Barbarians at the Gateways: High-frequency Trading and Exchange Technology • Hacker News Board

Re: Barbarians at the Gateways: High-frequency Trading and Exchange Technology

#141

Post by kasey_junk » Fri, Oct 18, 2013, 4:30 PM UTC

beagle3 wrote: post #138

kasey_junk wrote: post #136

Earlier quoted context omitted.

CME, ICE & CBOE (the major US futures exchanges) all enforce fill ratios as well and have for some time. Fill ratios are not designed to prevent either high frequency or low latency trading, it is there to prevent a particular form of exchange gaming (quote stuffing). You are not being clear (and you are being condescending) on what you mean by HFT players & what you find objectionable. Is a market maker that trades…

> Fill ratios are not designed to prevent either high frequency or low latency trading, it is there to prevent a particular form of exchange gaming (quote stuffing). They are very effective against quote stuffing, but they also work well against player that leave their quote active in the market for 1ms with high frequency. That's false price signaling, and is independent of quote stuffing (as I'm familiar with it: t…

Also as a contrast to your latency arbitrage point, as a market participant myself, I have no problem paying the latency arbitrage fees. It means that I can shop for trading venues that offer features/fee structures that work best for me, without worrying much about price imbalances.

This is much better for me as a participant than the single exchange monopoly is or having to build up an exchange presence at every exchange.

The competition in that space is so fierce that the cut they are taking from me is much less than the alternatives. For me at least, it is a small price to pay.

Re: Barbarians at the Gateways: High-frequency Trading and Exchange Technology

#142

Post by ckdhtc » Sat, Oct 19, 2013, 9:19 PM UTC

gd1 wrote: post #62

sumodds wrote: post #46

Earlier quoted context omitted.

I disagree with this assumption. The problems with military research, law firms, advertisements are of degree not of its existence. Sure, they have their own problems. But we need military research: which is arisen out of insecurities of nation states, to given protection to their states. Law firms, too have a place so too medical clinics and advertisement firms. In case of HFT, the argument is not of degree but exis…

It reduces the friction in every single financial transaction. There used to be considerably more people making markets, at first yelling at each other across the pit, then manually clicking on the screens, now automated out of existence. Machines not just doing the same job mind you, but doing it much better and faster (and without sleeping, toilet breaks, emotions). So the better consistency/efficiency means these…

Why is it concentrated in fewer hands? Yes, there are fewer firms, but many people employed at those firms. For example, Knight has over 1000 people.

Re: Barbarians at the Gateways: High-frequency Trading and Exchange Technology

#143

Post by ckdhtc » Sat, Oct 19, 2013, 9:25 PM UTC

sumodds wrote: post #78

vasilipupkin wrote: post #68

Earlier quoted context omitted.

"And how is it of enormous benefit to society, when it is concentrated in fewer hands". So by your logic, Tesla or SpaceX are not of benefit to society because it's concentraded in very few ( 2 ) hands of Elon Musk ? Secondly, anything that is profitable and legal is of benefit to society, unless it generates obviously negative externalities ( costs for others ) such as pollution the reason is, our society is mainly…

That is a weak argument :). Not really, there is a certain and rather high possibility that common man can buy Tesla cars. Sure, there is a premium price tag now, since we are still chipping the first blocks in making that technology a n economic reality. And that specific case is all the more important, since as you too argue helps to reduce pollution. "Anything that is profitable and legal is of benefit to society"…

"HFTs are tilting the balance in one way (helping the rich getting richer) "

WTF are you talking about?

1. HFT's are full of math and computer science people, which are usually drawn from the middle and lower classes.

2. Before HFT's, the people on the floor were inbred... That's right. There was a lot of passing down the torch since it was the type of job that you can learn by doing it. Oh, yes, and to claim that they were selecting by some "meritocracity", they were selecting for "street smarts" Haha! That only gave them carte blanche to hire their relatives

Re: Barbarians at the Gateways: High-frequency Trading and Exchange Technology

#144

Post by rfnslyr » Sat, Oct 19, 2013, 11:16 PM UTC

shogunmike wrote: post #130

rfnslyr wrote: post #114

Earlier quoted context omitted.

You run quantstart? Haha awesome, thanks for commenting. I've been familiarizing myself with the content on your website. Thanks.

Feel free to send me an email (mike@quantstart.com) if you want any other help!

I will for sure!

Re: Barbarians at the Gateways: High-frequency Trading and Exchange Technology

#145

Post by ckdhtc » Mon, Oct 21, 2013, 12:07 AM UTC

AndrewBissell wrote: post #93

beagle3 wrote: post #19

Earlier quoted context omitted.

Re: spreads & fees: Price spreads and fees have come down as a result of electronic trading being open to everyone, and is probably independent of HFT (at least, modern HFT): E.g., The decreased spreads and fees were happening in europe in the early 2000s, when fastest updates were at 1/4 second, and slower updates were at 2 seconds. The nanosecond scale was not the reason for this. Re liquidity: it depends how you d…

> If you define it as "the probability that a large order can complete", then liquidity has NOT gone up. People seem to have this idea that back in the days of floor-based trading you could just call up the NYSE and say, "sell 1 million shares of Citigroup!" and the market makers would just kindly oblige you, without widening their spreads or trying to eke out a bigger gain from a transaction which inherently carries…

"I don't know about "often," unless you're talking about trading individual issues where news events introduce a high degree of uncertainty. There's really only been one case of a market-wide drying up of liquidity, which lasted for about 15 minutes during the flash crash."

Actually not true. There was plenty of liquidity during the flash crash. It's just that the people who were selling ended up not liking the price they got. During the flash crash, the market was quite in order, except for a few stocks where all the bids were got (too much sell pressure) and the remaining bids were at $0.01... For most stocks, the market was just fine, just that the spread widened up considerably to take into account the temporary uncertainty in the market. Also, the flash crash took 5 minutes, not 15.

Flash crashes happen in human-traded markets took. Recently there was a flash crash in Indian stocks, where humans mark the trades. In fact, human-traded markets are worse: in 1987, the brokers just stopped picking up the phones, even if technically they had an obligation to do so.

Re: Barbarians at the Gateways: High-frequency Trading and Exchange Technology

#146

Post by ckdhtc » Wed, Oct 23, 2013, 2:09 PM UTC

RickHull wrote: post #128

tanzam75 wrote: post #127

Earlier quoted context omitted.

There is so much liquidity in MSFT that it'd trade at a penny spread with or without HFTs. Thus, the only advantage is speed. So you got your order filled in 5 milliseconds instead of 6 milliseconds. So what? You're a person. And stocks without enough liquidity to get to a penny spread? The HFTs don't like those stocks, because the "F" is not "H" enough for them to participate. The very nature of HFTs is that they pr…

> There is so much liquidity in MSFT that it'd trade at a penny spread with or without HFTs. Thus, the only advantage is speed. You're talking to an unabashed proponent of subpenny increments. Smaller spreads, more counterparties, faster execution -- these things cannot possibly hurt. Note that I am talking about the concept of HFT. It's true that there are shady operators who abuse rules and undertake things like qu…

The purpose is to make money, as with _all_ businesses.

You think Apple want to make products and improve people's lives without making money? If so, why don't they reduce the prices? You think Google is all about search? No, it's about making money -- you get encouraged to go after... and I quote Sergey and Larry here, "markets of at least 1 billion" and make products that could potentially be worth 1 billion per year. Search my ass... it's all about making money as with most companies, including most of the the non-profit ones (non-profit hospitals that charge more than the for-profit, universities, etc)