Well, fortunately for you his journal isn't a quasi-governmental entity. Unfortunately for your argument, our stock markets are. They wouldn't be remotely viable if they weren't supported and regulated by government. In exchange for the tax payer funded assistance is the social benefit of keeping the whole thing running. Or would you like to test the viability of a market with no government oversight and no governmen…
How would you build a newspaper or magazine without government enforcement of contracts and copyright? If you want to claim an HFT shop is "quasi-governmental" because contracts are enforced, then basically every enterprise in the world is "quasi-governmental" (except for the black market).
First, the NYSE gets way more government support and oversite than The Atlantic.
Second, copyright enforcement and free speech have defined limitations for the betterment of society.
The author's point is clear - that HFT adds no value to society ("socially worthless"). I don't believe that he wants to prevent anything, but he suggests that trades should be taxed to create some value to society from this. He is suggesting their value (at the moment) is exclusively to the benefit of making rich people - who can pay for access early information and technology - richer.
Traders are already taxed. They make money from their trades and pay income taxes on this trading. If, however, you tax the trading itself, there will be less of it, significantly less and, most likely, the total taxes collected will decrease
This argument seems to apply equivalently to VAT/sales tax, which in my mind makes it weak.
(Consumers are already taxed on their income etc)
There's no reason to believe total taxes collected will decrease. If actors still benefit from HFT post-taxation, they will still trade, and pay the tax.
The author's point is clear - that HFT adds no value to society ("socially worthless"). I don't believe that he wants to prevent anything, but he suggests that trades should be taxed to create some value to society from this. He is suggesting their value (at the moment) is exclusively to the benefit of making rich people - who can pay for access early information and technology - richer.
Traders are already taxed. They make money from their trades and pay income taxes on this trading. If, however, you tax the trading itself, there will be less of it, significantly less and, most likely, the total taxes collected will decrease
It will also harm people who have mutual funds in their 401(k) plans via higher fees.
A few immediate thoughts: Transaction volume is ultimately not the important metric--revenue is. And, following [1], it seems that the total revenue for HFT was probably around $2Billion in 2013--for a whole industry, that's not very much! Measuring transaction volume is akin to comparing shipping between Amazon and Walmart ignoring the fact that Amazon ships directly to consumers while Walmart mostly ships to large…
See, here's the thing I don't understand about liquidity: If it's so valuable for trades to execute in microseconds instead of seconds, and the stock exchanges recognize this value and provide co-location etc to enable it, why are so many stock exchanges closed for half to two thirds of the day? [1] Surely the 15+ hour shut downs are a much bigger limit to liquidity than a few microseconds here and there? There's obv…
Multiple reasons... History being one. They clear the books after market too, it's a big part of catching the crooks and frauds. Almost certainly makes auditing easier.
Is executing trades quickly bad? Or is flipping an equity quickly bad? I cam see no good that comes from buying and selling in milliseconds; the tax should inversely exponential to the hold time or something.
Early data access has been around for a decade and generally has NOTHING to do with HFT. Events desks typically have very different architecture than other groups in HFT, and, well, are a very very small cog.
I don't get it. The article first criticizes HFT for making markets rather than speculating, incorrectly asserting that it's somehow a tax on traders (hint: don't cross the spread if you don't want to pay the "tax"). Then it reveals that HFT does speculate - they pay people to do market research and trade on that basis, which is somehow also evil. Damned if they do, damned if they don't I guess. The authors reasoning…
It's plain simple trading luddism and it's been going on for decades. There was massive resistance to the computerisation and networking of the stock markets, which only succumbed via foreign competition. Lots of people who lived on being in a racket where passing orders and pushing buttons was extremely valuable saw their livelihoods endangered. Now the same happens to people who make a living on trivial short-term…
Yeah, any time people object to theft, it's "trading luddism".
A few immediate thoughts: Transaction volume is ultimately not the important metric--revenue is. And, following [1], it seems that the total revenue for HFT was probably around $2Billion in 2013--for a whole industry, that's not very much! Measuring transaction volume is akin to comparing shipping between Amazon and Walmart ignoring the fact that Amazon ships directly to consumers while Walmart mostly ships to large…
> popular reporters want to turn HFT into a moral issue and paint HFT firms as evil manipulators, when they really aren't.
First, almost every issue is a moral issue, especially one dealing with the value of a certain endeavor (isn't that what ethics is about? Trying to find the value of things?).
Second, claiming that HFTs aren't evil is as much of an assertion as calling them bullshitters. Most "popular reporters" as you call them (I assume pejoratively) at least support their claim. They say that HFT has little social value, and then claim that putting so much effort into something of little social value is at least morally questionable.
It is claiming that this is not a moral issue that is the more powerful moral assertion here, and quite suspect, at that. Whatever economic risks HFT may entail, its mere existence is first and foremost a problem of ethics.
Here is the problem that I have with this whole "socially useful" line of reasoning: Do we have philosopher kings or benevolent rules who are able to accurately designate social usefullness and ban or allow things on the basis of it? Is facebook or snapchat socially useful? Are hamburgers socially useful? what about french fries? Whether or not HFT is socially useful is irrelevant. Since there is no harm to a long te…
It's not about banning or allowing, it's about counting the true costs and benefits of the trade, not the immediate effects. And you don't need philosopher kings to do this, just basic math and science. This particular article may not make a good case for the harm of HFT, but that doesn't mean there isn't any. And yes, there are serious researchers that are pointing out hidden costs for things like facebook, hamburgers, and french fries. Those things may have demonstrable value, but that doesn't mean the value outweighs the cost or that they are correctly priced. For example, some studies put the true price of a hamburger at around $30 based on the burden put on healthcare and the environment, which are ultimately paid by other people. With perfect information, those costs should be factored into the trade, but they aren't. So, while HFT might have some small benefit to market liquidity as claimed by other comments, I can easily believe there are hidden costs that would outweigh such small benefits. I don't have any evidence to provide in this specific case, but I would support research to investigate whether we are overcounting the benefits or undercounting the costs.
I worked in the industry for a little while. At this point, some companies depend on having that daily downtime. Their whole development is based around the fact that they will have guaranteed downtime. It's built right into their software stack. Trying to fiddle with this expected downtime would throw (parts of) the industry into turmoil. It's just a historical quirk, but it's probably here to stay.
All the people who work in finance I've spoken to have imputed to me that the industry is on the cutting edge, that they will and are able to go to any lengths to execute trades faster, and that they earn their bumper salaries by being the most talented technologists out there. They tell me stories of FPGAs and how they certainly couldn't use garbage collected languages and about people cutting holes in walls to shav…
You don't understand. Not everything is written in C. There's a backend system for reporting OATS that starts at 5 PM. If you need to make a non-trivial change you better not deploy it during market hours. Most of these systems are written in Java by guys who aren't at the firm anymore and didn't care when they were. You say cutting edge (which I would strenuously debate). But it's not magic -- in fact it's actually quite mundane when you get down to the nuts and bolts.