone else wants to end his investment in that company. The bid and sell prices of outstanding stock of companies differ per day, per person.