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> Lots of things are illegible to the public. Explain to me all the processes involved in building the smart phone in your pocket. You can't. I can't. Probably
by librvf 11y ago
> Lots of things are illegible to the public. Explain to me all the processes involved in building the smart phone in your pocket. You can't. I can't. Probably no single person in the world can. Who cares?
That's not true, not like HFT anyway.
First, you can quickly and succinctly describe the traits and benefits of a smartphone. You can be high-level at first, you don't have to explain how every detail works. There's no question, for example, that a touch screen doesn't actually work as advertised. You can just say that a smartphone is a cellular/wireless computer device with a usefully large touch-screen display.
In contrast, the unknown question with High-Frequency Trading is: is it actually providing value to anyone but the traders themselves? They might say they are "market-making" but are they really market-making (a trading role with proven market value) or are they merely exploiting structural inefficiencies in the trading infrastructure that mostly hurt everybody else? Maybe they are, but they should be able to describe it in a high level terms first (market-making, liquidity, etc.) where their role provides an obvious benefit to the market, and if you don't understand the high-level terms (eg liquidity) you can look them up.
So far as I can tell (and I am willing to be proved wrong here) there is no consensus answer to the question of whether HFT is actually valuable to markets.
- harryh 11y agoI can quickly and succinctly describe the traits and benefits of HFT: Replacing slow expensive humans with fast and cheap computers has dramatically reduced the cost of trading. You can see this because buy/sell spreads have shrunk by at least 10x.
- librvf 11y agoThat's not what High-Frequency Trading means. The terms for what what you describe are the more general "electronic trading" and "automated trading". They enable HFT, but are not HFT. High-Frequency Trading, while also an umbrella term, virtually always refers to a subset of algorithmic trading involving arbitrage over extremely short timeframes. HFT is not about being faster than "slow expensive humans" it's about being microseconds faster than other HFTs.
- harryh 11y agoI believe that you are making a distinction without a difference. Operating over extremely short timeframes is what allows electronic traders to provide such efficient pricing.
- librvf 11y agoThe distinction I am making means everything. It enables "Latency Arbitrage." It allows HF traders to see trades that are about to happen before they actually happen and cut in front if it'll be profitable. http://blogmaverick.com/2014/04/03/the-idiots-guide-to-high-frequency-trading/ http://blogmaverick.com/2014/04/03/the-idiots-guide-to-high-...
- harryh 11y agoThat blog post does not accurately represent how markets work. It is not possible to see trades that are about to happen that have not happened yet just by being faster. You can react to past trades faster than someone else. But no matter how fast you react, it doesn't mean you can see the future.
- librvf 11y agoWe're getting off track. The point is that the value of HFT is disputed. You claimed HFT reduced buy/sell spreads by a factor of 10, which is obviously false once one distinguishes HFT and Electronic Trading in general. If you're unwilling to do anything but deny the difference between HFT and Electronic Trading there's no point in having a discussion about HFT's benefits.
- harryh 11y agoNo one (including you) has presented any meaningful distinction between HFT and Electronic Trading in general.
- kasey_junk 11y ago