Mark Cuban: High-Frequency Traders Are the Ultimate Hackers

sigh i got really excited about this because I was considering the interpretation of the word "hackers" like we use it in "Hacker News" (relevant: http://paulgraham.com/gba.html)

I know that the startup community at large doesn't largely respect short term trading, particularly HFT. I understand it, though I honestly think its misguided and the outrage is disproportionately large, but thats another story.

The reason why this article TITLE excited me was because I think its totally true, or least close to true. I think awesome HTFs and algo traders have a very similar skillset to top notch startup hackers.

Small prop shops ARE startups. You:

    1. wear a lot of hats
    2. release early, release often
    3. write really fast code, really fast
    4. validate theories against the market (or consumers)
    5. if you're right, keep going, if not, pivot
    6. success is dependent on understanding lots of different sub-specialties
    7. lots of overlapping skills: big data, distributed computing, machine learning

At some point, I'd love to get a bunch of hackers together and start a small prop shop. The jobs are different, but in so many ways it takes the same kind of person to succeed at either.

Definition of prop shop, for those unfamiliar with the term: http://www.investopedia.com/terms/p/prop_shop.asp

Exactly my thought - I guessed that MC was praising us. Sigh, you'd think we HFT practitioners were, I dunno, Goldman Sachs or something like that. ;) (jk, GS, you know we love you ...)

Good list, also. I work with some really smart programmers and tech people and HFT is a great laboratory to work on tough technical problems in the real-world, with real results.

I have no problem with HFT, but only because it is turning machines into things that are doing what humans did before, only at a speed that we can't keep up with as humans with our inherently physical interfaces.

How is HFT different than traditional arbitrage except for the fact that it is faster and potentially at a scale that normal traders would never be able to keep up with? How is buying something one second and selling the next inherently different than buying one day and selling the next? Speed?

Does computers being faster make it any more unfair than when one trader has access to millions or billions of dollars when I only have access to hundreds or thousands? I don't think so.

Now, one could argue that HFT disrupts the way that Wall Street has worked for decades, but really, it is shifting the profit from traders, bankers, and fund managers to HFT firms. Sure, Wall Street probably doesn't like it, but does anyone like it when someone disrupts their market and takes their profit?

You could also argue that HFT doesn't add value because HFT firms inherently don't do anything other than trade millions of stocks only for the sake of trading them, but how is this worse than day trading or running any other fund other than the turnover rate?

Perhaps I'm blind to the real issues, but I just don't see a huge difference between HFT and traditional Wall St. trading, except maybe that it magnifies the problems inherent in the system due to speed and scale.

The difference is that a crash can happen faster than any human can stop it. It's fine if you trust your high-frequency circuit breakers.