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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

#31

Post by steve8918 »

javert wrote: post #21
steve8918 wrote: post #17

Earlier quoted context omitted.

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.)

A lot of people lost a lot of money during the flash crash, through margin calls, stop loss hits, etc. It also called into question the stability of our markets. If people lose confidence in our stock markets, then people stop trading on them.

If we have another flash crash, you can bet that the already-low volumes on the markets will be met with even lower volumes, which could damage our economic recovery. Most peoples' 401ks are tied to the stock market, and the last thing we need is a generation of un-retireable people because they lost a lot of their retirement on the stock market.

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

#32

Post by chewxy »

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…

as in time spent to tune your hardware and software.

I do currently trade BTC. Not at a large volume though. My startups require more money than my hobby

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

#33

Post by overcyn »

mistermann wrote: post #30
javert wrote: post #22

Earlier quoted context omitted.

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.

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

Because it makes them money.

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

#34

Post by ezl »

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?

I forget where I read this, but in an article by someone else I read something like:

"[There's something very sinister about a company that takes society's greatest engineer and science minds away from important tasks for humanity and diverts them to the task of optimizing ads]

A lot of people will say what you say about HFT, but have no qualms about Google and Facebook and Twitter. Why is that?

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

#35

Post by javert »

mistermann wrote: post #30
javert wrote: post #22

Earlier quoted context omitted.

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.

Yes, I still disagree. I mean, even without that word there, the same premise is baked into the question the person I was responding to asked.

I disagree with your claim that I'm nitpicking and not discussing the topic.

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

#36

Post by jamii »

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…

Brick-and-mortar stores themselves don't create anything. They buy in bulk and sell at a markup, thus adding liquidity to the grocery market. Imagine if you had to buy carrots by the tonne.

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

#37

Post by javert »

steve8918 wrote: post #31
javert wrote: post #21

Earlier quoted context omitted.

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.)

A lot of people lost a lot of money during the flash crash, through margin calls, stop loss hits, etc. It also called into question the stability of our markets. If people lose confidence in our stock markets, then people stop trading on them. If we have another flash crash, you can bet that the already-low volumes on the markets will be met with even lower volumes, which could damage our economic recovery. Most peop…

A lot of people lost a lot of money during the flash crash, through margin calls, stop loss hits, etc.

Well, if day traders lost money, who cares? That's the business they're in.

It also called into question the stability of our markets. If people lose confidence in our stock markets, then people stop trading on them.

True, but there was a fast recovery, and people are still trading. You mentioned that volume is low. I wasn't aware of that (just don't follow things that closely). Does that correlate to when the flash crash was? I'd be surprised if the flash crash rattled people so much that it still has an effect on market confidence.

Most peoples' 401ks are tied to the stock market, and the last thing we need is a generation of un-retireable people because they lost a lot of their retirement on the stock market.

Well, investment managers who control people's 401ks should not be trading during a flash crash. I mean, I'm just not so sure that it affected everyday people much.

Also, there are a LOT of things to blame the current economic scewing-over of people on, and the market would be near the bottom of my list.

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

#38

Post by sskates »

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?

Can someone explain this mindset to me? That there is somehow a fixed amount of mathematical talent in the world and if there are people whose preferences make taking a job in HFT optimal then society is necessarily worse off.

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

#39

Post by _delirium »

javert wrote: post #25

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 acc…

I don't disagree in broad terms, but I think it's also quite possible that some configurations of trading will result in the "support" tail wagging the investment dog. At least, that would be the expected result if you think of markets like a dynamical system; in non-trivial dynamical systems (which I'd assume the economy is), the usual case is that there are significant internal dynamics (feedback loops, attractors, etc.) that in a number of cases will modulate, and may even dominate, the movements caused by external inputs. If that transfers to trading, there may well be pathological market dynamics that have little to do with the fundamentals of providing services to (ultimately) investors. Whether the dis-value of those pathologies produced outweighs the value of the services provided would then be the relevant question. Viewed as a machine, does the machine that includes the HFT lubricants run better in general, or is the reduced friction offset by a undesired effects such as greater risk of malfunction?
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