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

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

#51

Post by dchichkov »

nhaehnle wrote: post #49
dchichkov wrote: post #47

Earlier quoted context omitted.

How else would you connect the exchanges? Or you don't want major exchanges to be connected, and say, if you dump a lot of stock at one exchange you don't want that information to propagate to other exchanges? Benefits of having HFT traders, is that at the cost of having them around you can have fair and level ground. So if you come to one exchange to do a transaction, you don't have to think much about exchange intr…

The real question is: Why are there multiple exchanges for the same papers to begin with? In the case of stocks, for example, there has to be one ultimately authoritative copy of who owns which stocks anyway. So why not just do all the trading in the place where the authoritative copy is stored? That would certainly seem to be more efficient from the perspective of minimizing the overall social cost.

> So why not just do all the trading in the place where the authoritative copy is stored? That would certainly seem to be more efficient from the perspective of minimizing the overall social cost.

And what if trading on that exchange will stop for a couple of days for technical reasons? What kind of problems can that create to stock of large company, that can be traded only on that exchange? Or what, if the whole exchange will go out of business? Or decide to charge arbitrary large trading fees?

Competition and diversity is generally a good thing. Tend to increase efficiency and minimize overall costs. That's valid for exchanges as well.

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

#52

Post by anonymoushn »

joezydeco wrote: post #14
dllthomas wrote: post #8

Earlier quoted context omitted.

If you want to buy/sell at a price, and there's no one ready to sell/buy at that price, a speculator (of any stripe) coming in and making that deal with you means you got the price you asked for. Maybe you could have got better - that's what the speculator is hoping - but you're no longer taking that risk. Statistically, the money going to the trader is similar to an insurance premium then. That's all "in principle"…

Aren't these speculators constantly entering and withdrawing these orders from the market on the order of microseconds? It's not like the order book for Johnson and Johnson is completely empty and there is absolutely nobody out there willing to sell shares. If I understand it right, the HFT machines are poking numbers around the current price trying to step ahead of a regular order before it comes in.

HFT machines don't get to know about regular orders until it is too late to preempt them. If an order takes liquidity, the first sign of it that an HFT machine will see is the trade executing. If an order adds liquidity, the HFT machine will see the order appear on the book. Assuming that the venue uses time priority, which nearly all of them do, once the HFT machine is aware of the order it cannot get "ahead" of the order because the order has already received a timestamp that is lower than the present timestamp.

There may be some very minute portion of the industry that actually dedicates a lot of time to trying to predict specific actions of other market participants, but this seems like an awful idea to me. It would be much easier to try to predict the future price so you can avoid accumulating a large position in the wrong direction (as a market maker) or grab a big position in the right direction (as a speculator). It is also pretty easy to perform arbitrage, although this corner of the industry is harder to break into, since it requires more in the way of pricey hardware and data services and less in the way of strategy and predictive power.

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

#53

Post by eru »

dchichkov wrote: post #47
CJefferson wrote: post #42

Earlier quoted context omitted.

You are replying to the wrong points.The question is not are these things illegal, or does everyone do them. question is, do they benefit the market as a whole? Traders do not have a right to perform HFT, and if it destabilise markets, we can take steps to reduce it (of course, there is then the issue of how to take steps without causing different problems)

How else would you connect the exchanges? Or you don't want major exchanges to be connected, and say, if you dump a lot of stock at one exchange you don't want that information to propagate to other exchanges? Benefits of having HFT traders, is that at the cost of having them around you can have fair and level ground. So if you come to one exchange to do a transaction, you don't have to think much about exchange intr…

The exchange could trade in rounds, e.g. permanent auction mode, where orders get matched only ever minute.

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

#54

Post by robryan »

jhales wrote: post #11
sousousou wrote: post #9

Earlier quoted context omitted.

I cannot see a downside to improved networking infrastructure...and an eager market for advances.

I'm not sure I understand what you are saying. Would you elaborate?

The HFT arms race eventually results in systems/ algorithms/ networking advances that benefit us all.

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

#55

Post by nnq »

Light bulb: tax all tradings with a tax percent increasing with the number of transactions per second, in a continuous way (even for less than 1 t/s) that would not make any difference for regular traders (and have a tweakable taxing formula that could regulate a market's stability and sensitivity to information by letting more or less HFT happen by setting the 100% taxation limit - the HFTs will have all incentives to stop trading when they are taxed 100% or beyond - i.e. when they are "fined")!

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

#56

Post by dominicgs »

eru wrote: post #53
dchichkov wrote: post #47

Earlier quoted context omitted.

How else would you connect the exchanges? Or you don't want major exchanges to be connected, and say, if you dump a lot of stock at one exchange you don't want that information to propagate to other exchanges? Benefits of having HFT traders, is that at the cost of having them around you can have fair and level ground. So if you come to one exchange to do a transaction, you don't have to think much about exchange intr…

The exchange could trade in rounds, e.g. permanent auction mode, where orders get matched only ever minute.

I believe that Taiwan (TSEC) does this, although I can't find a reference for it now.

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

#57

Post by PavlovsCat »

robryan wrote: post #54
jhales wrote: post #11

Earlier quoted context omitted.

I'm not sure I understand what you are saying. Would you elaborate?

The HFT arms race eventually results in systems/ algorithms/ networking advances that benefit us all.

You can justify anything, and therefore nothing, with that speculation.

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

#59

Post by aangjie »

mverwijs wrote: post #45
snowwrestler wrote: post #22

One time I printed out all the code--at that time ASP, HTML, CSS, and Javascript--that got executed for one page load of the homepage of my employer's primary website. I taped the pieces of paper end-to-end and hung them on my wall. It made a great conversation piece with my coworkers. Non-technical folks (most of them) were astounded that so much text was being interpretted and executed every single time they loaded…

As an ops-guy (interestingly enough, at an HFT company), I used graphviz to draw out a diagram of all the network interfaces and routes that were being used when trading on a single exchange for one single instrument. It was a huge, big, complex, ugly thing. We laughed. Good times.

That sounds cool.... I would love to see it though understand the security concerns..
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