Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

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

blogs.smithsonianmag.com

Post reply on HN
Print view View original

61–70 of 121 posts

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

#61

Post by washedup »

SeanDav wrote: post #12
jhales wrote: post #7

All comments so far are negative, but I fail to see how this video shows anything other than incredible engineering. The negativity seems to be a result of previous bias.

It is incredible engineering and it has incredible downsides, not the least of which is the ability to destroy a market in seconds, due to a blip in information, with cascading domino effects.

I don't know if "destroy" is the right word, although that can happen. It has the ability to act extremely quickly, which is actually what we want. We want markets to respond to new market conditions quickly so that we know the information has been disseminated throughout the markets. The faster it behaves, the more efficient it is. The problems we see come from human programming errors, not from a mis-networked market. This is incredible engineering.

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

#62

Post by washedup »

jhales wrote: post #17
SeanDav wrote: post #12

Earlier quoted context omitted.

It is incredible engineering and it has incredible downsides, not the least of which is the ability to destroy a market in seconds, due to a blip in information, with cascading domino effects.

Assume you are referencing the flash and twitter crash? I always wondered why people never mention how fast it recovered... the ability to heal a market in seconds. The '87 crash was a cascade much more severe and actually involving the whole market that happened without HFT. Also the incredible focus on these two events, considering all the other turmoil in the financial markets, has always struck me as a clear case…

I agree. The speed at which markets respond to news reveals how efficient the system works. Flash-crashes and what not are either caused by human programming errors or it is simply the right reaction to new information about the environment. We want the new price to be discovered ASAP.

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

#63

Post by washedup »

nnq wrote: post #55

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…

A lot of those messages might not be trades, but actually update messages to resting orders.

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

#64

Post by jdietrich »

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.

All the critiques of HFT are a century old. When telegraphy was invented, it was feared that the ticker-tape would create devastating waves of speculation, by speeding up the markets beyond human comprehension.

When markets went over to computerised trading, it was argued that the human element of open-outcry trading was vital in preserving a culture of honesty and integrity.

Critiquing HFT is myopic, because it's based on a meaningless definition of "high frequency". HFTs are doing what traders have always done. There's a legitimate argument against speculation, but it's pointless to single out speculators that deal in the very short term. Singling out the newest technology is just a cheap shot, there's no fundamental difference between trading on a millisecond horizon or a minute or hour horizon.

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

#65

Post by raverbashing »

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...

Yes

So HFT should expect to be manipulated by false news.

I bet they won't be to happy when that happens.

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

#66

Post by jermy »

omegant wrote: post #44
skylan_q wrote: post #19

Earlier quoted context omitted.

None. This provides profit opportunities to those who will "heal" the price. Also, exchanges will revert back trades that happen over these flash crashes.

How long before someone (a hacker no doubt) games the system to create a selling spiral, just waiting to take profit of the rebound. If it´s well planned the one causing the dive is not going to be the one taking the profit (at least that it can be proved).

Well, it's been a common enough movie plot (cf. Casino Royale where the Antagonist engineers terrorist attacks on high-profile companies whilst short-selling their stocks).

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

#67

Post by OGC »

jdietrich wrote: post #64
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.

All the critiques of HFT are a century old. When telegraphy was invented, it was feared that the ticker-tape would create devastating waves of speculation, by speeding up the markets beyond human comprehension. When markets went over to computerised trading, it was argued that the human element of open-outcry trading was vital in preserving a culture of honesty and integrity. Critiquing HFT is myopic, because it's ba…

There sure is a fundamental difference between trading on a millisecond horizon or a minute or hour horizon. Otherwise it wouldn't happen:

One trader can act faster than another, and a millisecond(s) can be shaved of with the right location of your server (co-located near the exchange).

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

#68

Post by skorgu »

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…

> Detecting the presence of large trades about to go through or going through and capitalizing on the price movements they cause

Large trades move the market, full stop. That's a feature, not a bug. Moving a lot of size changes the market's estimate of the value of whatever you're moving. Splitting up large orders into smaller pieces is attempting to hide that information, why should that be a privileged operation?

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

#69

Post by m0th87 »

jdietrich wrote: post #64
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.

All the critiques of HFT are a century old. When telegraphy was invented, it was feared that the ticker-tape would create devastating waves of speculation, by speeding up the markets beyond human comprehension. When markets went over to computerised trading, it was argued that the human element of open-outcry trading was vital in preserving a culture of honesty and integrity. Critiquing HFT is myopic, because it's ba…

Never heard anyone arguing HFT is terrible because the trading floor died either. These are straw men constructs designed to paint HFT critics as luddites.

I'm undecided about HFT's ability to provide liquidity in the market. There are certainly some drawbacks (e.g. you have to have high capitalization to afford HFT colocation), but there might be some tangible long-term benefits as well.

But I'm more concerned about how much of a waste it all is. Jeff Hammerbacher famously quipped that "the best minds of my generation are thinking about how to make people click ads," when referring to developers pounding at the doors of google's and facebook's recruiters. HFT is similarly unfortunate. Somewhat useful maybe, but overall a depressing use of brilliant minds.

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

#70

Post by aitkin »

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.

The reason there are multiple exchanges is the same reason you can buy the same pair of shoes at 10 different places: it is competition.

Also, what is the social cost you are referring to? There are a lot of people here saying that HFT doesn't provide "social value". Does it somehow provide less social value than traders screaming at each other in the pits? Similar types of trading always existed, except now it's done by computers. For what it's worth, HFT provides well-paying jobs for a lot developers and ops people and often is very supportive of the engineering community.

Post reply on HN