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There's a pretty strong chance that your retirement funds are not being cannibalized by Samsung or Apple. Whereas, with HFT...

joosters 11y ago
Even if we all accept that HFTs are 'stealing' fractions of a penny per trade, just how often do you trade your retirement funds?
- djyaz1200 11y ago
  Much more often than you might think. Every time we make a deposit (likely monthly/bi/weekly) that money needs to be deployed (aka stock purchased). If we are part of a big fund that fund may need to buy stocks in huge chunks and when the HFT sniffs out what they are buying they will raise the price.
  - nick_dm 11y ago
    The price has to go up anyway, that's what happens when demand increases, it's nothing to do with HFT. Large block trades like this will often be arrange over the counter (OTC) or on dark pools, so the fund purchasing the shares will get a fixed price and it's up to the market maker to deal with the execution risk in the open market. Edit: As Harryh said, large mutual fund managers believe that HFT allows them to get better prices for their customers: http://www.cnbc.com/2014/04/25/vanguard-chief-defends-high-frequency-trading-firms.html http://www.cnbc.com/2014/04/25/vanguard-chief-defends-high-f...
  - harryh 11y ago
    Vanguard (the manager of the world's biggest funds) has consistently stated that HFT market making has lowered their trading costs and increased returns for investors.
- crdoconnor 11y ago
  Usually it's done on your behalf by institutional investors. The costs will be passed on to you in the form of less money once you retire.
yummyfajitas 11y ago
If you pay $100 extra once in your life for the gold iPhone, then Apple has probably cannibalized more of your retirement fund than HFT. Ballpark esitmate: drop $20k/year into retirement (1 lot of SPY/year) x 1 penny/share being robbed from you x 50 year working career, you've lost $50 to the evil HFTs.
- crdoconnor 11y ago
  TABB group estimated HFT income to be $21 billion in 2009. That's about $65 for every man, woman and child in the US. Ballpark figure, of course.
  - yummyfajitas 11y ago
    Not quite, that's a theoretical upper bound - it's spread x share volume. Compare that to Apple's actual profit last year of $39B. https://finance.yahoo.com/q/is?s=AAPL+Income+Statement&annual https://finance.yahoo.com/q/is?s=AAPL+Income+Statement&annua...
    - crdoconnor 11y ago
      Losses due to burglary, by contrast, are around $5 billion a year. For comparison. Which is probably more relevant than AAPL's net profit.
- djyaz1200 11y ago
  True, more than the money it's the problem that all these super talented people are trying to relive Superman 3 instead of curing cancer.
  - czinck 11y ago
    Have you found the cure for cancer and now you're wasting time while waiting for the FDA to approve it?
harryh 11y ago
HFT has DRAMATICALLY reduced trading costs which has improved the value of my retirement fund.
- crdoconnor 11y ago
  Electronic trading decreased them. HFT increased trading costs. This is why dark pools are now a thing.
  - Mikeb85 11y ago
    Try trading in a market with low liquidity and no HFT. It's a nightmare. Anyhow, HFT affects execution, 'electronic trading' affects how you put in orders, both make the process of buying/selling securities cheaper.
    - crdoconnor 11y ago
      >Try trading in a market with low liquidity and no HFT. It's a nightmare. Such markets are created specifically for the purpose of avoiding HFT: https://en.wikipedia.org/wiki/Dark_liquidity https://en.wikipedia.org/wiki/Dark_liquidity HFT hasn't been around that long, either. Before 2005 it basically didn't exist.
      - Mikeb85 11y ago
        Read your link. Dark pools are created so institutions can trade large blocks without moving the price, or to hide transactions. Dark pools are beneficial to institutions in some circumstances, not to individuals. And yes HFT hasn't always existed, once upon a time you'd have a pit of screaming traders and brokers, and for an individual to buy/sell stocks you'd have to call your broker on the phone, who'd charge you an obscene amount for the privilege. Anyhow, HFT is more or less just a euphemism for high-speed arbitrage/market making. I look at the execution I get on my trades today, I couldn't imagine not having that service available.
        11y ago

joosters 11y ago

Even if we all accept that HFTs are 'stealing' fractions of a penny per trade, just how often do you trade your retirement funds?

djyaz1200 11y ago
Much more often than you might think. Every time we make a deposit (likely monthly/bi/weekly) that money needs to be deployed (aka stock purchased). If we are part of a big fund that fund may need to buy stocks in huge chunks and when the HFT sniffs out what they are buying they will raise the price.
- nick_dm 11y ago
  The price has to go up anyway, that's what happens when demand increases, it's nothing to do with HFT. Large block trades like this will often be arrange over the counter (OTC) or on dark pools, so the fund purchasing the shares will get a fixed price and it's up to the market maker to deal with the execution risk in the open market. Edit: As Harryh said, large mutual fund managers believe that HFT allows them to get better prices for their customers: http://www.cnbc.com/2014/04/25/vanguard-chief-defends-high-frequency-trading-firms.html http://www.cnbc.com/2014/04/25/vanguard-chief-defends-high-f...
- harryh 11y ago
  Vanguard (the manager of the world's biggest funds) has consistently stated that HFT market making has lowered their trading costs and increased returns for investors.
crdoconnor 11y ago
Usually it's done on your behalf by institutional investors. The costs will be passed on to you in the form of less money once you retire.

yummyfajitas 11y ago

If you pay $100 extra once in your life for the gold iPhone, then Apple has probably cannibalized more of your retirement fund than HFT. Ballpark esitmate: drop $20k/year into retirement (1 lot of SPY/year) x 1 penny/share being robbed from you x 50 year working career, you've lost $50 to the evil HFTs.

crdoconnor 11y ago
TABB group estimated HFT income to be $21 billion in 2009. That's about $65 for every man, woman and child in the US. Ballpark figure, of course.
- yummyfajitas 11y ago
  Not quite, that's a theoretical upper bound - it's spread x share volume. Compare that to Apple's actual profit last year of $39B. https://finance.yahoo.com/q/is?s=AAPL+Income+Statement&annual https://finance.yahoo.com/q/is?s=AAPL+Income+Statement&annua...
  - crdoconnor 11y ago
    Losses due to burglary, by contrast, are around $5 billion a year. For comparison. Which is probably more relevant than AAPL's net profit.
djyaz1200 11y ago
True, more than the money it's the problem that all these super talented people are trying to relive Superman 3 instead of curing cancer.
- czinck 11y ago
  Have you found the cure for cancer and now you're wasting time while waiting for the FDA to approve it?

harryh 11y ago

HFT has DRAMATICALLY reduced trading costs which has improved the value of my retirement fund.

crdoconnor 11y ago
Electronic trading decreased them. HFT increased trading costs. This is why dark pools are now a thing.
- Mikeb85 11y ago
  Try trading in a market with low liquidity and no HFT. It's a nightmare. Anyhow, HFT affects execution, 'electronic trading' affects how you put in orders, both make the process of buying/selling securities cheaper.
  - crdoconnor 11y ago
    >Try trading in a market with low liquidity and no HFT. It's a nightmare. Such markets are created specifically for the purpose of avoiding HFT: https://en.wikipedia.org/wiki/Dark_liquidity https://en.wikipedia.org/wiki/Dark_liquidity HFT hasn't been around that long, either. Before 2005 it basically didn't exist.
    - Mikeb85 11y ago
      Read your link. Dark pools are created so institutions can trade large blocks without moving the price, or to hide transactions. Dark pools are beneficial to institutions in some circumstances, not to individuals. And yes HFT hasn't always existed, once upon a time you'd have a pit of screaming traders and brokers, and for an individual to buy/sell stocks you'd have to call your broker on the phone, who'd charge you an obscene amount for the privilege. Anyhow, HFT is more or less just a euphemism for high-speed arbitrage/market making. I look at the execution I get on my trades today, I couldn't imagine not having that service available.
      - 11y ago