61–70 of 123 posts
The primary function of the stock market is to exchange ownership (shares) in a company. It's odd that we seem to have forgotten that. What value is there in a computer owning a stock for 10 milliseconds?
Actually, it's arguable that among the primary functions of the markets in addition to exchanging ownership is price discovery.
I've never really understood the stock market. Is this basically how it works? A person can make or sell things, but that person is limited in the scope of their business by their available capital. Thus, they can increase their capital by either securing a business loan or by making their company "public." Securing a business loan is risky, because they will still have to pay back the loan regardless of whether or n…
I'm not entirely clear on the exact process either, but I think your initial summary has it mostly correct. There are additional complexities in Share Dividends (you receive a fraction of the companies profits proportional to your number of shares owned, which incentivises not-selling, to a point) The basic issue that HFT (and markets in general) seek to solve is liquidity - the ability to buy & sell when you want, r…
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See, here's the thing I don't understand about liquidity: If it's so valuable for trades to execute in microseconds instead of seconds, and the stock exchanges recognize this value and provide co-location etc to enable it, why are so many stock exchanges closed for half to two thirds of the day? [1] Surely the 15+ hour shut downs are a much bigger limit to liquidity than a few microseconds here and there? There's obv…
I worked in the industry for a little while. At this point, some companies depend on having that daily downtime. Their whole development is based around the fact that they will have guaranteed downtime. It's built right into their software stack. Trying to fiddle with this expected downtime would throw (parts of) the industry into turmoil. It's just a historical quirk, but it's probably here to stay.
Lost me at That brings us to high-frequency trading (HFT) hedge funds. These funds use computer algorithms—a.k.a.: algobots No-one says this. I'm not involved in HFT myself but I know a bunch of people who are, there is a jargon word, but it's not that.
Source: I used to work in high frequency trading.
Earlier quoted context omitted.
See, here's the thing I don't understand about liquidity: If it's so valuable for trades to execute in microseconds instead of seconds, and the stock exchanges recognize this value and provide co-location etc to enable it, why are so many stock exchanges closed for half to two thirds of the day? [1] Surely the 15+ hour shut downs are a much bigger limit to liquidity than a few microseconds here and there? There's obv…
the stock exchanges recognize this value and provide co-location etc to enable it Not true. The exchanges charge hefty fees to colo in their datacentre. What you do with it is completely up to you. It's just more revenue as far as the exchange is concerned. why are so many stock exchanges closed for half to two thirds of the day In practice, this doesn't matter. When NYC closes, trading moves to Tokyo, then onto Lond…
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There is a subset of HFT (Arbitrage) that does have a value to society, because it allows you to trade between markets without fearing that you're somehow losing out (Because the arbritage players would have swept that up).
> allows you to trade between markets without fearing that you're somehow losing out // The corollary to that is that your trades as a mere producer are never going to be [indirectly] profitable because all potential profits from varying price have been swept up by others who're not producing goods/services but instead are only operating to extract value that would otherwise go to producers.
I've never really understood the stock market. Is this basically how it works? A person can make or sell things, but that person is limited in the scope of their business by their available capital. Thus, they can increase their capital by either securing a business loan or by making their company "public." Securing a business loan is risky, because they will still have to pay back the loan regardless of whether or n…
Kinda. A few points to help clarify things: All funds that go into the business will either be debt or equity. Debt gets a guaranteed rate of return, and needs to be paid back. It gets first claim if you go under, but gets no "bonus" if you do well. Equity is an ownership stake; last in line if you go under, but with a claim on all future profits if you do well. The most obvious type of equity stake is your own, but…
That totally makes sense for stocks that pay dividends, but how do you claim your 0.0001% of profits for stocks that don't?
Earlier quoted context omitted.
See, here's the thing I don't understand about liquidity: If it's so valuable for trades to execute in microseconds instead of seconds, and the stock exchanges recognize this value and provide co-location etc to enable it, why are so many stock exchanges closed for half to two thirds of the day? [1] Surely the 15+ hour shut downs are a much bigger limit to liquidity than a few microseconds here and there? There's obv…
I worked in the industry for a little while. At this point, some companies depend on having that daily downtime. Their whole development is based around the fact that they will have guaranteed downtime. It's built right into their software stack. Trying to fiddle with this expected downtime would throw (parts of) the industry into turmoil. It's just a historical quirk, but it's probably here to stay.
Now, I'm sure that in the absence of any need to they haven't done the work to achieve 24-hour operation, but I didn't get the impression it would be beyond the abilities of the entire industry.
Do you think the people I've talked to misrepresented the industry, and it's not as advanced and competent as they made out?