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Mark Cuban: High-Frequency Traders Are the Ultimate Hackers

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Re: Mark Cuban: High-Frequency Traders Are the Ultimate Hackers

#21

Post by javert »

steve8918 wrote: post #17
programminggeek wrote: post #8

I have no problem with HFT, but only because it is turning machines into things that are doing what humans did before, only at a speed that we can't keep up with as humans with our inherently physical interfaces. How is HFT different than traditional arbitrage except for the fact that it is faster and potentially at a scale that normal traders would never be able to keep up with? How is buying something one second an…

The real issue is that in order to get an edge, HFT traders are engaging in electronic warfare in order to slow down their opponents. One of the worst things they are doing is "quote stuffing", which means submitting bids and cancelling them tens of thousands of times per second. They stuff the exchanges with quotes and eventually cause a huge latency with respect to the quotes that are shown by the exchange, such as…

If I recall correctly, wasn't there, like, an extremely fast recovery from the flash crash? Why does the flash crash even matter? (I'm not being snarky at all, BTW.)

Re: Mark Cuban: High-Frequency Traders Are the Ultimate Hackers

#22

Post by javert »

kristianp wrote: post #5

I for one don't agree with HFT. Why should our best hackers and mathematical minds be wasted on something so shallow as gaming the market? Would a small randomised delay introduced by the exchange into each stock trade (or price datum) reduce the incentive for HFT?

Why should our best hackers and mathematical minds be wasted on something so shallow as gaming the market?

Your mistaken premise is "our." That implies ownership.

How would you rather allocate those minds, commissar?

Re: Mark Cuban: High-Frequency Traders Are the Ultimate Hackers

#23

Post by [deleted] »

drblast wrote: post #20
twoodfin wrote: post #9

Earlier quoted context omitted.

Why should our best hackers and mathematical minds be wasted on something so shallow as gaming the market? If you think they're wasting their time, don't give them your money.

I don't think it's as simple as all that. There are legitimate parties at either end of a stock transaction, and the HFT's are pretty much just siphoning off small amounts of the proceeds. The reason this can occur is that our government ensures that public companies have to do business this way. And all of these rules are in place for good reasons and it works pretty well, but HFT is an aberration. A good analogy is…

[deleted]

Re: Mark Cuban: High-Frequency Traders Are the Ultimate Hackers

#24

Post by chewxy »

javert wrote: post #19
chewxy wrote: post #7

Earlier quoted context omitted.

I was very interested in HFT when I was in uni. Then I discovered the minimum sunk costs of running a HFT startup and my balls shrank. So now I create my own matching markets which is still based on high speed trading theories, but without the pressure. But if ever you're interested, my email is my username here at gmail

Then I discovered the minimum sunk costs of running a HFT startup and my balls shrank. Care to elaborate?

Everything matters if you're doing HFT (or back in the day, high speed algorithmic trading). In Australia, the support for algorithmic trading means you're required to house your server in ASX itself (ASX has recently introduced their HFT platform in 2011). And that meant ball-shrinking dollar values from place rental alone, not to mention the hardware and software times.

So I concluded that it's not where I could be.

Re: Mark Cuban: High-Frequency Traders Are the Ultimate Hackers

#25

Post by javert »

It's clear why we need investors.

Why do we need day traders? Well, they can only exist because the investors exist, and they provide the function of pricing the market accurately. And provide liquidity to investors. Nobody is arguing that we should ban day trading.

Why do we need market makers? Well, they definitely benefit the day traders, because they do lower the bid/ask spread, once again making pricing more accurate. And provide liquidity to day traders.

So what I'm proposing is that we only "really need" investors - but day traders are good for investors, and market makers are good for day traders. Thus, market makers are good for investors.

I'd be legitemitely interested to hear criticism of the above argument. I've been learning about market making recently, and I'm certainly sure that there's still more for me to learn.

Re: Mark Cuban: High-Frequency Traders Are the Ultimate Hackers

#26

Post by AznHisoka »

ezl wrote: post #2

sigh i got really excited about this because I was considering the interpretation of the word "hackers" like we use it in "Hacker News" (relevant: http://paulgraham.com/gba.html ) I know that the startup community at large doesn't largely respect short term trading, particularly HFT. I understand it, though I honestly think its misguided and the outrage is disproportionately large, but thats another story. The reason…

I find HFT is a lot similar to SEO, and the perception is similar as well.

People just don't like either because they feel it's not bringing any extra value to society, and it's all about gaming something for your own personal wealth. But most people aren't looking out for your personal interest anyway, so you should ignore them.

Re: Mark Cuban: High-Frequency Traders Are the Ultimate Hackers

#27

Post by javert »

chewxy wrote: post #24
javert wrote: post #19

Earlier quoted context omitted.

Then I discovered the minimum sunk costs of running a HFT startup and my balls shrank. Care to elaborate?

Everything matters if you're doing HFT (or back in the day, high speed algorithmic trading). In Australia, the support for algorithmic trading means you're required to house your server in ASX itself (ASX has recently introduced their HFT platform in 2011). And that meant ball-shrinking dollar values from place rental alone, not to mention the hardware and software times. So I concluded that it's not where I could be…

And that meant ball-shrinking dollar values from place rental alone, not to mention the hardware and software times.

I got the first part of that, but what do you mean by "hardware and software times"? Yes, HFT relies on fast hardware/networks/software. Was that your point, or is there something I'm missing?

FWIW, despite a strong entrepreneurial bent, I would (possibly even will) look to join an existing HFT operation, rather than start my own.

(Unless you want to do it in the Bitcoin world - there is a Bitcoin stock exchange now and it's exciting times, my friend!)

Re: Mark Cuban: High-Frequency Traders Are the Ultimate Hackers

#29

Post by mistermann »

unabridged wrote: post #14
wmf wrote: post #10

Earlier quoted context omitted.

The difference is that a crash can happen faster than any human can stop it. It's fine if you trust your high-frequency circuit breakers.

What exactly is a flash crash and why should individuals care? Isn't it just bank's computers temporarily offering stock at a severe discount and then the price going back to normal. It doesn't hurt anyone but the people with poorly programmed algorithms. No trades should ever be broken just because someone can't control their trading bots.

Are you familiar with stop loss orders?

Re: Mark Cuban: High-Frequency Traders Are the Ultimate Hackers

#30

Post by mistermann »

javert wrote: post #22
kristianp wrote: post #5

I for one don't agree with HFT. Why should our best hackers and mathematical minds be wasted on something so shallow as gaming the market? Would a small randomised delay introduced by the exchange into each stock trade (or price datum) reduce the incentive for HFT?

Why should our best hackers and mathematical minds be wasted on something so shallow as gaming the market? Your mistaken premise is "our." That implies ownership. How would you rather allocate those minds, commissar?

Take the word "our" out, do you still disagree?

One thing you will notice about certain topics is advocates of one side or the other will nitpick inconsequential portions of sentences rather than actually discussing the topic.

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