431–440 of 493 posts
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The fact that people make money off of HFT by definition means that the market conditions have changed in those time frames.
No, it is proof that they are parasitically extracting money via non-productive strategies like latency arbitrage and order front-running.
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So, you want everyone to trade only daily or weekly or quarterly?
The same time frames that existed when humans manually traded.
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Every few seconds is fine. Disagree? You think milliseconds is “better” somehow? Then by that logic microseconds are better still! (A straight-faced argument made by thousands of HFT people.) Then, surely, nanoseconds matter. Again, some traders care deeply about shaving single digit “nanos” off their response times by using smart NICs that can respond before the incoming packet has even finished arriving! Bypassing…
This is the “speculation is bad” take with a side of naïveté about how markets work. Open an order book. Prices and quantities aren’t decoration; they’re live telemetry for supply, demand, and how tight the crowd’s consensus is at each level. That’s information, full stop. A human (or machine) trader forms a view of fair value against that tape. The book helps decide how to trade—size, urgency, venue—regardless of mo…
Earlier quoted context omitted.
The fact that people make money off of HFT by definition means that the market conditions have changed in those time frames.
No, it is proof that they are parasitically extracting money via non-productive strategies like latency arbitrage and order front-running.
Earlier quoted context omitted.
So, you want everyone to trade only daily or weekly or quarterly?
Every few seconds is fine. Disagree? You think milliseconds is “better” somehow? Then by that logic microseconds are better still! (A straight-faced argument made by thousands of HFT people.) Then, surely, nanoseconds matter. Again, some traders care deeply about shaving single digit “nanos” off their response times by using smart NICs that can respond before the incoming packet has even finished arriving! Bypassing…
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This is the free market speaking. If there was one exchange there would be ~no~ less latency arbitrage. But there are many... Which creates a competitive landscape and reduces fees for investors. The by product is you have many HFTs that come in to take advantage of mispricings, even if they are on sub millisecond scales. It doesn't harm the company or the investor. Its quite the opposite... Investors benefit from co…
One other aspect of HFT that is good for the general investor is that HFT injects liquidity, making it easier for a general investor to liquidate their position, which is a desirable thing for human traders. HFT does not magically make human investors engage in more or less speculative behavior. HFT is an easy thing to attack, but I've never encountered a lucid argument for why it's bad. "It's not fair that I'm not a…
Why not go all the way and have markets running 24/7/365?
Earlier quoted context omitted.
Every few seconds is fine. Disagree? You think milliseconds is “better” somehow? Then by that logic microseconds are better still! (A straight-faced argument made by thousands of HFT people.) Then, surely, nanoseconds matter. Again, some traders care deeply about shaving single digit “nanos” off their response times by using smart NICs that can respond before the incoming packet has even finished arriving! Bypassing…
So, seconds good but milliseconds bad? That seems rather arbitrary.
We have some convenient "lines in the sand" that we can use as a guide:
- To make trading fair globally, the round-trip time for light around the planet could be multiplied a couple of times. That's about a second.
- The fastest possible time a human can parse the meaning of a long headline (not the full news article!) is... about a second.
- Nobody in their right mind should be buying any significant volume of shares without double-checking their order. There's no way to do this even vaguely carefully in under... a second.
Etc...
Bots trading faster than a second are trading with each other, and the only signals they have are each other.
Humans are what markets are for, not bots.
This reminds me of a story from WWII where a bunch of generals took a holiday at the same time, leaving a junior general in charge. He was in a bit of a panic because he was expecting to be overloaded with work... but found it easy. The generals were making work for each other by requesting reports, organising meetings with each other, etc...
Bots make work for bots, they generate signals for bots ever faster, to be processed by faster bots still, etc...
It's just... nonsense. Zero real information is being generated, they're just "riffing" off of the much less frequent human-initiated trades, all of which take minutes to organise and execute with due diligence.
It's like being asked to write a 10-page essay on a three-line poem.
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One other aspect of HFT that is good for the general investor is that HFT injects liquidity, making it easier for a general investor to liquidate their position, which is a desirable thing for human traders. HFT does not magically make human investors engage in more or less speculative behavior. HFT is an easy thing to attack, but I've never encountered a lucid argument for why it's bad. "It's not fair that I'm not a…
Why do we encourage microsecond scale HFT and tout its virtues, yet shut the market down for the majority of every day? Why not go all the way and have markets running 24/7/365?
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Why do we encourage microsecond scale HFT and tout its virtues, yet shut the market down for the majority of every day? Why not go all the way and have markets running 24/7/365?
And while at that. Remove all circuit breakers. Let the markets be free. Whatever they do. Rocket up or down.
Maybe you expect to be one of them, but you'll probably just end up in the soup lines with everyone else.
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Millisecond trading strategies have zero relationship to information about companies or economic fundamentals and are therfore not economically productive. They're exploiting microstructure inefficiencies like latency arbitrage, order front-running, not price discovery. That's not 'teaching' the market it's a tax on everyone else's execution. The fact that it's legal doesn't make it structurally useful. It is just a…
> Millisecond trading strategies have zero relationship to information about companies or economic fundamentals and are therfore not economically productive It is not clear to me that the only economically productive information is "information about companies or economic fundamentals." If I know some idiot is willing to pay 100x what a company is actually worth, that is economically productive because it gives me, s…