4 ms·

Humans aren't competing against HFTs on speed. That's not an accurate view of the world. Different HFT firms are competing against each other on various bases

by harryh 11y ago

Humans aren't competing against HFTs on speed. That's not an accurate view of the world. Different HFT firms are competing against each other on various bases (one if which is speed) to provide you, a human, the best service.

ThomPete 11y ago
Thats not what I am saying either or at least not what I meant to say. What I was trying to say was that humans simply can't do HFT and that the advantage of that is only possible if you have millisecond updates. If you remove that then you remove the advantages of HFT and humans would be able to compete. Whether that is good or bad for the market is another discussion.
- kbenson 11y ago
  Humans can't compete in the specific thing HFT does, but I'm not sure why humans need to compete there. There's plenty of other areas that humans can compete in (such as analyzing data and market prediction), so it's not like humans are being squeezed out of the market. I don't think making the market quantized (upon reviewing the Nanex story from last week[1], that's apparently the term) makes the problem of people not being able to compete in this small aspect of the market go away, it will just change its nature. Everyone will make trades immediately before and after the point at which it coalesces, otherwise you are leaking information to the market that might be used against you. This requires fast machines, and we're back where be began, with an arms race to see who can submit the most orders in the shortest time right before that point, and who can analyze the orders fastest immediately after (which is specifically the point I was originally making regarding. "sharp edges" and "continuous lines", since the quantized market is essentially a step function). 1: https://news.ycombinator.com/item?id=11211093 https://news.ycombinator.com/item?id=11211093
  - ThomPete 11y ago
    I feel like the discussion keeps getting turned on it's head now. The original claim was that if we did by the minutes updated then there would be issues with more buyers than sellers. This was the original claim that was being used as a reason for why a minute frequency would be problematic. I haven't seen any real explanation for why that is problematic for the reasons discussed in this thread. Less frequent updates means less frequent available information to trade on, means less advantage for the HFT algos who won't have the advantage of being able to trade in the milliseconds anyoore, something humans can't do. If one thinks HFT is a problem then thats a perfectly fine solution which isn't from what I can se giving problems of more buyers than sellers. If one doesn't think it's a problem then sure we don't need to compete with them but at least to my understanding the premise of this whole discussion was that someone suggested slowing down the frequency and the answer was that this would be problematic.
    - kbenson 11y ago
      > The original claim was that if we did by the minutes updated then there would be issues with more buyers than sellers. I wasn't responding to that. My original reply to fr0sty was somewhat of a tangent. I can see where we might have been having two separate arguments with each without knowing it because of that. > Less frequent updates means less frequent available information to trade on, means less advantage for the HFT algos who won't have the advantage of being able to trade in the milliseconds anyoore, something humans can't do. The advantage of HFT isn't necessarily the frequency, which is just a way to increase number of trades, but speed, which is what allows them to capitalize on information before the competition. Changing how often they trade will not affect the real reason they do so, which is to capitalize on market information before the competition. That race still exists. > If one thinks HFT is a problem then thats a perfectly fine solution which isn't from what I can se giving problems of more buyers than sellers. My stance is that even if you think it's a problem, I don't think it provides any sort of solution. They can still make trades much closer to the cut-off and much sooner after the market coalesces than any human, so humans are still unable to compete in that particular area. > If one doesn't think it's a problem... I'm not sure how I feel about them, but I don't see "humans competing" as a valid reason. HFT algorithms are humans competing, just at a meta level. Whether it comes down to mental ability to analyze markets and physical reflexes without HFT algos, or it comes down to intelligence of the design of the algorithms, it's still humans competing (we could have the same argument decades ago regarding humans filling out order sheets by pen and pencil and those trading through a terminal, the technology doesn't replace, it enables).
      - ThomPete 11y ago
        The frequency of the stock market updates is an advantage to HFT which has the speed to trade in the milliseconds. Thats what I mean with frequency being an advantage to HFT. I.e. it's more or less the only way to trade in the milliseconds. You take that away you take away the advantage of most HFT. I don't see how thats not part of the solution. HFT algorithms are humans competing at a meta level which begs the question whether the value it provides is meta too. I.e. I have yet to see any benefit HFT brings to anyone but those who do HFT. It doesn't seem to help the market as far as I can see. It's done as I said purely because it's possible with computers to trade there and it seems to be a privatized version of a tobin tax.
- cynix 11y ago
  The main advantage HFTs have over humans is that they can react quickly to new information. The frequency of new information becoming available is only an added bonus, not a requirement.
  - ThomPete 11y ago
    HFT don't react to the same kind of information that Humans do. HFT reacts to price at the millisecond level not to anything outside of that as far as I understand.
    - harryh 11y ago
      Your understanding here is factually incorrect. Automated traders react to all kinds of different information not just prices. And even if it was just prices that would be enough because there are lots of different markets and you can't coordinate them all.
      - ThomPete 11y ago
        What else are HFT algorithms reacting to? From Wikipedia: "...Algorithmic trading, also called algo trading and blackbox trading, encompasses trading systems that are heavily reliant on complex mathematical formulas and high-speed, computer programs to determine trading strategies.[1][2] These strategies use electronic platforms to enter trading orders with an algorithm which executes pre-programmed trading instructions accounting for a variety of variables such as timing, price, and volume..." https://en.wikipedia.org/wiki/Algorithmic_trading https://en.wikipedia.org/wiki/Algorithmic_trading

by harryh 11y ago

ThomPete 11y ago

Thats not what I am saying either or at least not what I meant to say. What I was trying to say was that humans simply can't do HFT and that the advantage of that is only possible if you have millisecond updates. If you remove that then you remove the advantages of HFT and humans would be able to compete. Whether that is good or bad for the market is another discussion.

kbenson 11y ago
Humans can't compete in the specific thing HFT does, but I'm not sure why humans need to compete there. There's plenty of other areas that humans can compete in (such as analyzing data and market prediction), so it's not like humans are being squeezed out of the market. I don't think making the market quantized (upon reviewing the Nanex story from last week[1], that's apparently the term) makes the problem of people not being able to compete in this small aspect of the market go away, it will just change its nature. Everyone will make trades immediately before and after the point at which it coalesces, otherwise you are leaking information to the market that might be used against you. This requires fast machines, and we're back where be began, with an arms race to see who can submit the most orders in the shortest time right before that point, and who can analyze the orders fastest immediately after (which is specifically the point I was originally making regarding. "sharp edges" and "continuous lines", since the quantized market is essentially a step function). 1: https://news.ycombinator.com/item?id=11211093 https://news.ycombinator.com/item?id=11211093
- ThomPete 11y ago
  I feel like the discussion keeps getting turned on it's head now. The original claim was that if we did by the minutes updated then there would be issues with more buyers than sellers. This was the original claim that was being used as a reason for why a minute frequency would be problematic. I haven't seen any real explanation for why that is problematic for the reasons discussed in this thread. Less frequent updates means less frequent available information to trade on, means less advantage for the HFT algos who won't have the advantage of being able to trade in the milliseconds anyoore, something humans can't do. If one thinks HFT is a problem then thats a perfectly fine solution which isn't from what I can se giving problems of more buyers than sellers. If one doesn't think it's a problem then sure we don't need to compete with them but at least to my understanding the premise of this whole discussion was that someone suggested slowing down the frequency and the answer was that this would be problematic.
  - kbenson 11y ago
    > The original claim was that if we did by the minutes updated then there would be issues with more buyers than sellers. I wasn't responding to that. My original reply to fr0sty was somewhat of a tangent. I can see where we might have been having two separate arguments with each without knowing it because of that. > Less frequent updates means less frequent available information to trade on, means less advantage for the HFT algos who won't have the advantage of being able to trade in the milliseconds anyoore, something humans can't do. The advantage of HFT isn't necessarily the frequency, which is just a way to increase number of trades, but speed, which is what allows them to capitalize on information before the competition. Changing how often they trade will not affect the real reason they do so, which is to capitalize on market information before the competition. That race still exists. > If one thinks HFT is a problem then thats a perfectly fine solution which isn't from what I can se giving problems of more buyers than sellers. My stance is that even if you think it's a problem, I don't think it provides any sort of solution. They can still make trades much closer to the cut-off and much sooner after the market coalesces than any human, so humans are still unable to compete in that particular area. > If one doesn't think it's a problem... I'm not sure how I feel about them, but I don't see "humans competing" as a valid reason. HFT algorithms are humans competing, just at a meta level. Whether it comes down to mental ability to analyze markets and physical reflexes without HFT algos, or it comes down to intelligence of the design of the algorithms, it's still humans competing (we could have the same argument decades ago regarding humans filling out order sheets by pen and pencil and those trading through a terminal, the technology doesn't replace, it enables).
    - ThomPete 11y ago
      The frequency of the stock market updates is an advantage to HFT which has the speed to trade in the milliseconds. Thats what I mean with frequency being an advantage to HFT. I.e. it's more or less the only way to trade in the milliseconds. You take that away you take away the advantage of most HFT. I don't see how thats not part of the solution. HFT algorithms are humans competing at a meta level which begs the question whether the value it provides is meta too. I.e. I have yet to see any benefit HFT brings to anyone but those who do HFT. It doesn't seem to help the market as far as I can see. It's done as I said purely because it's possible with computers to trade there and it seems to be a privatized version of a tobin tax.
cynix 11y ago
The main advantage HFTs have over humans is that they can react quickly to new information. The frequency of new information becoming available is only an added bonus, not a requirement.
- ThomPete 11y ago
  HFT don't react to the same kind of information that Humans do. HFT reacts to price at the millisecond level not to anything outside of that as far as I understand.
  - harryh 11y ago
    Your understanding here is factually incorrect. Automated traders react to all kinds of different information not just prices. And even if it was just prices that would be enough because there are lots of different markets and you can't coordinate them all.
    - ThomPete 11y ago
      What else are HFT algorithms reacting to? From Wikipedia: "...Algorithmic trading, also called algo trading and blackbox trading, encompasses trading systems that are heavily reliant on complex mathematical formulas and high-speed, computer programs to determine trading strategies.[1][2] These strategies use electronic platforms to enter trading orders with an algorithm which executes pre-programmed trading instructions accounting for a variety of variables such as timing, price, and volume..." https://en.wikipedia.org/wiki/Algorithmic_trading https://en.wikipedia.org/wiki/Algorithmic_trading