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This Is What One Half Second of High Speed Trading Looks Like

blogs.smithsonianmag.com

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Re: This Is What One Half Second of High Speed Trading Looks Like

#31

Post by twoodfin »

pak wrote: post #24

If we eventually decide that all of this ridiculously fast bid/offer blitzing by our HFT overlords is a destabilization risk to the economy [1], couldn't we start taxing these transactions, or the bids/offers themselves? This level of high-frequency noise being thrown into the market can't reasonably go on increasing forever, right... at some point we just bury ourselves in a never-ending war of inscrutable, difficul…

What's stopping you from making lots of money by successfully predicting next year's stock price for Apple, IBM or Ford? Normal human investors can obviously keep doing normal human investment.

Re: This Is What One Half Second of High Speed Trading Looks Like

#32

Post by jussij »

Rangi42 wrote: post #28
jussij wrote: post #18

Earlier quoted context omitted.

> but claiming that we are using computers to do things better than we did 10 years ago is a bad thing But they are not using those computer to do something better, they are using those computers to do something that was impossible 10 years ago. The problem I have with HST is what purpose does it serve, other than offer another way to gamble on stock price movements. Now there is nothing new about gambling on stock p…

If you can trade faster, the market can react to information faster. Stocks dropped almost as soon as the tweet was released, without needing to wait for a few major news channels -- and recovered in five minutes after people stopped panicking.[1] [1] http://21stcenturywire.com/2013/04/24/white-house-attacked-o...

So by making the system trade faster, they have made the market less stable and opened it up to outside manipulation.

Hardly what you call progress.

Re: This Is What One Half Second of High Speed Trading Looks Like

#34

Post by crdoconnor »

m0th87 wrote: post #21
minimax wrote: post #6

If there was a similar video showing all of the electronic sensors of a modern airliner flowing into the central flight control computer would it would engender the same sort of trepidation about air travel? Should we be afraid of something just because it's "complicated" to someone unfamiliar with the state of the art? There are a lot of valid criticisms you can make about modern financial markets, but claiming that…

I don't see any comments here critiquing HFT simply because it's complicated. Rather, they seem related to whether it's actually a net-positive for society.

Every description of an HFT algo seems to fall into one of three categories:

* Acting on public information, milliseconds before anybody else - which helps everybody else about as much as insider trading does.

* Acting on trading information gleaned from "bid stuffing" (making and canceling orders really quickly) - which helps everybody else about as much as front running does.

* Detecting the presence of large trades about to go through or going through and capitalizing on the price movements they cause - i.e. imposing a tax others making large trades in the stock market.

In return, they flood the market with liquidity when it is least needed and withdraw it suddenly when it is (e.g. when prices are diving).

There's literally nothing to like about HFT.

Re: This Is What One Half Second of High Speed Trading Looks Like

#35

Post by [deleted] »

m0th87 wrote: post #21
minimax wrote: post #6

If there was a similar video showing all of the electronic sensors of a modern airliner flowing into the central flight control computer would it would engender the same sort of trepidation about air travel? Should we be afraid of something just because it's "complicated" to someone unfamiliar with the state of the art? There are a lot of valid criticisms you can make about modern financial markets, but claiming that…

I don't see any comments here critiquing HFT simply because it's complicated. Rather, they seem related to whether it's actually a net-positive for society.

[deleted]

Re: This Is What One Half Second of High Speed Trading Looks Like

#36

Post by josh2600 »

twoodfin wrote: post #31
pak wrote: post #24

If we eventually decide that all of this ridiculously fast bid/offer blitzing by our HFT overlords is a destabilization risk to the economy [1], couldn't we start taxing these transactions, or the bids/offers themselves? This level of high-frequency noise being thrown into the market can't reasonably go on increasing forever, right... at some point we just bury ourselves in a never-ending war of inscrutable, difficul…

What's stopping you from making lots of money by successfully predicting next year's stock price for Apple, IBM or Ford? Normal human investors can obviously keep doing normal human investment.

Whoosh.

Re: This Is What One Half Second of High Speed Trading Looks Like

#37

Post by rgarcia »

m0th87 wrote: post #21
minimax wrote: post #6

If there was a similar video showing all of the electronic sensors of a modern airliner flowing into the central flight control computer would it would engender the same sort of trepidation about air travel? Should we be afraid of something just because it's "complicated" to someone unfamiliar with the state of the art? There are a lot of valid criticisms you can make about modern financial markets, but claiming that…

I don't see any comments here critiquing HFT simply because it's complicated. Rather, they seem related to whether it's actually a net-positive for society.

I believe minimax is responding to the article, which is quite clearly making the classic "it's too complicated" critique of HFT.

Re: This Is What One Half Second of High Speed Trading Looks Like

#38

Post by aeturnum »

josh2600 wrote: post #36
twoodfin wrote: post #31

Earlier quoted context omitted.

What's stopping you from making lots of money by successfully predicting next year's stock price for Apple, IBM or Ford? Normal human investors can obviously keep doing normal human investment.

Whoosh.

That was a not very helpful response to a fairly obvious question. HFT is taking advantage of arbitrage over a very short period of time (seconds). What effect does it have on long-term prices? If you hold stock for longer than 0.01 seconds (or 1-2 days in the case of a fat-fingered-algorithm), why should you care?

Re: This Is What One Half Second of High Speed Trading Looks Like

#39

Post by rgarcia »

crdoconnor wrote: post #34
m0th87 wrote: post #21

Earlier quoted context omitted.

I don't see any comments here critiquing HFT simply because it's complicated. Rather, they seem related to whether it's actually a net-positive for society.

Every description of an HFT algo seems to fall into one of three categories: * Acting on public information, milliseconds before anybody else - which helps everybody else about as much as insider trading does. * Acting on trading information gleaned from "bid stuffing" (making and canceling orders really quickly) - which helps everybody else about as much as front running does. * Detecting the presence of large trade…

Acting on public information, milliseconds before anybody else - which helps everybody else about as much as insider trading does.

"They can do it faster, therefore it must be illegal."

Acting on trading information gleaned from "bid stuffing" (making and canceling orders really quickly) - which helps everybody else about as much as front running does.

The only people that notice this behavior are...other people capable of doing this behavior. Why should it matter to you, the long-term investor, the trading tactics computers employ at the millisecond scale?

Detecting the presence of large trades about to go through or going through and capitalizing on the price movements they cause - i.e. imposing a tax others making large trades in the stock market

This happens in any market at any timescale. Everyone capitalizes on trends.

Re: This Is What One Half Second of High Speed Trading Looks Like

#40

Post by marshray »

jussij wrote: post #32
Rangi42 wrote: post #28

Earlier quoted context omitted.

If you can trade faster, the market can react to information faster. Stocks dropped almost as soon as the tweet was released, without needing to wait for a few major news channels -- and recovered in five minutes after people stopped panicking.[1] [1] http://21stcenturywire.com/2013/04/24/white-house-attacked-o...

So by making the system trade faster, they have made the market less stable and opened it up to outside manipulation. Hardly what you call progress.

Outside "manipulation" has always been a force in markets. Perhaps HFT is making the system faster to recover to false information?

Or maybe it's just another zero-sum scheme for moving money from the rich to the very rich. Heck I dunno.

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