'Flash Boys' IEX stock exchange opens for business • Hacker News Board

Re: 'Flash Boys' IEX stock exchange opens for business

#101

Post by tedunangst » Sat, Aug 20, 2016, 1:06 AM UTC

minimax wrote: post #98

tptacek wrote: post #96

Earlier quoted context omitted.

I do not believe DRW is colluding with Virtu to keep spreads wide. In fact, all available evidence overwhelmingly suggests that the opposite is happening. But human market makers colluded routinely, and in some cases famously.

Do you think when Don Wilson (founder of DRW) was making markets in the pits at the CME in the 80s that he was colluding with anyone is more what I was asking. Does he deserve to be labeled "crooked as a barrel of fishhooks?"

Maybe? I mean, he's been in hot water much more recently than that for trying to fix the market. http://www.bloomberg.com/news/articles/2016-03-09/manipulati...

Re: 'Flash Boys' IEX stock exchange opens for business

#102

Post by tedunangst » Sat, Aug 20, 2016, 1:10 AM UTC

naveen99 wrote: post #88

physguy1123 wrote: post #31

Earlier quoted context omitted.

Short story: HFT is generally considered good for retail traders because spreads tend to be lower. You trade both more cheaply and more quickly. However, it's generally not good for large institutions (which are more than just 'big evil hedge funds') because markets react very quickly to movements caused by this big firms. If they decide that something is priced wrong, they won't be able to make many trades taking ad…

A clarification on my other sister post: options allow one to lock in a price for cheap even at large volumes. For example expiring options can be bought for nickels in premium, with each one locking in price for 100 shares.

Expiring options are pretty thinly traded, no? If you're trying to sell 100000 shares, you may have a hard time scrounging up 1000 puts at 3:30 Friday.

Re: 'Flash Boys' IEX stock exchange opens for business

#103

Post by tedunangst » Sat, Aug 20, 2016, 1:14 AM UTC

QuarterReptile wrote: post #99

eggy wrote: post #30

I've read both sides of the argument about the IEX delay, and my common sense tells me you cannot try and put the genie back in the bottle. If technology exists, has been discovered, you cannot thwart it by trying to mask it by retarding it. It think it is ironic that an exchange, IEX, founded with one of its aims being to level the playing field by calling out HFT as 'wrong' or 'unfair', and yet allow for their dyna…

In what way could this comment possibly be worthy of a down vote? It's complete and thought-provoking.

Called HFT innovative. Can't say that here.

Re: 'Flash Boys' IEX stock exchange opens for business

#104

Post by minimax » Sat, Aug 20, 2016, 2:06 AM UTC

tedunangst wrote: post #101

minimax wrote: post #98

Earlier quoted context omitted.

Do you think when Don Wilson (founder of DRW) was making markets in the pits at the CME in the 80s that he was colluding with anyone is more what I was asking. Does he deserve to be labeled "crooked as a barrel of fishhooks?"

Maybe? I mean, he's been in hot water much more recently than that for trying to fix the market. http://www.bloomberg.com/news/articles/2016-03-09/manipulati...

On that case I think I agree with the Matt Levine take that "Back in September I was pretty sympathetic to DRW and after reading the CFTC's complaint. I'll double down on that.†" I guess we'll see what happens.

My only point was that some people think all HFT is bad, and here we have a complaint that actually the situation is reversed and it was actually all human market making that was bad. I don't think either statement is completely true, and I was trying to highlight the contradiction because the human market makers and the HFTs are, in a lot of cases, the same people.

† https://www.bloomberg.com/view/articles/2013-11-06/cftc-sues...

Re: 'Flash Boys' IEX stock exchange opens for business

#105

Post by tedunangst » Sat, Aug 20, 2016, 2:37 AM UTC

minimax wrote: post #104

tedunangst wrote: post #101

Earlier quoted context omitted.

Maybe? I mean, he's been in hot water much more recently than that for trying to fix the market. http://www.bloomberg.com/news/articles/2016-03-09/manipulati...

On that case I think I agree with the Matt Levine take that "Back in September I was pretty sympathetic to DRW and after reading the CFTC's complaint. I'll double down on that.†" I guess we'll see what happens. My only point was that some people think all HFT is bad, and here we have a complaint that actually the situation is reversed and it was actually all human market making that was bad. I don't think either stat…

Alright, it's hard for me to explain how sometimes all means all and sometimes it doesn't. But tptacek's comment didn't literally say that every last floor trader was crooked, just that was generally true. And it's easy to see how it could be true. A wink here, etc. The difficulty for anyone to see the size of the order book.

I think it's harder to describe how HFT is bad. Most of the efforts in this thread are, we'll say, only loosely connected to reality.

The best you can say about sweaty men shouting is that if not corrupt, still inefficient. (To say nothing of spreads in eighths.) I think that's a claim that really is true for literally every trader.

Re: 'Flash Boys' IEX stock exchange opens for business

#106

Post by fma » Sat, Aug 20, 2016, 2:45 AM UTC

tptacek wrote: post #93

prklmn wrote: post #92

Earlier quoted context omitted.

This is true only to a certain extent. Mutual funds have been getting squeezed and the impact, though not immense, trickles down to millions of middle class investors.

No. The opposite is true. Vanguard, one of the largest and beyond a doubt the most trustworthy mutual fund complex, is on the record repeatedly as saying HFTs have lowered their cost of trading. Where did you get your claim from? I can source mine, if you really need me to.

Then source it...

Re: 'Flash Boys' IEX stock exchange opens for business

#107

Post by airza » Sat, Aug 20, 2016, 2:54 AM UTC

prklmn wrote: post #92

tptacek wrote: post #84

Earlier quoted context omitted.

The technology targets the wealthy people who were taking advantage of the markets.

This is true only to a certain extent. Mutual funds have been getting squeezed and the impact, though not immense, trickles down to millions of middle class investors.

No, the exact opposite happened, narrowing the spread is super favorable to mutual funds http://www.cnbc.com/2014/04/25/vanguard-chief-defends-high-f...

Re: 'Flash Boys' IEX stock exchange opens for business

#108

Post by kasey_junk » Sat, Aug 20, 2016, 2:55 AM UTC

fma wrote: post #106

tptacek wrote: post #93

Earlier quoted context omitted.

No. The opposite is true. Vanguard, one of the largest and beyond a doubt the most trustworthy mutual fund complex, is on the record repeatedly as saying HFTs have lowered their cost of trading. Where did you get your claim from? I can source mine, if you really need me to.

Then source it...

http://www.cnbc.com/2014/04/25/vanguard-chief-defends-high-f...

Re: 'Flash Boys' IEX stock exchange opens for business

#109

Post by kasey_junk » Sat, Aug 20, 2016, 3:00 AM UTC

sjbase wrote: post #75

chollida1 wrote: post #9

Earlier quoted context omitted.

The IEX delay and batch auctions are really two completely different things. IEX delays almost all messages in and out by a small amount. They don't delay messages for orders that their own router modifies, their discretionary peg order. This lets their peg orders update before any one, ie HFTs, can update their own resting orders on IEX or at other exchanges in the case of a fill at IEX. It's important to note that…

Do you mind expanding on that last point? I'm interested in your take on how/why a batch auction's advantage is eliminated by the rest of the world trading around them.

Largely because the entirety of latency arb has to do with taking advantage of price differences between exchanges. How those differences are created is largely immaterial.

As long as you have multiple exchanges that are not perfectly syncd (a distributed systems problem!) There will be time based arbitrage opportunities.

Re: 'Flash Boys' IEX stock exchange opens for business

#110

Post by kasey_junk » Sat, Aug 20, 2016, 3:03 AM UTC

tuna-piano wrote: post #78

fleitz wrote: post #61

Earlier quoted context omitted.

Unless you are exceeding the liquidity on a single exchange HFT will never affect you. Here how it works... Imagine you want to BUY 10000 MSFT... You send your order to exchange A, it does a partial fill for 1000 orders, and sends the remainder to exchanges b,c,d. An HFT firm sees your order to exchange A knows its not going to fill and sends its own orders to buy the liquidity on B,C,D and then sends sell orders at…

I kind of agree with your underlying premise, but when I invest in a mutual fund / ETF, isn't that a giant investor that might be affected by HFT? And if that was costing the fund money, wouldn't that affect me (without me seeing it directly)?

Assuming that hft forms didn't drive other prices down. In particular the costs to trade (in the form of the spread, fees & execution costs) hadn't been decimated by hft firms.