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I can't help but be reminded of that Taibbi quote about Wall Street being a vampire squid plunging its blood funnel into anything that smells like money. It's
by username223 11y ago
I can't help but be reminded of that Taibbi quote about Wall Street being a vampire squid plunging its blood funnel into anything that smells like money. It's a living, I suppose, but does "running your arbs" create anything of value?
- alasdair_ 11y ago>It's a living, I suppose, but does "running your arbs" create anything of value? Something similar could be said of the people chasing the ball around the field.
- samwisethethird 11y agoEntertainment has value.
- rajacombinator 11y ago"Running arbs" is fine and definitely creates value. The problem with vampire squids is their parasitic relationship with govt, i.e. the people with the guns.
- miscellaneous 11y agoArbitrage definitely adds value to society. Without arbitrage, traded assets could exist with arbitrary values. The process of arbitrage involves observing a mis-priced asset and then making a profit from that observation. By doing so, you push the asset towards its correct value. This kind of activity maintains the integrity of a market.
- username223 11y agoIt does up to a point. I think we're well beyond that point, when people pay for microwave relays to get a few milliseconds of arbitrage, because light is faster in air than in fiber. If someone ever drills a hole through the earth's core, it will be traders looking to save latency between New York and Hong Kong (kidding, I hope).
- miscellaneous 11y agoYes I absolutely believe that there are diminishing returns associated with arbitrage. I would personally think that exchanges should put some lower limit on the 'time resolution' of their markets to prevent HFT investment beyond a certain point.