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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

#91

Post by rayiner »

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…

On the flip side, maybe in the future computers take the money out of the finance industry. As things become automated, the function Wall Street provides, allocating capital, should in theory become cheaper relative to the rest of the economy. Say one day maybe computers will replace VC's: instead of pitching, you plug your information into a web page and get an answer as to whether you're getting funded.

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

#92

Post by incawater »

jrockway wrote: post #16
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.

Which market has been destroyed in seconds?

None

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

#93

Post by skylan_q »

joezydeco wrote: post #81
skylan_q wrote: post #20

Earlier quoted context omitted.

Yes. That's what it does. If you, as a human, try to trade like this, the computers will destroy you. That's why people shouldn't trade like computers and they should use their experience and judgment to guide them.

So you're implying we should all be complacent and let HFT machines take a small parasitic profit off of every stock transaction humans make?

Complacent? Get in on HFT if you feel that it's making it unfair for human traders.

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

#94

Post by joezydeco »

skylan_q wrote: post #93
joezydeco wrote: post #81

Earlier quoted context omitted.

So you're implying we should all be complacent and let HFT machines take a small parasitic profit off of every stock transaction humans make?

Complacent? Get in on HFT if you feel that it's making it unfair for human traders.

I'm speaking for the majority of people that can't afford racks of servers and custom-laid transatlantic fiberoptic lines. I'm speaking about typical americans that have their money in 401(k) accounts or maybe buy stocks from an online broker to try and fund their kids' college accounts.

These people are all being scraped, very slowly but very surely, by HFT. That's the point I'm making.

At least we all admit that the modern stock market has absolutely no connection to the economy or to the interests of long-term investing or capital building. It's just a very large and very legal casino.

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

#95

Post by tptacek »

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…

I don't understand the comparison you're making between "bid stuffing" and frontrunning. Could you expand on that?

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

#96

Post by pessimizer »

nailer wrote: post #85
nhaehnle wrote: post #50

Earlier quoted context omitted.

The question is: Does fast trading provide a net positive to society? Real investment decisions - as in, decisions of which factories to build, which products to develop, who to hire, and so on - are made on a time-scale of weeks or months. Having the stock market react on a sub-second time scale certainly has no effect at all on those decisions. To gain some perspective, consider if trading operated on an hourly-auc…

> The question is: Does fast trading provide a net positive to society? Do web apps provide a net positive to society?

As opposed to what? We know that fast trading is being judged against non-fast trading. Are you asking us to judge webapps as opposed to non-web apps (for which anyone could give you a detailed response), or are you just trying to insult webapp developers?

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

#97

Post by jzwinck »

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).

We need not wait for that to happen. Such shenanigans have been observed and documented already, such as in the book "Reminiscences of a Stock Operator." It was written in 1923, and worth reading today.

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

#98

Post by fixxer »

CJefferson wrote: post #42
rgarcia wrote: post #39

Earlier quoted context omitted.

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 capa…

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)

Show me a market where such a restrictive view is mandated and I will show you a failed market. This notion that "trading should benefit the market" is complete and total nonsense propagated by people with no understanding of liquidity. Trading is adversarial by definition.

1987 was caused by portfolio insurance from major funds, not HFT (which didn't really exist then as it does now). HFT also didn't cause the mortgage crisis. That was long term consumer financing & Gov mortgage buyers & pension investors. HFT was definitely involved in the flash crash, but what were the long term implications of that? Zero. The most recent blip was caused my dissemination of bad news via a source that had been compromised. Again, not HFT.

Want to hate HFT (I do!)? Hate it because it isn't profitable (which is why I left in 2010) and because it still sucks up engineering talent like a black hole of despair.

These anti-HFT articles that occasionally come out are hilarious because the money that put HFT on the public radar simply isn't there anymore. Look at GETCO.

The question I have is why is the public so willing to accept disinformation? Residual banker hate?

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

#99

Post by fixxer »

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.

Would you prefer one exchange? Interesting things happen to commissions (the real enemy) when exchanges consolidate...

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

#100

Post by HockeyPlayer »

kasey_junk wrote: post #78
lifeformed wrote: post #25

Just how profitable is HFT anyways? What kind of returns do HFT traders get?

Depends. It is mostly a zero sum game, so all told $0. Of course, some people make lots and some people make -lots.

While intraday trading as a whole is zero-sum, the HFTs are taking profits from other traders, not from each other. HFTs as a group are profitable.
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