4 ms·

> personally I'm very in favor of slowing down trading... As a retail trader, no. As an example, yesterday I placed a sell order on $90,000HK worth of a stock

by Mikeb85 11y ago

> personally I'm very in favor of slowing down trading... As a retail trader, no. As an example, yesterday I placed a sell order on $90,000HK worth of a stock. Once I hit 'send', my order was fulfilled before my browser could load the confirmation page, and at the market price I was quoted seconds before. This is, in large part, thanks to market makers who use HFT. Before this, the broker/market maker might take a spread worth half a percent or more (and being a retail investor, you probably wouldn't get the 'market' price), now it's pennies or less, and at the market price. Thanks to HFT, spreads are smaller, execution quicker, and it definitely 'levels' the playing field.

sigmar 11y ago
HFT exists because low latency trading exists. Not the other way around. >it definitely 'levels' the playing field. Have you read Michael Lewis's Flash Boys? Because HFT demonstrably doesn't level the playing field.
- Mikeb85 11y ago
  Levels the playing field for retail investors. If your entire strategy is arbitrage, then of course you're going to lose out to someone who is quicker and has better technology. Of course some people who lost out on 'low hanging fruit' are going to be mad someone else bought a bigger ladder. But if your strategy is anything else (investing or any type of speculative trading) then HFT benefits you. I've traded on markets with low liquidity and no HFT, and high liquidity with HFT. I don't miss the low-liquidity markets, waiting half a day to see your order executed only to see the price move against you because no one could match your order, meanwhile institutional traders are trading the same stock outside the exchange is the worst kind of infuriating. The argument against HFT is like saying that bank tellers who exchange currency for a 2% spread are cheating out back-alley money changers who take a 20% spread... Yes someone is losing, but it's not necessarily a bad thing.
sjbase 11y ago
I completely agree that liquidity is first and foremost, and that in today's market structure HFT drives a lot of it. Retail enjoys a lot of the benefit, because trades in the $1,000s - $100,000s range probably aren't enough to slip the market. But is ultra-low-latency the ONLY way to bring about that liquidity? I have yet to come across any economic or technical reason why that has to be the case. Also, slowing down trading doesn't mean eliminating HFT, it's a matter of what constitutes "high" frequency... I'd argue we're well past the point where incremental increases in speed result in equal gains in liquidity. And those increments now cost more than ever before.
- Mikeb85 11y ago
  When incremental gains are no longer worthwhile, institutions will no longer invest in the infrastructure. As long as the profit gained > costs, they will invest in infrastructure, to the benefit of the tech industry. And you're right, we don't need market makers trading as fast or as frequently as they do, but they see an opportunity, so they go for it, and we benefit anyway. I'd personally be happy with 10 second execution, but if I can get 1/2 second execution, why would I complain?

by Mikeb85 11y ago

sigmar 11y ago

HFT exists because low latency trading exists. Not the other way around. >it definitely 'levels' the playing field. Have you read Michael Lewis's Flash Boys? Because HFT demonstrably doesn't level the playing field.

Mikeb85 11y ago
Levels the playing field for retail investors. If your entire strategy is arbitrage, then of course you're going to lose out to someone who is quicker and has better technology. Of course some people who lost out on 'low hanging fruit' are going to be mad someone else bought a bigger ladder. But if your strategy is anything else (investing or any type of speculative trading) then HFT benefits you. I've traded on markets with low liquidity and no HFT, and high liquidity with HFT. I don't miss the low-liquidity markets, waiting half a day to see your order executed only to see the price move against you because no one could match your order, meanwhile institutional traders are trading the same stock outside the exchange is the worst kind of infuriating. The argument against HFT is like saying that bank tellers who exchange currency for a 2% spread are cheating out back-alley money changers who take a 20% spread... Yes someone is losing, but it's not necessarily a bad thing.

sjbase 11y ago

I completely agree that liquidity is first and foremost, and that in today's market structure HFT drives a lot of it. Retail enjoys a lot of the benefit, because trades in the $1,000s - $100,000s range probably aren't enough to slip the market. But is ultra-low-latency the ONLY way to bring about that liquidity? I have yet to come across any economic or technical reason why that has to be the case. Also, slowing down trading doesn't mean eliminating HFT, it's a matter of what constitutes "high" frequency... I'd argue we're well past the point where incremental increases in speed result in equal gains in liquidity. And those increments now cost more than ever before.

Mikeb85 11y ago
When incremental gains are no longer worthwhile, institutions will no longer invest in the infrastructure. As long as the profit gained > costs, they will invest in infrastructure, to the benefit of the tech industry. And you're right, we don't need market makers trading as fast or as frequently as they do, but they see an opportunity, so they go for it, and we benefit anyway. I'd personally be happy with 10 second execution, but if I can get 1/2 second execution, why would I complain?