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HFT in My Backyard (2014)

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Re: HFT in My Backyard (2014)

#31

Post by yellowstuff »

alasdair_ wrote: post #24
amelius wrote: post #5

Earlier quoted context omitted.

I could be totally wrong, and perhaps I should read that blog, but working in HFT doesn't sound very rewarding except perhaps in a pure financial sense. It seems to me that the field contributes nothing to society, and has only negative externalities like raising barriers of entry to markets and using insane amount of resources.

> It seems to me that the field contributes nothing to society, and has only negative externalities like raising barriers of entry to markets and using insane amount of resources. I thought the same way for a long time. HFT helps make markets more liquid and (somewhat) may aid price discovery. Now, assuming you buy that, the standard response is “sure, but how does pouring all these resources into shaving picoseconds…

I'm generally supportive of HFT, I think the massive reduction in total profits to market makers relative to 20 years ago is proof of a positive-sum efficiency gain. But I'm not sure I buy your argument for why the nanosecond arms race is good.

Computers getting faster has allowed us to do more and different stuff with computers. What are the actual benefits of HFT "efficiency"? If stocks had an auction every millisecond wouldn't that still be plenty fast enough for any practical purpose?

Only other HFTs will notice or care that AAPL's price got updated in 1 nanosecond instead of 2. Or to go the other way, how would we be better off if stocks ticked every femtosecond? Every attosecond? Is there some limit where the benefits of this "efficiency" aren't worth the resources to pursue it?

Re: HFT in My Backyard (2014)

#32

Post by b20000 »

amelius wrote: post #5
client4 wrote: post #3

This blog actually got me into HFT. It's a fascinating industry with a lot of fun bleeding edge tech challenges.

I could be totally wrong, and perhaps I should read that blog, but working in HFT doesn't sound very rewarding except perhaps in a pure financial sense. It seems to me that the field contributes nothing to society, and has only negative externalities like raising barriers of entry to markets and using insane amount of resources.

working for facebook where you get to inflict pain and insecurity on millions of people is a better investment of your time?

Re: HFT in My Backyard (2014)

#33

Post by b20000 »

doublesCs wrote: post #9
amelius wrote: post #5

Earlier quoted context omitted.

I could be totally wrong, and perhaps I should read that blog, but working in HFT doesn't sound very rewarding except perhaps in a pure financial sense. It seems to me that the field contributes nothing to society, and has only negative externalities like raising barriers of entry to markets and using insane amount of resources.

It's a lot of fun. Unlike selling ads for google.

this

Re: HFT in My Backyard (2014)

#34

Post by nv-vn »

tehjoker wrote: post #28
harryh wrote: post #17

Earlier quoted context omitted.

Thinking of the stock market as merely "a way to provide retirement plans" is wrong. It costs money to serve meals, put people in housing and invent technologies. Where does a lot of that money come from? Our financial system (of which the stock market is a key component). A better functioning financial system enables progress in lots of other industries.

You can have a financial system without a stock market. It would be constituted with public banks or various kinds of credit unions. The reason I cited retirement plans is that is the most sympathetic argument I could think of for caring about the stock market going up. Only ~20% of Americans own stocks, so it going up basically just enriches 1/5th of the population at the expense of the rest.

This says 55% https://news.gallup.com/poll/266807/percentage-americans-own...

Re: HFT in My Backyard (2014)

#35

Post by hendzen »

1e-9 wrote: post #21
hendzen wrote: post #10

Earlier quoted context omitted.

I think it’s more nuanced in reality. There are liquidity providing HFT strategies that profit off the spread - this is good for people moving big size like Vanguard. Then there are liquidity taking strategies that profit by picking off quotes in anticipation of a probable price move. I don’t see how those strategies help Vanguard. Also, most HFT firms do a mix of both types strategies...

The markets need aggressive orders as well as passive orders. There is nothing inherently bad about liquidity taking. It is generally just as beneficial as liquidity providing. If anything, the misuse of passive orders is probably more common than the misuse of aggressive orders because passive orders can be used to influence a market without trading. Even the taking of liquidity in the anticipation of a price move i…

The aggressive liquidity taking strategies cause wider spreads and shallower books as liquidity providers are forced to quote wider and smaller to avoid those adversely selected orders. This essentially is a small tax (or rent) collected from all other market participants.

Re: HFT in My Backyard (2014)

#36

Post by client4 »

amelius wrote: post #5
client4 wrote: post #3

This blog actually got me into HFT. It's a fascinating industry with a lot of fun bleeding edge tech challenges.

I could be totally wrong, and perhaps I should read that blog, but working in HFT doesn't sound very rewarding except perhaps in a pure financial sense. It seems to me that the field contributes nothing to society, and has only negative externalities like raising barriers of entry to markets and using insane amount of resources.

The other replies have valuable points, I can only offer my own. I design low latency fiber routes (not wireless like sniper) and find HFT's are willing to spend a large amount of money for infrastructure (AKA will let me trench 100 miles of fiber if it pencils out). This then translates to better connectivity for regular internet users and lower costs for average internet users, as the primary infra providers are recouping their profits on the high margin customers.

Re: HFT in My Backyard (2014)

#37

Post by client4 »

xwdv wrote: post #18
amelius wrote: post #5

Earlier quoted context omitted.

I could be totally wrong, and perhaps I should read that blog, but working in HFT doesn't sound very rewarding except perhaps in a pure financial sense. It seems to me that the field contributes nothing to society, and has only negative externalities like raising barriers of entry to markets and using insane amount of resources.

It doesn’t “raise barrier to entry”, it lowers it. Before HFT spreads on stocks were hell, imagine a quarter size spread. Now it’s mere pennies, fractions. Also, for people who love computers, HFT is very exciting. Imagine a job where no optimization is too premature, where everything must be done to get the fastest possible speeds and push machines and software to physical limits. Very challenging and very fun. And…

This comment really hits the nail on the head. Want to write code that never hits the L2 cache? Write packet headers before you even know what's going inside? Do the math to see if Starlink provides a better latency based on distance between markets? The questions and answers are endless, difficult, and rewarding to solve.

Re: HFT in My Backyard (2014)

#38

Post by client4 »

ladberg wrote: post #25
jcun4128 wrote: post #4

Are the lines on the map literal? I would think propagation goes around vs. linear but maybe they're using helical antennas so it is high gain? I'm probably confused I'm vaguely aware of the concept with dedicated lines/least latency/etc... I saw a picture of a tower/thinking it's about transmission...

I think it's all point-to-point directional antennas, so it would be linear.

Yes. The HFT industry likes Aviat radios.

Re: HFT in My Backyard (2014)

#39

Post by gruez »

hendzen wrote: post #35
1e-9 wrote: post #21

Earlier quoted context omitted.

The markets need aggressive orders as well as passive orders. There is nothing inherently bad about liquidity taking. It is generally just as beneficial as liquidity providing. If anything, the misuse of passive orders is probably more common than the misuse of aggressive orders because passive orders can be used to influence a market without trading. Even the taking of liquidity in the anticipation of a price move i…

The aggressive liquidity taking strategies cause wider spreads and shallower books as liquidity providers are forced to quote wider and smaller to avoid those adversely selected orders. This essentially is a small tax (or rent) collected from all other market participants.

>The aggressive liquidity taking strategies cause wider spreads and shallower books as liquidity providers are forced to quote wider and smaller to avoid those adversely selected orders

Is there evidence for this?

Re: HFT in My Backyard (2014)

#40

Post by xwdv »

client4 wrote: post #37
xwdv wrote: post #18

Earlier quoted context omitted.

It doesn’t “raise barrier to entry”, it lowers it. Before HFT spreads on stocks were hell, imagine a quarter size spread. Now it’s mere pennies, fractions. Also, for people who love computers, HFT is very exciting. Imagine a job where no optimization is too premature, where everything must be done to get the fastest possible speeds and push machines and software to physical limits. Very challenging and very fun. And…

This comment really hits the nail on the head. Want to write code that never hits the L2 cache? Write packet headers before you even know what's going inside? Do the math to see if Starlink provides a better latency based on distance between markets? The questions and answers are endless, difficult, and rewarding to solve.

Love reading about HFT optimizations, unfortunately it’s rare since a lot of the techniques used are basically trade secrets. Everyone’s always looking for an edge.
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