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Apple and the risks of trading 29,000 times per second

tech.fortune.cnn.com

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Re: Apple and the risks of trading 29,000 times per second

#21

Post by retube »

tedunangst wrote: post #3

"In 2011, BATS accounted for more than one in 10 U.S. stock trades, processing an average of 29,000 trades per second. Against that kind of computer power, retail investors don't stand a chance." Correct me if I'm wrong, but isn't BATS an exchange? Why are retail investors "competing" against the exchange? Is the solution some sort of paper and pencil exchange? Or maybe we can go back to jumping up and down and flapp…

You're correct. It just means BATS is processing a lot of orders. I'm guessing LIFFE, LSE etc process far more. The articles conclusion is comepletey erreneous - this has nothing to do with HFT.

Edit: And wrt to retail investors "competing" agianst HFT - they're not. A retail investor is not interested in expoiting very short-lived pricing discrepancies between different contracts (or perhaps the same/equivalent contracts that trade on multiple exchanges). A retail investor is just that - an _investor_ - who holds the stock.

Re: Apple and the risks of trading 29,000 times per second

#22

Post by crististm »

guelo wrote: post #20

I've been trying to figure out how to keep my money as far away from Wall Street goons as possible. The hit on Goldman Sachs' reputation from a couple weeks ago is the latest signal that Wall Street's job is to steal customers' money, stay away. The loss in confidence will eventually get them, though that will probably just mean they get another bailout.

I just like how they invent lingo to cover up their screw-ups. False print? Come on - Now if I want to describe the problem there is a name for it. And they made sure to mention it three times + one in the photo so I will remember it.

Re: Apple and the risks of trading 29,000 times per second

#23

Post by fleitz »

Iv wrote: post #12
fleitz wrote: post #7

Earlier quoted context omitted.

Why should trading at that frequency be illegal? What is the optimal amount of trades per second one should be making? Once per second? Once per minute? Once per year? Even if there were such a number how could any bureaucrat ever arrive at the optimal frequency any particular market participant should be trading at?

Does the intrinsic value of a company change 29 000 times per second ? is this signal or noise ? Trading once per day and randomizing the order of trades would work nicely I think. There was a recent very good example of this concerning Apple : When Steve Jobs died, they kept the information secret and agreed with the stock exchange to suspend trading for a day. The time for everyone to think about what it meant for…

The intrinsic value of a company is unknowable, the only thing we can know is the market value.

For some companies I do think the value could change 29,000 times per second, if it didn't the stock simply wouldn't move . You can see this in the juniors where HFT is rare if non-existant.

I do think that it's a good idea to have an exchange that doesn't allow HFT, or perhaps only allows trades every day, and for it to be able to compete with exchanges that do allow HFT. If this system is better then companies will list their stock on that exchange instead of exchanges that don't allow HFT.

However, what I disagree with is the idea that people should be put in jail for trading stock too frequently.

Re: Apple and the risks of trading 29,000 times per second

#24

Post by anonymoushn »

ars wrote: post #8
fleitz wrote: post #7

Earlier quoted context omitted.

Why should trading at that frequency be illegal? What is the optimal amount of trades per second one should be making? Once per second? Once per minute? Once per year? Even if there were such a number how could any bureaucrat ever arrive at the optimal frequency any particular market participant should be trading at?

Just add a sales tax on stock.

You'll just make the spread larger by the amount of the tax. Why is this a good thing?

Re: Apple and the risks of trading 29,000 times per second

#25

Post by anonymoushn »

prodigal_erik wrote: post #17
tedunangst wrote: post #15

Earlier quoted context omitted.

If it's mainly noise, why do you care? What I find most amazing is that the stock market is relatively small, yet people have strong opinions about it while ignoring much larger markets. There's some adage about how if you can't measure it, it doesn't exist or something. If CNN doesn't run a ticker for some market, I guess it doesn't matter.

I care if all my 401(k) alternatives are in markets being parasitized by HFTs who have learned to exploit execution flaws and attack the confidentiality of the order book. Less selfishly, I care if HFTs are diverting society's resources away from the effective producers the market exists to support.

Less selfishly, I care if HFTs are diverting society's resources away from the effective producers the market exists to support.

Unfortunately, there's gold in them there microseconds.

Re: Apple and the risks of trading 29,000 times per second

#26

Post by bloat »

crististm wrote: post #22
guelo wrote: post #20

I've been trying to figure out how to keep my money as far away from Wall Street goons as possible. The hit on Goldman Sachs' reputation from a couple weeks ago is the latest signal that Wall Street's job is to steal customers' money, stay away. The loss in confidence will eventually get them, though that will probably just mean they get another bailout.

I just like how they invent lingo to cover up their screw-ups. False print? Come on - Now if I want to describe the problem there is a name for it. And they made sure to mention it three times + one in the photo so I will remember it.

Right... because we don't have any jargon in the tech industry.

Re: Apple and the risks of trading 29,000 times per second

#27

Post by EvilTerran »

anonymoushn wrote: post #24
ars wrote: post #8

Earlier quoted context omitted.

Just add a sales tax on stock.

You'll just make the spread larger by the amount of the tax. Why is this a good thing?

While it would make the spread larger, I disagree with your use of the word "just". It would have many other effects as well - for one thing, it'd make trades on small shifts in value (ie less than twice the sales tax) unprofitable.

That would make HFT much less attractive at the ridiculous frequencies it happens currently, as you'd need to hold on to stock for longer for it to shift enough for the gross gain to exceed the sales tax. I suspect that's the effect ars had in mind.

Also, you could always put the tax into a kitty for bailing out the financial institutions who're engaging in this lark the next time they mess it up ;)

Re: Apple and the risks of trading 29,000 times per second

#28

Post by Iv »

tedunangst wrote: post #15
Iv wrote: post #12

Earlier quoted context omitted.

Does the intrinsic value of a company change 29 000 times per second ? is this signal or noise ? Trading once per day and randomizing the order of trades would work nicely I think. There was a recent very good example of this concerning Apple : When Steve Jobs died, they kept the information secret and agreed with the stock exchange to suspend trading for a day. The time for everyone to think about what it meant for…

If it's mainly noise, why do you care? What I find most amazing is that the stock market is relatively small, yet people have strong opinions about it while ignoring much larger markets. There's some adage about how if you can't measure it, it doesn't exist or something. If CNN doesn't run a ticker for some market, I guess it doesn't matter.

For the same reason you minimize noise to prevent Larsen effects : It is noise that can have feedback effects.

Re: Apple and the risks of trading 29,000 times per second

#29

Post by jrabone »

My fear as a pessimistic engineer is that unless there is more regulation of HFT, sooner or later someone big (a bank, an exchange, a country) is going to be financially wiped out by a HFT-gone-bad incident, and the resulting mess will take years to unravel while everyone else (pension funds, private investments, etc.) gets to suffer for the sins of their masters.

I propose an exponentially decaying tax on trades - the longer you hold a purchase, the less you pay when you sell it. If you WANT to trade at sub-microsecond levels, you can bloody well pay for the clean-up fund when your system goes bad.

Re: Apple and the risks of trading 29,000 times per second

#30

Post by tezza »

crististm wrote: post #22
guelo wrote: post #20

I've been trying to figure out how to keep my money as far away from Wall Street goons as possible. The hit on Goldman Sachs' reputation from a couple weeks ago is the latest signal that Wall Street's job is to steal customers' money, stay away. The loss in confidence will eventually get them, though that will probably just mean they get another bailout.

I just like how they invent lingo to cover up their screw-ups. False print? Come on - Now if I want to describe the problem there is a name for it. And they made sure to mention it three times + one in the photo so I will remember it.

Easy, "false print" comes from the days of ticker-tape

Ticker tape would literally be a paper tape. Trade info like last trade prices/qty would be sent over a telegraph link to be printed on the paper tape.

That's where the Print comes from.

The False bit is some error along the way means the print you got should be discarded. Historical reasons were operator error, dead rats on wires, cosmic rays etc

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