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Why Do High-Frequency Traders Cancel So Many Orders?

bloombergview.com

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Re: Why Do High-Frequency Traders Cancel So Many Orders?

#101

Post by yummyfajitas »

crdoconnor wrote: post #99
yummyfajitas wrote: post #85

Earlier quoted context omitted.

If you pay $100 extra once in your life for the gold iPhone, then Apple has probably cannibalized more of your retirement fund than HFT. Ballpark esitmate: drop $20k/year into retirement (1 lot of SPY/year) x 1 penny/share being robbed from you x 50 year working career, you've lost $50 to the evil HFTs.

TABB group estimated HFT income to be $21 billion in 2009. That's about $65 for every man, woman and child in the US. Ballpark figure, of course.

Not quite, that's a theoretical upper bound - it's spread x share volume. Compare that to Apple's actual profit last year of $39B.

https://finance.yahoo.com/q/is?s=AAPL+Income+Statement&annua...

Re: Why Do High-Frequency Traders Cancel So Many Orders?

#102

Post by harryh »

crdoconnor wrote: post #66
harryh wrote: post #43

Earlier quoted context omitted.

Lots of things are illegible to the public. Explain to me all the processes involved in building the smart phone in your pocket. You can't. I can't. Probably no single person in the world can. Who cares?

There's a pretty strong chance that your retirement funds are not being cannibalized by Samsung or Apple. Whereas, with HFT...

HFT has DRAMATICALLY reduced trading costs which has improved the value of my retirement fund.

Re: Why Do High-Frequency Traders Cancel So Many Orders?

#103

Post by plonh »

kasey_junk wrote: post #100
librvf wrote: post #97

Earlier quoted context omitted.

> HFT has led to a dramatic decrease in the price of market making. How? It seems like this should not be that hard to explain.

Link in the posted article: http://www.bloombergview.com/articles/2014-03-31/michael-lew... . Quote from the posted article: " it should be said that market makers have existed in the stock market for a long time and that electronic market makers do the job waaaaaaaaaay cheaper than their human predecessors."

Electronic market makers are a much larger category than HFT.

Microsoft Word is phenomenally heaper than hiring a typewriterist, because it is electronic.

Re: Why Do High-Frequency Traders Cancel So Many Orders?

#104

Post by harryh »

librvf wrote: post #96
harryh wrote: post #43

Earlier quoted context omitted.

Lots of things are illegible to the public. Explain to me all the processes involved in building the smart phone in your pocket. You can't. I can't. Probably no single person in the world can. Who cares?

> Lots of things are illegible to the public. Explain to me all the processes involved in building the smart phone in your pocket. You can't. I can't. Probably no single person in the world can. Who cares? That's not true, not like HFT anyway. First, you can quickly and succinctly describe the traits and benefits of a smartphone. You can be high-level at first, you don't have to explain how every detail works. There'…

I can quickly and succinctly describe the traits and benefits of HFT:

Replacing slow expensive humans with fast and cheap computers has dramatically reduced the cost of trading. You can see this because buy/sell spreads have shrunk by at least 10x.

Re: Why Do High-Frequency Traders Cancel So Many Orders?

#105

Post by sigmar »

Mikeb85 wrote: post #91
sjbase wrote: post #73

The "new" part of this news, which not many have responded to here, is the notion of an HFT tax. The arguments on either side of HFT (liquidity/spread/etc. vs. cost/unfairness/etc.) have been largely unchanged for the last few years. There simply isn't enough data made public to declare a victor. As far as the tax: personally I'm very in favor of slowing down trading... unfortunately, what's being proposed introduces…

> personally I'm very in favor of slowing down trading... As a retail trader, no. As an example, yesterday I placed a sell order on $90,000HK worth of a stock. Once I hit 'send', my order was fulfilled before my browser could load the confirmation page, and at the market price I was quoted seconds before. This is, in large part, thanks to market makers who use HFT. Before this, the broker/market maker might take a sp…

HFT exists because low latency trading exists. Not the other way around.

>it definitely 'levels' the playing field.

Have you read Michael Lewis's Flash Boys? Because HFT demonstrably doesn't level the playing field.

Re: Why Do High-Frequency Traders Cancel So Many Orders?

#106

Post by crdoconnor »

kasey_junk wrote: post #100
librvf wrote: post #97

Earlier quoted context omitted.

> HFT has led to a dramatic decrease in the price of market making. How? It seems like this should not be that hard to explain.

Link in the posted article: http://www.bloombergview.com/articles/2014-03-31/michael-lew... . Quote from the posted article: " it should be said that market makers have existed in the stock market for a long time and that electronic market makers do the job waaaaaaaaaay cheaper than their human predecessors."

I was wondering when some HFT shill was going to try and pretend that electronic market making and HFT were the same thing.

Every damn time...

Re: Why Do High-Frequency Traders Cancel So Many Orders?

#107

Post by crdoconnor »

harryh wrote: post #102
crdoconnor wrote: post #66

Earlier quoted context omitted.

There's a pretty strong chance that your retirement funds are not being cannibalized by Samsung or Apple. Whereas, with HFT...

HFT has DRAMATICALLY reduced trading costs which has improved the value of my retirement fund.

Electronic trading decreased them. HFT increased trading costs. This is why dark pools are now a thing.

Re: Why Do High-Frequency Traders Cancel So Many Orders?

#108

Post by yummyfajitas »

Retric wrote: post #87
kasey_junk wrote: post #67

Earlier quoted context omitted.

What you are talking about are precisely the aggregate benefits to the markets I mentioned, liquidity and easy risk management. That the markets provide those behaviors is what makes them valuable but the actual trades that make up those aggregates, your selling of shares when you need a car to someone else is zero sum. Either you would make more by holding or you wouldn't. That something other than that is more impo…

Continuing from the perspective of buying a car: If I put a sell order on the market at 12:00 the only impact is the sales price. If it executes at 1PM or 2PM it makes zero difference to me as I can only access money at the end of the day. So, I only gain liquidity if I would have been otherwise unable to sell by the end of the day. Therefore, I don't gain liquidity from HFT.

If you don't want liquidity don't buy it. No one is forcing you.

https://www.chrisstucchio.com/blog/2014/how_to_not_get_rippe...

Re: Why Do High-Frequency Traders Cancel So Many Orders?

#109

Post by kasey_junk »

plonh wrote: post #103
kasey_junk wrote: post #100

Earlier quoted context omitted.

Link in the posted article: http://www.bloombergview.com/articles/2014-03-31/michael-lew... . Quote from the posted article: " it should be said that market makers have existed in the stock market for a long time and that electronic market makers do the job waaaaaaaaaay cheaper than their human predecessors."

Electronic market makers are a much larger category than HFT. Microsoft Word is phenomenally heaper than hiring a typewriterist, because it is electronic.

Neither electronic market maker or HFT is a technically defined term, nor is it clear what people mean when they use those terms.

That said, when I was in the industry the common usage of the terms would be that electronic market makers were a subset of HFT.

That is there are HFT strategies that are not market makers, but there are no electronic market makers who are not HFT.

Re: Why Do High-Frequency Traders Cancel So Many Orders?

#110

Post by Mikeb85 »

sigmar wrote: post #105
Mikeb85 wrote: post #91

Earlier quoted context omitted.

> personally I'm very in favor of slowing down trading... As a retail trader, no. As an example, yesterday I placed a sell order on $90,000HK worth of a stock. Once I hit 'send', my order was fulfilled before my browser could load the confirmation page, and at the market price I was quoted seconds before. This is, in large part, thanks to market makers who use HFT. Before this, the broker/market maker might take a sp…

HFT exists because low latency trading exists. Not the other way around. >it definitely 'levels' the playing field. Have you read Michael Lewis's Flash Boys? Because HFT demonstrably doesn't level the playing field.

Levels the playing field for retail investors.

If your entire strategy is arbitrage, then of course you're going to lose out to someone who is quicker and has better technology. Of course some people who lost out on 'low hanging fruit' are going to be mad someone else bought a bigger ladder.

But if your strategy is anything else (investing or any type of speculative trading) then HFT benefits you.

I've traded on markets with low liquidity and no HFT, and high liquidity with HFT. I don't miss the low-liquidity markets, waiting half a day to see your order executed only to see the price move against you because no one could match your order, meanwhile institutional traders are trading the same stock outside the exchange is the worst kind of infuriating.

The argument against HFT is like saying that bank tellers who exchange currency for a 2% spread are cheating out back-alley money changers who take a 20% spread... Yes someone is losing, but it's not necessarily a bad thing.

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