6 ms·

What if all stock market would adopt a strategy that orders are processed one per minute. Same way it works during opening/closing market. Some advantages: 1.

What if all stock market would adopt a strategy that orders are processed one per minute. Same way it works during opening/closing market. Some advantages: 1. All assets will be as liquid as they are now. Still got opportunity to buy/sell 8 * 60 = 480 times per day. 2. Most of the HFT industry will be redundant. Instead of allocating super smart people on made up problem, they can solve more important social problems (e.g. robotics, curing cancer, aging, space exploration, high growth tech companies). 3. Less day trading, encourage long term perspective.

JupiterMoon 11y ago
4. Competing stock markets grow (maybe in another jurisdiction) that allows faster order processing
- cdetrio 11y ago
  But faster (continuous-time) order processing results in wider bid/ask spreads; slower (discrete-time) batch processing results in narrower spreads. At least that's what the models show. Follow-up papers even analyze a multi-exchange model (competing continuous-time and discrete-time exchanges), and concluded that investors and retail traders would prefer the discrete-time exchange because it would have narrower spreads (i.e. lower transaction costs).
  - fr0sty 11y ago
    > At least that's what the models show. What models? Increasing the amount of risk a market maker must bear will widen the quoted spreads not narrow them since that increased risk needs to be priced in.
    - cdetrio 11y ago
      The models in the "Frequent batch auctions as a market design response to HFT" paper by Budish et. al.; i linked the slides in another comment. Since batch auctions use single-price clearing, market makers can post bids and asks without fear of being sniped (so its less risk, not more). And since you can't snipe, they have to compete on price rather than investing in faster connections, resulting in narrower spreads.
cdetrio 11y ago
Yeah yeah, its called frequent batch auctions. obligatory mention in every hft discussion: http://faculty.chicagobooth.edu/eric.budish/research/HFT-FrequentBatchAuctions-Slides.pdf http://faculty.chicagobooth.edu/eric.budish/research/HFT-Fre...
pc86 11y ago
0. Why once a minute? Why not twice? Why not once every 5 minutes? 15? 60? You can still buy or sell eight times a day so once an hour should be plenty. 1. Putting "high growth tech companies" (we know you mean startups) in the "important social problem" bucket, especially in the same group as aging, cancer, space exploration, is tenuous at best. 2. Until any of the above pay half a million a year plus huge bonus potential, I seriously doubt anyone going into HFT would give them more than a passing glance.
- jakozaur 11y ago
  0. Just to be fair I think any discrete time auction would reduce HFT. No matters less if it will be 100ms or 15 minutes. Just a parameter that you can optimize based on your market. 1. Not all startups are equal, but quite a few will create some lasting value. 2. Unsure if most of this career alternatives will ever give that sort of gains. The question is where the gains come from? Inefficiencies in trading strategies of your retirement fund? Maybe those inefficiencies are always present if humans type orders? Maybe we should design stock market with human first approach, not HFT exploitable?
  - fr0sty 11y ago
    > Just to be fair I think any discrete time auction would reduce HFT. But is the reduction of HFT qua HFT really the goal? Making a market low-frequency will by definition reduce/eliminate HFT as a strategy but you will still have a lot of trading activity done by well capitalized companies using lots of expensive equipment. They will just use different strategies.
- vostok 11y ago
  For what it's worth, I am a trader at an HFT firm and my pay is comparable to what my friends in similarly competitive tech roles make. We are talking about the levels of compensation that are always mentioned here and generate discussion about how they do not exist. I have not heard of similar comp levels in the aging/cancer/rocket space. My suspicion is that this is the result of cultural differences where management takes a much bigger piece of the pie. I would be happy to change fields once this is fixed.
harryh 11y ago
This doesn't have the advantages you think it has. 1) Speed is still critically important as you have every incentive to wait until the very last microsecond before the end of the 1 minute window to submit any orders. 2) What do you do if there are more buy orders than sell orders at a given price for a given batch? Who's orders get filled?
- ThomPete 11y ago
  2) Wouldn't that sort itself out since you now only get information once a minute? So it would still be first come first serve. Or am I missing someting?
  - fr0sty 11y ago
    You only get information directly from the market-center once a minute, but the rest of the world (and other markets which trade continuously, or at a different frequency) are generating new information constantly. Clever and/or well-capitalized participants will be taking advantage of that information in much the same ways as with a continuous market.
    - jakozaur 11y ago
      The problem you mention is real, but first come first served is an easy solution. That also solve the order problem. That encourage you to submit transactions earlier in time slot (as you get more chance to complete them). Still there is some HFT strategies possible, but window of opportunity will be by an order of magnitude or two smaller.
      - harryh 11y ago
        If orders are filled on a first come first serve basis then you've just recreated the continuous market that we have today and changed nothing.
        ThomPete 11y ago
auntienomen 11y ago
What if every armchair market structure analyst focused their efforts on curing cancer, instead of posting the same poorly researched suggestions in every HFT thread?
- ThomPete 11y ago
  Why the snarky tone? Why not show how he is wrong so we all can learn something?
  - auntienomen 11y ago
    Why reward laziness and sloppy thinking? Anyone interested in HFT can peruse a few dozen threads on HN, where these questions have already been answered at length.
    - ThomPete 11y ago
      Because if you really are annoyed about it perhaps you should explain why it's wrong so it will eventually stop being proposed. People are wrong about all sorts of things, that doesn't mean we need to belittle them or be snarky.
      - auntienomen 11y ago
        Regarding the snark: The OP suggests making major alterations to the functioning of equity markets, without any evidence that he's done any research or even thought carefully about the costs and benefits involved. He suggests that the proposed changes are highly beneficial (we might even cure cancer!). How seriously are we supposed to take this sort of thing? Should we also welcome the kind of amateur mathematician who has a simple proof of Fermat's Last Theorem? Personally, I think a bit of snark is warranted.
- fr0sty 11y ago
  I really wish someone would make a version of this form letter for HFT: https://craphound.com/spamsolutions.txt https://craphound.com/spamsolutions.txt
vostok 11y ago
I am an active participant on an exchange that functions in this way. As others have mentioned, this structure does not negate the benefits of speed. Someone else already asked what you would do if there are more buyers than sellers (or vice-versa) in auction. If you're going to allocate randomly instead of using time-priority this is equivalent to pro-rata allocation in expectation. There are already pro-rata markets in the US and elsewhere. This structure does increase transaction costs because I am less willing to make a tight market if I have to hold risk for such a long period of time. > Most of the HFT industry will be redundant. Instead of allocating super smart people on made up problem, they can solve more important social problems (e.g. robotics, curing cancer, aging, space exploration, high growth tech companies). It seems to me that you are overestimating the profits generated by HFT and the number of people employed in this industry. The above is just my probably incorrect opinion.

JupiterMoon 11y ago

4. Competing stock markets grow (maybe in another jurisdiction) that allows faster order processing

cdetrio 11y ago
But faster (continuous-time) order processing results in wider bid/ask spreads; slower (discrete-time) batch processing results in narrower spreads. At least that's what the models show. Follow-up papers even analyze a multi-exchange model (competing continuous-time and discrete-time exchanges), and concluded that investors and retail traders would prefer the discrete-time exchange because it would have narrower spreads (i.e. lower transaction costs).
- fr0sty 11y ago
  > At least that's what the models show. What models? Increasing the amount of risk a market maker must bear will widen the quoted spreads not narrow them since that increased risk needs to be priced in.
  - cdetrio 11y ago
    The models in the "Frequent batch auctions as a market design response to HFT" paper by Budish et. al.; i linked the slides in another comment. Since batch auctions use single-price clearing, market makers can post bids and asks without fear of being sniped (so its less risk, not more). And since you can't snipe, they have to compete on price rather than investing in faster connections, resulting in narrower spreads.

cdetrio 11y ago

Yeah yeah, its called frequent batch auctions. obligatory mention in every hft discussion: http://faculty.chicagobooth.edu/eric.budish/research/HFT-FrequentBatchAuctions-Slides.pdf http://faculty.chicagobooth.edu/eric.budish/research/HFT-Fre...

pc86 11y ago

0. Why once a minute? Why not twice? Why not once every 5 minutes? 15? 60? You can still buy or sell eight times a day so once an hour should be plenty. 1. Putting "high growth tech companies" (we know you mean startups) in the "important social problem" bucket, especially in the same group as aging, cancer, space exploration, is tenuous at best. 2. Until any of the above pay half a million a year plus huge bonus potential, I seriously doubt anyone going into HFT would give them more than a passing glance.

jakozaur 11y ago
0. Just to be fair I think any discrete time auction would reduce HFT. No matters less if it will be 100ms or 15 minutes. Just a parameter that you can optimize based on your market. 1. Not all startups are equal, but quite a few will create some lasting value. 2. Unsure if most of this career alternatives will ever give that sort of gains. The question is where the gains come from? Inefficiencies in trading strategies of your retirement fund? Maybe those inefficiencies are always present if humans type orders? Maybe we should design stock market with human first approach, not HFT exploitable?
- fr0sty 11y ago
  > Just to be fair I think any discrete time auction would reduce HFT. But is the reduction of HFT qua HFT really the goal? Making a market low-frequency will by definition reduce/eliminate HFT as a strategy but you will still have a lot of trading activity done by well capitalized companies using lots of expensive equipment. They will just use different strategies.
vostok 11y ago
For what it's worth, I am a trader at an HFT firm and my pay is comparable to what my friends in similarly competitive tech roles make. We are talking about the levels of compensation that are always mentioned here and generate discussion about how they do not exist. I have not heard of similar comp levels in the aging/cancer/rocket space. My suspicion is that this is the result of cultural differences where management takes a much bigger piece of the pie. I would be happy to change fields once this is fixed.

harryh 11y ago

This doesn't have the advantages you think it has. 1) Speed is still critically important as you have every incentive to wait until the very last microsecond before the end of the 1 minute window to submit any orders. 2) What do you do if there are more buy orders than sell orders at a given price for a given batch? Who's orders get filled?

ThomPete 11y ago
2) Wouldn't that sort itself out since you now only get information once a minute? So it would still be first come first serve. Or am I missing someting?
- fr0sty 11y ago
  You only get information directly from the market-center once a minute, but the rest of the world (and other markets which trade continuously, or at a different frequency) are generating new information constantly. Clever and/or well-capitalized participants will be taking advantage of that information in much the same ways as with a continuous market.
  - jakozaur 11y ago
    The problem you mention is real, but first come first served is an easy solution. That also solve the order problem. That encourage you to submit transactions earlier in time slot (as you get more chance to complete them). Still there is some HFT strategies possible, but window of opportunity will be by an order of magnitude or two smaller.
    - harryh 11y ago
      If orders are filled on a first come first serve basis then you've just recreated the continuous market that we have today and changed nothing.
      - ThomPete 11y ago

auntienomen 11y ago

What if every armchair market structure analyst focused their efforts on curing cancer, instead of posting the same poorly researched suggestions in every HFT thread?

ThomPete 11y ago
Why the snarky tone? Why not show how he is wrong so we all can learn something?
- auntienomen 11y ago
  Why reward laziness and sloppy thinking? Anyone interested in HFT can peruse a few dozen threads on HN, where these questions have already been answered at length.
  - ThomPete 11y ago
    Because if you really are annoyed about it perhaps you should explain why it's wrong so it will eventually stop being proposed. People are wrong about all sorts of things, that doesn't mean we need to belittle them or be snarky.
    - auntienomen 11y ago
      Regarding the snark: The OP suggests making major alterations to the functioning of equity markets, without any evidence that he's done any research or even thought carefully about the costs and benefits involved. He suggests that the proposed changes are highly beneficial (we might even cure cancer!). How seriously are we supposed to take this sort of thing? Should we also welcome the kind of amateur mathematician who has a simple proof of Fermat's Last Theorem? Personally, I think a bit of snark is warranted.
fr0sty 11y ago
I really wish someone would make a version of this form letter for HFT: https://craphound.com/spamsolutions.txt https://craphound.com/spamsolutions.txt

vostok 11y ago

I am an active participant on an exchange that functions in this way. As others have mentioned, this structure does not negate the benefits of speed. Someone else already asked what you would do if there are more buyers than sellers (or vice-versa) in auction. If you're going to allocate randomly instead of using time-priority this is equivalent to pro-rata allocation in expectation. There are already pro-rata markets in the US and elsewhere. This structure does increase transaction costs because I am less willing to make a tight market if I have to hold risk for such a long period of time. > Most of the HFT industry will be redundant. Instead of allocating super smart people on made up problem, they can solve more important social problems (e.g. robotics, curing cancer, aging, space exploration, high growth tech companies). It seems to me that you are overestimating the profits generated by HFT and the number of people employed in this industry. The above is just my probably incorrect opinion.