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>The behaviors that we want in our markets, price discovery, liquidity, easy risk management None of which we get from HFT. HFT cannibalizes the research done

>The behaviors that we want in our markets, price discovery, liquidity, easy risk management None of which we get from HFT. HFT cannibalizes the research done by value investors (oh, but it's not legally front running if they're not your customer!), rendering that a market for lemons, so there goes price discovery. HFT floods the market with more liquidity than it needs during normal periods (there is no benefit to you being able to trade at split second intervals. nada. none) and then extracts it all during periods of market distress when liquidity would acually be useful. And risk management? Please. They're only managing their own risks.

kasey_junk 11y ago
> None of which we get from HFT. No but we do get it from market makers. HFT has led to a dramatic decrease in the price of market making. Unless your claim is that market making is not something that should be allowed? > And risk management? Please. They're only managing their own risks. My point about risk management was about the aggregate benefits of the markets, not about HFT providing someone risk management. If you have some risk that you want to sell, there will be a buyer for it because of the aggregate sum total of all the zero sum transactions available in the markets.
- crdoconnor 11y ago
  >No but we do get it from market makers. HFT has led to a dramatic decrease in the price of market making. Unless your claim is that market making is not something that should be allowed? No, my claim is that market making was made significantly cheaper by electronic trading in the 90s-00s but HFT had very little effect on that. HFTs do a lot of market making, make almost no profit from it and mainly use it as cover for their more nefarious activities. >My point about risk management was about the aggregate benefits of the markets, not about HFT providing someone risk management Great. So even you agree that if we banned HFT we'd be no worse off.
  - tptacek 11y ago
    You are ignoring the context of the article in order to push an ideological point. Levine is explaining how you can get a 95+% cancellation rate simply by running the most brain-dead simple possible market maker strategy: because you're required to post orders at multiple exchanges, and because every price change involves order cancellations (potentially lots of order cancellations, even on a single exchange, because of pairs trading and price ladders), and because adjusting prices on exchanges in near-real-time is the basic job of a market maker, virtually anyone running an electronic market maker is going to have a huge cancellation rate. Levine brings this up to illustrate the silliness of proposals to regulate HFT by targeting entities with huge cancellation rates. Comes now 'cdroconnor. You're playing a semantic game. You're defining "HFT" as "bad HFT", and everything else as simple "electronic trading". FINE. Nobody disagrees with you, except on the very boring point of what labels to attach to things. But your argument here doesn't make any sense for the thread, because the good simple electronic trading you're condoning is also targeted by the cancellation regulation Clinton proposed. Which is the whole point of the article.
    - crdoconnor 11y ago
      >You are ignoring the context of the article The discussion went off course way before I dived in. >Comes now 'cdroconnor. You're playing a semantic game. You're defining "HFT" as "bad HFT", and everything else as simple "electronic trading". FINE. Nobody disagrees with you, except on the very boring point of what labels to attach to things. There is a very substantial non-semantic difference between robot-executed sub-millisecond trades (HFT) and trades which are are just executed electronically. In every discussion about HFT the probability of someone falsely attributing the decreased transaction costs of "not shouting in a pit" to algorithms that execute sub-millisecond transactions approaches 1. >But your argument here doesn't make any sense for the thread, because the good simple electronic trading you're condoning is also targeted by the cancellation regulation Clinton proposed I'm no particular fan of that either. I'd prefer Italian style micro-transaction tax. That wipes out nearly all of the sub-millisecond trading and leaves the rest intact, including market making.
      - 11y ago
- librvf 11y ago
  > HFT has led to a dramatic decrease in the price of market making. How? It seems like this should not be that hard to explain.
  - kasey_junk 11y ago
    Link in the posted article: http://www.bloombergview.com/articles/2014-03-31/michael-lewis-doesn-t-like-high-frequency-traders http://www.bloombergview.com/articles/2014-03-31/michael-lew.... Quote from the posted article: " it should be said that market makers have existed in the stock market for a long time and that electronic market makers do the job waaaaaaaaaay cheaper than their human predecessors."
    - plonh 11y ago
      Electronic market makers are a much larger category than HFT. Microsoft Word is phenomenally heaper than hiring a typewriterist, because it is electronic.
      - kasey_junk 11y ago
        Neither electronic market maker or HFT is a technically defined term, nor is it clear what people mean when they use those terms. That said, when I was in the industry the common usage of the terms would be that electronic market makers were a subset of HFT. That is there are HFT strategies that are not market makers, but there are no electronic market makers who are not HFT.
    - crdoconnor 11y ago
      I was wondering when some HFT shill was going to try and pretend that electronic market making and HFT were the same thing. Every damn time...
      - kasey_junk 11y ago
        Given that the posted article made that comparison and it matches my experience in the industry it seemed ok to "pretend" that electronic market making was a subset of HFT. I understand that these terms are used differently by different people, so maybe you can define what you mean to make it more clear what you think the distinctions are. [edit] You've edited your comment since I replied to call me a shill. Full disclosure, I have worked in HFT and make no secret of it. I do not currently.

kasey_junk 11y ago

> None of which we get from HFT. No but we do get it from market makers. HFT has led to a dramatic decrease in the price of market making. Unless your claim is that market making is not something that should be allowed? > And risk management? Please. They're only managing their own risks. My point about risk management was about the aggregate benefits of the markets, not about HFT providing someone risk management. If you have some risk that you want to sell, there will be a buyer for it because of the aggregate sum total of all the zero sum transactions available in the markets.

crdoconnor 11y ago
>No but we do get it from market makers. HFT has led to a dramatic decrease in the price of market making. Unless your claim is that market making is not something that should be allowed? No, my claim is that market making was made significantly cheaper by electronic trading in the 90s-00s but HFT had very little effect on that. HFTs do a lot of market making, make almost no profit from it and mainly use it as cover for their more nefarious activities. >My point about risk management was about the aggregate benefits of the markets, not about HFT providing someone risk management Great. So even you agree that if we banned HFT we'd be no worse off.
- tptacek 11y ago
  You are ignoring the context of the article in order to push an ideological point. Levine is explaining how you can get a 95+% cancellation rate simply by running the most brain-dead simple possible market maker strategy: because you're required to post orders at multiple exchanges, and because every price change involves order cancellations (potentially lots of order cancellations, even on a single exchange, because of pairs trading and price ladders), and because adjusting prices on exchanges in near-real-time is the basic job of a market maker, virtually anyone running an electronic market maker is going to have a huge cancellation rate. Levine brings this up to illustrate the silliness of proposals to regulate HFT by targeting entities with huge cancellation rates. Comes now 'cdroconnor. You're playing a semantic game. You're defining "HFT" as "bad HFT", and everything else as simple "electronic trading". FINE. Nobody disagrees with you, except on the very boring point of what labels to attach to things. But your argument here doesn't make any sense for the thread, because the good simple electronic trading you're condoning is also targeted by the cancellation regulation Clinton proposed. Which is the whole point of the article.
  - crdoconnor 11y ago
    >You are ignoring the context of the article The discussion went off course way before I dived in. >Comes now 'cdroconnor. You're playing a semantic game. You're defining "HFT" as "bad HFT", and everything else as simple "electronic trading". FINE. Nobody disagrees with you, except on the very boring point of what labels to attach to things. There is a very substantial non-semantic difference between robot-executed sub-millisecond trades (HFT) and trades which are are just executed electronically. In every discussion about HFT the probability of someone falsely attributing the decreased transaction costs of "not shouting in a pit" to algorithms that execute sub-millisecond transactions approaches 1. >But your argument here doesn't make any sense for the thread, because the good simple electronic trading you're condoning is also targeted by the cancellation regulation Clinton proposed I'm no particular fan of that either. I'd prefer Italian style micro-transaction tax. That wipes out nearly all of the sub-millisecond trading and leaves the rest intact, including market making.
    - 11y ago
librvf 11y ago
> HFT has led to a dramatic decrease in the price of market making. How? It seems like this should not be that hard to explain.
- kasey_junk 11y ago
  Link in the posted article: http://www.bloombergview.com/articles/2014-03-31/michael-lewis-doesn-t-like-high-frequency-traders http://www.bloombergview.com/articles/2014-03-31/michael-lew.... Quote from the posted article: " it should be said that market makers have existed in the stock market for a long time and that electronic market makers do the job waaaaaaaaaay cheaper than their human predecessors."
  - plonh 11y ago
    Electronic market makers are a much larger category than HFT. Microsoft Word is phenomenally heaper than hiring a typewriterist, because it is electronic.
    - kasey_junk 11y ago
      Neither electronic market maker or HFT is a technically defined term, nor is it clear what people mean when they use those terms. That said, when I was in the industry the common usage of the terms would be that electronic market makers were a subset of HFT. That is there are HFT strategies that are not market makers, but there are no electronic market makers who are not HFT.
  - crdoconnor 11y ago
    I was wondering when some HFT shill was going to try and pretend that electronic market making and HFT were the same thing. Every damn time...
    - kasey_junk 11y ago
      Given that the posted article made that comparison and it matches my experience in the industry it seemed ok to "pretend" that electronic market making was a subset of HFT. I understand that these terms are used differently by different people, so maybe you can define what you mean to make it more clear what you think the distinctions are. [edit] You've edited your comment since I replied to call me a shill. Full disclosure, I have worked in HFT and make no secret of it. I do not currently.