Thread for people to explain how immigrants take jobs

[Dinner]

See post above your's. Oh, and we haven't even gotten into the whole conflict of interest problem where brokerages handle both their own and customer's trades but give themselves a leg up over their own customers. Sure, you can say the guy should move his business but when they're all doing the same thing and only one guy has the optimum HFT spot closest to the server, well... There really isn't all that much choice is there? Just bad and worse so once again we've ended up with the game slightly rigged in certain people's favor.

[giblets]

Your judgment is meaningless on that, as is mine, except for the fact that I base my statements on the combined wisdom of the entire human race as revealed through market prices.

How does my judgment have anything to do with your or Pax's income? **** off.

[Dinner]

I'd also like to hear what people think of last year's flash crash due to HST and how such negative effects can be avoided in the future.

[KrazyHorse]

That's not necessarily true in this case as being closer to the exchanges server would still allow some players (the guy who gets his server closest to the exchange's server) to retain an advantage simply due to geography of how close they can get their equipment to the exchanges equipment. Sure, you can reasonably say that with increased competition the margin would go down but some people would still have an inherent advantage over everyone else.

Let's think about a relatively old piece of HFT technology: the transatlantic telegraph. To this day, the GBP/USD FX rate is called the "cable" due to the impact the telegraph had on the market. Was it fair that those who did not have access to the telegraph could be arbitraged by those who did (and who therefore knew the price on the other side of the ocean virtually instantaneously)? Does it matter? Of course not. There's no such thing as fair. There was an inefficiency in the market (the week it took for news to travel from NYC to LDN) and by reducing the inefficiency some people made some money for a while, until that source of alpha disappeared. Meanwhile, people as a whole were better off because they knew more quickly the financial conditions in the other important world center of the time, and were able to more fully integrate this information into their plans.

There is no difference between this and a HFT scooping some fractions of a penny out of a transaction. Remember that JUST TEN YEARS AGO stocks weren't even decimalized yet; spreads were more than 10 times as large. Now people ***** and moan that they might get hit for 0.2 cents. In ten years they'll be whining about the 0.02 cents the evil HFT sucked out of them...

[Dinner]

Please, do enlighten us with your definition of "fair".

The SEC's proposal to limit how fast the HSTs can go seems fair. Sure, that will have down sides (increases latency and a ever so slightly increased spread) but it would get rid of the institutional advantage some players enjoy over others.

[KrazyHorse]

I'd also like to hear what people think of last year's flash crash due to HST and how such negative effects can be avoided in the future.

The thing that really pissed me off was that the exchanges canceled the trades they considered unreasonable (after the fact).

Let that sink in for a second. Some people had written their code in such a way to profit from, and thereby slow down or stop such an occurrence and were, after the fact, told that this service was not something they should provide.

Way to go.

[Dinner]

There is no difference between this and a HFT scooping some fractions of a penny out of a transaction. Remember that JUST TEN YEARS AGO stocks weren't even decimalized yet; spreads were more than 10 times as large. Now people ***** and moan that they might get hit for 0.2 cents. In ten years they'll be whining about the 0.02 cents the evil HFT sucked out of them...

That's true and it does increase liquidity as well as lower spreads but I'd still like to hear from experts about ways to make the market more transparent so that some players can't game others in this fashion. What do you think of the flash crash, HST's role in it, and ways to reduce such things happening in the future?

Edit: It sounds like you anwsered the flash crash thing but what do you think of the SEC's "buy in force" proposal WRT HST. That is a buy order has to sit out there for X amount of time before it can be retracted.

[KrazyHorse]

The SEC's proposal to limit how fast the HSTs can go seems fair. Sure, that will have down sides (increases latency and a ever so slightly increased spread) but it would get rid of the institutional advantage some players enjoy over others.

"Certainly there is some marginal benefit to New York knowing what the price of things is in London with less than a week's delay, but it's unfair that those whose offices are near the telegraph building have an advantage. I say we make it illegal to pass on financial information over the telegraph. Harrumph harrumph hear hear monocle monocle cigars."

[KrazyHorse]

By the way, the amount your broker charges you to complete a cash equity transaction outweighs the average profit some HFT makes on your transaction by 1-2 orders of magnitude...

[Dinner]

Also I mentioned conflict of interest earlier. The whole does HST amount to front running thing which salon.com wrote so much about back in 2010 after the flash crash. Depending on the how the code is written it seems like front running could be occuring (which is illegal) and goes back to the whole unfairness issue earlier.

[KrazyHorse]

It's already illegal for brokers to front run customer trades. Note that front-running is useless unless the customer trade is quite large (and will therefore move the market). It's not a concern for most of us small investors.

Knowing salon.com, they don't actually know what front-running is

By the way, the only people who have to fear HFTs are slower HFTs. If you're entering the marketplace with a microsecond turnaround and there's somebody at half a microsecond he will eat you alive. If you're transacting once a day or once a year, you are essentially impervious to HFTs.

[Dinner]

That is very possible.

[Tupac Shakur]

I'll respond when you manage to address a single point with anything approaching an intelligible argument. Until then, I'm quite happy to let you sputter about like a little *****.

Well said.

[Tupac Shakur]

I sometimes wonder if there really is something wrong with you.

There is, dude. Don't be a dick to the disabled.

[Guynemer]

Who does, then?

The government.