201–210 of 328 posts
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Forgive me for asking but what does GP here stand for?
Grandparent comment, i.e., two links up in the comment tree. (It's a common term on internet forums -- I learned it from Slashdot years ago)
...actually it doesn't sound to me like this article is about HFT-based prop trading at all (prop trading would mean Goldman Sachs taking positions onto their own books), but about the business unit called GSAT (Goldman Sachs algorithmic trading) who execute trades on behalf of clients, so never taking any positions onto their own books. The traditional market model used to be that at every point in time, a market ma…
> When a pension fund wanted to execute a trade, they would have had to cross the spread, and, statistically speaking, half the spread would immediately accrue to the market maker as profit. ..so this is money that YOU, the holder of a pension, are losing, and that THEY, the rich folks acting as market makers that the public likes to get mad at, are taking away from you. This is totally incorrect. Let's say a pension…
I was making a point about the business model of a proptrader marketmaker versus the business model of an algorithmically sophisticated broker and needed to establish some preliminaries and it would have served zero purpose to go into the particulars of the costs related to risk warehousing.
Having worked for an equities highfrequency marketmaking business myself: Mark-to-market at mid-price is the benchmark that those traders will use for figuring out, at the end of the day/week/month, whether it was a good or a bad day/week/month, and at the end of the year for negotiating their bonuses, even when they are left holding some positions with uncertain future. Everybody knows that it's a simplification/approximation, but, due to the efficient markets hypothesis, it's a very good one.
It's the kind of approximation where it's being taken for granted that people understand that it's not ACTUALLY the trader's profit. Because otherwise one would need to include in the discussion the fact that the receptionist at the proptrader marketmaker's office building is also a cost factor eating into their margins.
I didn't mention the risk warehousing for the same reason I didn't mention the receptionist. And I'm not going to go into a rebuttal about how it's definitely not necessary to hedge every single trade, for the same reason: because it's not the topic under discussion here.
It's called the "maxim of quantity" and it is a generally-accepted maxim of conversation. (see https://en.wikipedia.org/wiki/Cooperative_principle)
Maxim of quantity: * Make your contribution as informative as is required (for the current purposes of the exchange). * Do not make your contribution more informative than is required.
So, to conclude: Your conversational move in this language game was a pretty weak one. The sentence "this is totally incorrect" however sounds like someone trying to establish dominance. Weakness and trying to establish dominance is a bad combo.
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Is the human allowed to use pencil & paper when reasoning about the stock? A graphing calculator? A spreadsheet program? A numerical SDE solver? By what rule do you propose limiting other people’s free choice to use computing resources to accelerate the time scale of reasoning about a price?
The "free choice" argument is a charade: the only people with the "freedom" (ie, wealth) to win that race are "people" like Goldman Sachs. On the whole, it's just another legal mechanism for pumping money from the poor to the wealthy. Modern markets could not exist without regulation, which by definition limits freedoms. We're just talking about a sensible regulation that eliminates a pointless misdirection of resour…
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Firstly, this article has nothing to do with HFT. Goldman is executing on behalf of clients who are not HFT Secondly, your statement makes an implicit assumption that there is no value in providing liquidity to capital markets. This assumption is false. Think of your local grocery store. Sure, you could drive down to the distribution center and buy stuff there. But instead you go to the store where it’s conveniently…
An article titled "GS spending millions to shave millisecconds off stock trades" has nothing to do with HFT? It isn't at all clear to me buying and selling at an auction even only once a day, let alone once a minute or second would make financial market end user worse off. Grocery logistics is a terrible analogy for financial markets.
> It isn't at all clear to me buying and selling at an auction even only once a day, let alone once a minute or second would make financial market end user worse off.
Go look at the history. Back before the 80s, trading was done by hand, sub-second anything was impossible. Guess what! Spreads were enormous, and the cost of doing business was huge. As a financial market end user (I have a pension), I want the smallest spreads possible.
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> What about price discovery is pointless? Would you prefer that prices update only once a day? Once a week? Once a month? Realtime pricing of securities and derivatives is critical for an efficiently functioning economy. Pretty much everything at sub-second resolution is pointless. I'd like to hear a coherent argument how realtime or even sub-second pricing of securities and derivatives is critical for an efficientl…
This. A million times this. All possible arguments for price discovery are totally invalidated by regular market closures. Conversely, if sub-second resolution is somehow "a good", then by extension sub-millisecond price discovery is "even better". There are some insane people that state this kind of gibberish with a straight face. If millisecond are good, then surely microseconds are even better! Next... nanosecond…
HFT systems look a lot like feedback driven control loops. Mandating a minimum resolution would be ridiculous.
Markets around the world are determining prices on a massive variety of instruments that derive value from the current and future value of products such as currencies, interest rates, equities, grains, livestock, metals, oil, gasoline, natural gas, and electricity. These prices allow us to prioritize resources, make fair transactions, and manage risk (i.e. buy insurance on the value of critical products so that we ca…
Yes, that's the model. So, tell me. Would any profit be possible in an ideally functioning market? If so, how is any item worth more than the total cost of all inputs including externalities? If not, how is such a dynamic system attracted to an ideal state, given that those who would make the market ideally functional are best placed to gain from market inefficiency and dysfunction? Given an answer, do you have a sou…
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> What about price discovery is pointless? Would you prefer that prices update only once a day? Once a week? Once a month? Realtime pricing of securities and derivatives is critical for an efficiently functioning economy. Pretty much everything at sub-second resolution is pointless. I'd like to hear a coherent argument how realtime or even sub-second pricing of securities and derivatives is critical for an efficientl…
This. A million times this. All possible arguments for price discovery are totally invalidated by regular market closures. Conversely, if sub-second resolution is somehow "a good", then by extension sub-millisecond price discovery is "even better". There are some insane people that state this kind of gibberish with a straight face. If millisecond are good, then surely microseconds are even better! Next... nanosecond…
As has been pointed out elsewhere, the really big markets are OTC.
> If millisecond are good, then surely microseconds are even better! Next... nanosecond resolution price discovery for the uuuuuultimate liquidity.
If I go to market to get a price, I'd quite like that price "now", not at some arbitrary point in the future. Increasing the resolution reduces the amount of time I have to wait.
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> The reason why shaving a few milliseconds (or even microseconds) can be beneficial is because the price discovery feedback loops get faster Berkshire Hathway has couple of trades every minute and difference in bid/ask prices is huge around $1000+, yet you dont see people complaining about that.
The bid/ask spread is a separate issue from latency (Edit: although it should tend to be less with better price discovery). To appreciate the benefit of lower latency, I think you have to consider the bigger picture of many interrelated price discovery feedback loops involving many instruments. Many small speedups can result in a much more stable and beneficial system. In the case of Berkshire Hathaway, the value of…
Exactly, its the same with other stocks.
> The bid/ask spread is a separate issue from latency.
Yes but it also the second point made by HFT's that they reduce the spread.
"Using so-called microservices to break complicated problems into easy-to-solve ones" I would love to see microservices which actually solve problems and reduce complexity! :(
I am curious how that will help latency here. It must be pretty bad if refactoring and adding more network connections is an improvement.
Markets around the world are determining prices on a massive variety of instruments that derive value from the current and future value of products such as currencies, interest rates, equities, grains, livestock, metals, oil, gasoline, natural gas, and electricity. These prices allow us to prioritize resources, make fair transactions, and manage risk (i.e. buy insurance on the value of critical products so that we ca…