3 ms·

costs are lot lower than ever. Think about what you had to do before direct feeds and colocation. You had to have guys on the floor of the exchange. If you t

costs are lot lower than ever. Think about what you had to do before direct feeds and colocation. You had to have guys on the floor of the exchange. If you think paying them was cheaper than a direct feed, then you are wrong. Direct feeds cost money because....everything costs money. Exchanges are businesses, why should they give away their data for free ?

harmegido 11y ago
Couldn't agree with you more. The question surrounding HFT should not be: "is this perfect?" , but instead should be: "is this better than before?". And also, I'd point out that it takes hundreds of thousands of dollars to start a bank as well. Do existing banks have an unfair advantage over prospective start-ups due to these barriers to entry? Of course, but that's pretty much how the world works everywhere. It's not specific to HFT.
beagle3 11y ago
> costs are lot lower than ever. Depends on your time frame. Back in 2005 or so (until NASDAQ bought INET), you could get everything INET for ~$1000/month, and be on par with the big guys (as far as INET was concerned). And practically overnight after NASDAQ bought them, the price went up to ~$6000 (for exactly the same service). And HFTs are (at least partially) to blame - they all used INET, raising the volume there significantly, which got NASDAQ scared, rushed to buy INET, and jack up the price to pay for it (and because now, monopolizing the nasdaq trades again, they could). Also back in 2005, Eurex did NOT have a fast feed, only a slow one (updating twice a second, if memory serves me right, and fitting on a 512Kb line). And it cost just a couple of hundred dollars to get above infrastructure costs (dedicated line, data providers, trading systems, etc). Then the fast feed came, and it costs thousands of dollars per month (in addition to infrastructure). And it came because of the HFTs. Costs are lower than ever in the sense that slow data is cheaper than it was, and fast data is cheaper than it was. However, costs are not at all lower than ever in the sense that in 2000 to ~2006, you could be on par with the most sophisticated players for much cheaper than you can today. > You had to have guys on the floor of the exchange. If you think paying them was cheaper than a direct feed, then you are wrong. Although the floors still dominated in the early 2000s, you only needed to trade them if you traded huge blocks. Smaller blocks worked perfectly well (and more efficiently, and with much better price discovery) on the electronic exchanges. How far back are you thinking of? > Direct feeds cost money because....everything costs money. Exchanges are businesses, why should they give away their data for free ? They shouldn't. Some people (me not among them) think it's unfair that to get that data completely and timely is so expensive. Personally, I think the unfairness runs so much deeper that it makes no difference. And I also think that expectations of fairness are also misguided. As you mentioned, the exchanges are businesses - they are in business of making money, not of being fair. Unfortunately, most people are blind to that.
- vasilipupkin 11y ago
  The idea that you, as an unsophisticated investor, could ever be on par with the most sophisticated investors is a myth. Sophistication is there for a reason.
- shalmanese 11y ago
  It's like the fast pass system at Disneyland. In the beginning, there were no fast passes so everyone was equally miserable. Then Disney introduced fast passes and the people who spent the money on them got a significantly better experience. As more and more people bought fast passes, the wait times for fast passes began to resemble the pre-fast pass experience. Nowadays, it's pretty much mandatory to get a fast pass if you want any sort of reasonable experience in the park at all. People are still equally as miserable but Disney is now making a lot more money.

harmegido 11y ago

Couldn't agree with you more. The question surrounding HFT should not be: "is this perfect?" , but instead should be: "is this better than before?". And also, I'd point out that it takes hundreds of thousands of dollars to start a bank as well. Do existing banks have an unfair advantage over prospective start-ups due to these barriers to entry? Of course, but that's pretty much how the world works everywhere. It's not specific to HFT.

beagle3 11y ago

> costs are lot lower than ever. Depends on your time frame. Back in 2005 or so (until NASDAQ bought INET), you could get everything INET for ~$1000/month, and be on par with the big guys (as far as INET was concerned). And practically overnight after NASDAQ bought them, the price went up to ~$6000 (for exactly the same service). And HFTs are (at least partially) to blame - they all used INET, raising the volume there significantly, which got NASDAQ scared, rushed to buy INET, and jack up the price to pay for it (and because now, monopolizing the nasdaq trades again, they could). Also back in 2005, Eurex did NOT have a fast feed, only a slow one (updating twice a second, if memory serves me right, and fitting on a 512Kb line). And it cost just a couple of hundred dollars to get above infrastructure costs (dedicated line, data providers, trading systems, etc). Then the fast feed came, and it costs thousands of dollars per month (in addition to infrastructure). And it came because of the HFTs. Costs are lower than ever in the sense that slow data is cheaper than it was, and fast data is cheaper than it was. However, costs are not at all lower than ever in the sense that in 2000 to ~2006, you could be on par with the most sophisticated players for much cheaper than you can today. > You had to have guys on the floor of the exchange. If you think paying them was cheaper than a direct feed, then you are wrong. Although the floors still dominated in the early 2000s, you only needed to trade them if you traded huge blocks. Smaller blocks worked perfectly well (and more efficiently, and with much better price discovery) on the electronic exchanges. How far back are you thinking of? > Direct feeds cost money because....everything costs money. Exchanges are businesses, why should they give away their data for free ? They shouldn't. Some people (me not among them) think it's unfair that to get that data completely and timely is so expensive. Personally, I think the unfairness runs so much deeper that it makes no difference. And I also think that expectations of fairness are also misguided. As you mentioned, the exchanges are businesses - they are in business of making money, not of being fair. Unfortunately, most people are blind to that.

vasilipupkin 11y ago
The idea that you, as an unsophisticated investor, could ever be on par with the most sophisticated investors is a myth. Sophistication is there for a reason.
shalmanese 11y ago
It's like the fast pass system at Disneyland. In the beginning, there were no fast passes so everyone was equally miserable. Then Disney introduced fast passes and the people who spent the money on them got a significantly better experience. As more and more people bought fast passes, the wait times for fast passes began to resemble the pre-fast pass experience. Nowadays, it's pretty much mandatory to get a fast pass if you want any sort of reasonable experience in the park at all. People are still equally as miserable but Disney is now making a lot more money.