6 ms·

They're saying that low latency / lack of fundamentals (versus 'market events') marks HFT. Unfortunately, at the end of the day, even if you are only about 'fu

They're saying that low latency / lack of fundamentals (versus 'market events') marks HFT. Unfortunately, at the end of the day, even if you are only about 'fundamentals' (whatever that means) you're obviously going to want to trade FIRST on those fundamentals .. right? Cause whoever does is going to win the day. Ok, so low latency is necessary for normal electronic trading. Ok, now market events versus fundamentals. Seriously? At what point are 'market events' not fundamentals? The definition is all arbitrary. If there is a change in some correlating index, isn't that a 'market event'? But isn't it also rather fundamental (say, that correlating index is interest rates futures)? At what point does that change in the correlating index no long qualify as a 'fundamental event'? When Nanex says it doesn't? Nanex simply wants to have its cake and doesn't want to be marked as "HFT". All electronic trading, at its heart, is going to be HFT at some point. The only way to keep that from happening is just come up with really arbitrary definitions marking the line you can't cross. Likely those definitions will be used to help whoever is paying Hillary Clinton/Bush/Trump/etc the most money. Let's not bother with these shenanigans just put a transactional tax on everything and be done with it. Let's stop spending all our time and our brain power creating software to do trading and start getting back to actually researching /innovating / building things.

vasilipupkin 11y ago
the problem with transaction taxes is, if they are high, they reduce trading and liquidity. When you go to buy and sell stocks, or futures or govt bonds, what do you think is the process that keeps the difference between bid ( buy ) price and ask ( sell price ) relatively narrow ? it's the frequent trading process that does it
- tomchristie 11y ago
  Does anyone know if regulations on minimum terms for holding period for stock ever been used/considered in modern markets? (eg. day/week/month?) I realize that it'd effect liquidity in a similar way to transactional taxes (portion of portfolio tied up in term at any given point) but could it also reduce volatility and ensure trading against long term value rather than short term artifacts?
  - vasilipupkin 11y ago
    no, it would increase volatility. People think that volatility increases with trading. In fact, volatility can be very high without trading. Because the prices at which people can trade will fluctuate even more if you make it harder to trade
    - tomchristie 11y ago
      I understand we can speculate that volatility could increase due to lower trading volumes, but the lower volumes aren't the only factor to take into account in this scenario.
      - vasilipupkin 11y ago
        right, well, think of it this way. Trading process is the process of price discovery. Most recent traded price is the current price for the asset, assuming it's trading frequently. An infrequently traded asset creates more uncertainty about what is its actual current market price. And volatility is a function of uncertainty.
tomchristie 11y ago
> you're obviously going to want to trade FIRST on those fundamentals .. right? Cause whoever does is going to win the day If you're only trading long term, then sub-second differences are essentially irrelevant. I think there's a perfectly reasonable point here. Fundamentals as "trading against the future profit of the company". HFT as "trading against the system".
- blazespin 11y ago
  Absolutely! Which is why a transactional / tobin tax wouldn't hurt such folks as they will be trading infrequently. https://en.wikipedia.org/wiki/European_Union_financial_transaction_tax https://en.wikipedia.org/wiki/European_Union_financial_trans...
  - Frondo 11y ago
    And it's funny, New York already has such a law on the books: http://www.thenation.com/article/why-cuomo-leaving-wall-street-cash-table/ http://www.thenation.com/article/why-cuomo-leaving-wall-stre... The tax is instantly rebated since 1981 (thanks, Reagan-era politicians!), so no money around this tax ever changes hands. It seems like it could be an interesting place to start looking as a model for a federal-level tax on financial trading.
    - blazespin 11y ago
      Yeah, but I'm not naive enough to think this will get passed soon. The problem with the US is that its manufacturing base has been so hollowed out it has become reliant on its treasury bonds + QE money printing fed (backed by its military) and financial hegemony (think Goldman Sachs) that results from it. The ftt got passed in the EU because Germany (which runs the EU, mostly) actually still makes things. They don't need the world to transact their bonds in order to stay liquid.
      - dantillberg 11y ago
        I was curious about this conjecture that the US doesn't make things, while Germany does. So I dug up [0], a table of "Manufacturing, value added (current US$)", and here are the top five countries for 2013: 1: China $2.9bn, 2: United States $1.9bn, 3: Japan $904m, 4: Germany $745m, 5: Korea $368m Manufacturing in Germany may contribute a higher percentage of GDP, but it does not appear to have a larger (in dollars, according to this data) manufacturing base than the US in absolute terms. [0]: http://data.worldbank.org/indicator/NV.IND.MANF.CD?order=wbapi_data_value_2013+wbapi_data_value&sort=desc http://data.worldbank.org/indicator/NV.IND.MANF.CD?order=wba...

vasilipupkin 11y ago

the problem with transaction taxes is, if they are high, they reduce trading and liquidity. When you go to buy and sell stocks, or futures or govt bonds, what do you think is the process that keeps the difference between bid ( buy ) price and ask ( sell price ) relatively narrow ? it's the frequent trading process that does it

tomchristie 11y ago
Does anyone know if regulations on minimum terms for holding period for stock ever been used/considered in modern markets? (eg. day/week/month?) I realize that it'd effect liquidity in a similar way to transactional taxes (portion of portfolio tied up in term at any given point) but could it also reduce volatility and ensure trading against long term value rather than short term artifacts?
- vasilipupkin 11y ago
  no, it would increase volatility. People think that volatility increases with trading. In fact, volatility can be very high without trading. Because the prices at which people can trade will fluctuate even more if you make it harder to trade
  - tomchristie 11y ago
    I understand we can speculate that volatility could increase due to lower trading volumes, but the lower volumes aren't the only factor to take into account in this scenario.
    - vasilipupkin 11y ago
      right, well, think of it this way. Trading process is the process of price discovery. Most recent traded price is the current price for the asset, assuming it's trading frequently. An infrequently traded asset creates more uncertainty about what is its actual current market price. And volatility is a function of uncertainty.

tomchristie 11y ago

> you're obviously going to want to trade FIRST on those fundamentals .. right? Cause whoever does is going to win the day If you're only trading long term, then sub-second differences are essentially irrelevant. I think there's a perfectly reasonable point here. Fundamentals as "trading against the future profit of the company". HFT as "trading against the system".

blazespin 11y ago
Absolutely! Which is why a transactional / tobin tax wouldn't hurt such folks as they will be trading infrequently. https://en.wikipedia.org/wiki/European_Union_financial_transaction_tax https://en.wikipedia.org/wiki/European_Union_financial_trans...
- Frondo 11y ago
  And it's funny, New York already has such a law on the books: http://www.thenation.com/article/why-cuomo-leaving-wall-street-cash-table/ http://www.thenation.com/article/why-cuomo-leaving-wall-stre... The tax is instantly rebated since 1981 (thanks, Reagan-era politicians!), so no money around this tax ever changes hands. It seems like it could be an interesting place to start looking as a model for a federal-level tax on financial trading.
  - blazespin 11y ago
    Yeah, but I'm not naive enough to think this will get passed soon. The problem with the US is that its manufacturing base has been so hollowed out it has become reliant on its treasury bonds + QE money printing fed (backed by its military) and financial hegemony (think Goldman Sachs) that results from it. The ftt got passed in the EU because Germany (which runs the EU, mostly) actually still makes things. They don't need the world to transact their bonds in order to stay liquid.
    - dantillberg 11y ago
      I was curious about this conjecture that the US doesn't make things, while Germany does. So I dug up [0], a table of "Manufacturing, value added (current US$)", and here are the top five countries for 2013: 1: China $2.9bn, 2: United States $1.9bn, 3: Japan $904m, 4: Germany $745m, 5: Korea $368m Manufacturing in Germany may contribute a higher percentage of GDP, but it does not appear to have a larger (in dollars, according to this data) manufacturing base than the US in absolute terms. [0]: http://data.worldbank.org/indicator/NV.IND.MANF.CD?order=wbapi_data_value_2013+wbapi_data_value&sort=desc http://data.worldbank.org/indicator/NV.IND.MANF.CD?order=wba...