5 ms·

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

by 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
    You removed the HFT advantage of being able to trade at the millisecond no?
    - harryh 11y ago
      No. Because if orders are filled first come first serve if my order arrives 1 millisecond before yours my order will get filled before yours. Just like today with continuous markets.
      - ThomPete 11y ago
        The continous market delivers continues information which can then be used by HFT companies to take advantage of doing something humans can't. buy and sell in milliseconds. This is the problem NOT that one trader gets his or her orders in before the other. At least that is how I understand the problem.
        harryh 11y ago
        If my order goes in before yours then there is a good chance that my order will get filled and yours won't. The speed at which traders (automated or otherwise) get in orders is of critical importance. If you don't understand that, then your understanding of the problem is hopelessly wrong.
        ThomPete 11y ago
        That someone get an order in before another will always be a reality. It's not a problem anymore than there are winners and loosers on the stock market. What we are talking about is specifically removing the advantages of HFT (if one consider it a problem), not removing the fact that someone can get and order in before someone else.
kbenson 11y ago
In that sense, you can see what the HFT firms are doing (providing liquidity at the microsecond level) as bringing the market more in-line with reality. Another way to look at it is that the less the market resembles reality (through regulations, such as larger defined processing intervals) the more it can be taken advantage of. Rules often provide sharp edges where there was previously a continuous curve, and sharp edges are where you can game the system.
- ThomPete 11y ago
  I am trying to understand how this reflect reality. If milliseconds gives us HFT wouldn't minutes get rid of the advantage of doing HFT? I.e. the reality is determined by it being milliseconds, seconds, minutes etc. So we can control which reality we want. As far as I understand HFT, it's not that it's better at predicting the market but rather it's better at taking advantage of micro volatility? Or am I completely wrong?
  - kbenson 11y ago
    Depending on how queued orders are served at whatever interval the market coalesces at, there will always be some type of high speed trading, even if the frequency isn't as high. In reality (as in any transaction between two individuals), there's no defined interval at which we wait to complete our transactions, we just do them. Adding arbitrary times at which transactions go through creates edge cases, and edge cases can be gamed. Current markets are limited by either an arbitrary interval upon which orders are fulfilled, or as fast as a system can handle them, which is limited by the technology in use. For a very simplistic example of this, if you look at some type of transaction that has extra regulatory requirement/burden that kick in on certain criteria (for example, over a certain price), you should see some interesting behavior when looking at transactions immediately above and below this price level. You'll also likely find interesting solutions to circumvent that rule to capitalize on the reduced competition that allows (to my understanding, this is a semi-accurate high level overview of a part of the derivative mess we found ourselves in a few years back). > As far as I understand HFT, it's not that it's better at predicting the market but rather it's better at taking advantage of micro volatility? My understanding is that you are correct, but in taking advantage of the volatility, they make it a micro level volatility, and both provide a more accurate value of a stock (by reducing the spread), and at a shorter time interval (which together I guess is liquidity). Of course that's all armchair theorizing on my part (in case it came across as overly authoritative or knowledgeable). I'm not a trader, don't work in the industry, and am not an economist. This is just the working model in my mind based on the economics as I see them and my knowledge of the markets, which admittedly is mostly from discussion here...
ThomPete 11y ago
How is that different than today? The big guys also have access to information that others in the market don't.

by fr0sty 11y ago

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
  You removed the HFT advantage of being able to trade at the millisecond no?
  - harryh 11y ago
    No. Because if orders are filled first come first serve if my order arrives 1 millisecond before yours my order will get filled before yours. Just like today with continuous markets.
    - ThomPete 11y ago
      The continous market delivers continues information which can then be used by HFT companies to take advantage of doing something humans can't. buy and sell in milliseconds. This is the problem NOT that one trader gets his or her orders in before the other. At least that is how I understand the problem.
      - harryh 11y ago
        If my order goes in before yours then there is a good chance that my order will get filled and yours won't. The speed at which traders (automated or otherwise) get in orders is of critical importance. If you don't understand that, then your understanding of the problem is hopelessly wrong.
        ThomPete 11y ago
        That someone get an order in before another will always be a reality. It's not a problem anymore than there are winners and loosers on the stock market. What we are talking about is specifically removing the advantages of HFT (if one consider it a problem), not removing the fact that someone can get and order in before someone else.

kbenson 11y ago

In that sense, you can see what the HFT firms are doing (providing liquidity at the microsecond level) as bringing the market more in-line with reality. Another way to look at it is that the less the market resembles reality (through regulations, such as larger defined processing intervals) the more it can be taken advantage of. Rules often provide sharp edges where there was previously a continuous curve, and sharp edges are where you can game the system.

ThomPete 11y ago
I am trying to understand how this reflect reality. If milliseconds gives us HFT wouldn't minutes get rid of the advantage of doing HFT? I.e. the reality is determined by it being milliseconds, seconds, minutes etc. So we can control which reality we want. As far as I understand HFT, it's not that it's better at predicting the market but rather it's better at taking advantage of micro volatility? Or am I completely wrong?
- kbenson 11y ago
  Depending on how queued orders are served at whatever interval the market coalesces at, there will always be some type of high speed trading, even if the frequency isn't as high. In reality (as in any transaction between two individuals), there's no defined interval at which we wait to complete our transactions, we just do them. Adding arbitrary times at which transactions go through creates edge cases, and edge cases can be gamed. Current markets are limited by either an arbitrary interval upon which orders are fulfilled, or as fast as a system can handle them, which is limited by the technology in use. For a very simplistic example of this, if you look at some type of transaction that has extra regulatory requirement/burden that kick in on certain criteria (for example, over a certain price), you should see some interesting behavior when looking at transactions immediately above and below this price level. You'll also likely find interesting solutions to circumvent that rule to capitalize on the reduced competition that allows (to my understanding, this is a semi-accurate high level overview of a part of the derivative mess we found ourselves in a few years back). > As far as I understand HFT, it's not that it's better at predicting the market but rather it's better at taking advantage of micro volatility? My understanding is that you are correct, but in taking advantage of the volatility, they make it a micro level volatility, and both provide a more accurate value of a stock (by reducing the spread), and at a shorter time interval (which together I guess is liquidity). Of course that's all armchair theorizing on my part (in case it came across as overly authoritative or knowledgeable). I'm not a trader, don't work in the industry, and am not an economist. This is just the working model in my mind based on the economics as I see them and my knowledge of the markets, which admittedly is mostly from discussion here...

ThomPete 11y ago

How is that different than today? The big guys also have access to information that others in the market don't.