7 ms·

HFT reduces the spread, which is actually great for consumers. It also pushes the frontiers on high speed scalable computing out and produces a ton of great res

HFT reduces the spread, which is actually great for consumers. It also pushes the frontiers on high speed scalable computing out and produces a ton of great research. Finally, it is great for the tech scene in NYC.

duaneb 10y ago
> Finally, it is great for the tech scene in NYC. I dunno, the fact that I have to sell my soul to finance to find a decent tech job doesn't speak particularly well to its health.
- jgalt212 10y ago
  > I dunno, the fact that I have to sell my soul to finance to find a decent tech job doesn't speak particularly well to its health. As opposed to selling your soul to the advertising industry. At the end of the end of the day, unless you are independently wealthy or live in a very low cost area, you're gonna have to make peace with Adam Smith's invisible hand.
- gozur88 10y ago
  As opposed to not having a tech job at all?
tajen 10y ago
> HFT reduces the spread ... by chopping off the difference and putting it in the pocket of the HFT, right? I mean, without them, the earnings would go to the pocket of more loosely programmed organizations (=probably, our banks).
- greenleafjacob 10y ago
  Without market makers the trade wouldn't happen at all.
  - yxhuvud 10y ago
    There was trading going on before HFT was a thing.
    - evanpw 10y ago
      But there were market makers, and they charged a lot more for the same service.
      - viraptor 10y ago
        I find this description weird. It's not like they provide a service. They act for their own profit and the fact that they make the spread smaller is a bit of a side effect. Why call that a service? You wouldn't pay them directly to do those trades. Sure, you'd spend more on your buy orders otherwise. So what? It just makes the stock gambling a bit different.
        gd1 10y ago
        >They act for their own profit Lol, as opposed to all the other actors in the economy who provide a service. >and the fact that they make the spread smaller is a bit of a side effect It's not 'a bit of a side effect', it is what they have to do to earn fills or they will be undercut by their competition. Narrowing the spread is literally what a market maker is paid to do. It is their reason for existence. It isn't a 'side effect'. If you make a spread narrower than your competition, you steal his customers. Otherwise you don't trade and you don't make any money and you are out of business. > Why call that a service? It is a service. A very useful one. They offer, for a specified price, to sell (or buy) a financial instrument to (or from) you. No one forces you to use it. If you don't want to, and think you can do better, you can take your chances and place a limit order in the book instead. So like all services, it is completely optional, costs you money (to cross the spread), and provides you a benefit (immediate execution and certainty of price). I suspect what you are struggling with, is that you don't realise that risk transferral is a benefit. Take for example, the dairy farmer who sells his milk to a company (a middleman) that transports it, pasteurizes it, bottles it and on-sells it to a supermarket chain. In this case, you would probably tell me that you can see what service they provide - they add value by pasteurizing and bottling the milk, which they specialize in. Which is true. But there is a hidden value too - they take risk away from the farmer. The milk could spoil, the trucks could breakdown, the vats be contaminated, the supermarkets cancel their orders. All of these are risks that the farmer would have to bear if the farmer wanted to bottle their own milk, take it to a market and sell it. Part of the service provided is to take risk away from the farmer and be paid for it. That is all a market maker does. They offer you the opportunity to dispose of your risk (the risk that the financial instrument you hold may move against you in the time it takes you to find a buyer or seller) instantly by paying a very (very) small fee to do so.

duaneb 10y ago

> Finally, it is great for the tech scene in NYC. I dunno, the fact that I have to sell my soul to finance to find a decent tech job doesn't speak particularly well to its health.

jgalt212 10y ago
> I dunno, the fact that I have to sell my soul to finance to find a decent tech job doesn't speak particularly well to its health. As opposed to selling your soul to the advertising industry. At the end of the end of the day, unless you are independently wealthy or live in a very low cost area, you're gonna have to make peace with Adam Smith's invisible hand.
gozur88 10y ago
As opposed to not having a tech job at all?

tajen 10y ago

> HFT reduces the spread ... by chopping off the difference and putting it in the pocket of the HFT, right? I mean, without them, the earnings would go to the pocket of more loosely programmed organizations (=probably, our banks).

greenleafjacob 10y ago
Without market makers the trade wouldn't happen at all.
- yxhuvud 10y ago
  There was trading going on before HFT was a thing.
  - evanpw 10y ago
    But there were market makers, and they charged a lot more for the same service.
    - viraptor 10y ago
      I find this description weird. It's not like they provide a service. They act for their own profit and the fact that they make the spread smaller is a bit of a side effect. Why call that a service? You wouldn't pay them directly to do those trades. Sure, you'd spend more on your buy orders otherwise. So what? It just makes the stock gambling a bit different.
      - gd1 10y ago
        >They act for their own profit Lol, as opposed to all the other actors in the economy who provide a service. >and the fact that they make the spread smaller is a bit of a side effect It's not 'a bit of a side effect', it is what they have to do to earn fills or they will be undercut by their competition. Narrowing the spread is literally what a market maker is paid to do. It is their reason for existence. It isn't a 'side effect'. If you make a spread narrower than your competition, you steal his customers. Otherwise you don't trade and you don't make any money and you are out of business. > Why call that a service? It is a service. A very useful one. They offer, for a specified price, to sell (or buy) a financial instrument to (or from) you. No one forces you to use it. If you don't want to, and think you can do better, you can take your chances and place a limit order in the book instead. So like all services, it is completely optional, costs you money (to cross the spread), and provides you a benefit (immediate execution and certainty of price). I suspect what you are struggling with, is that you don't realise that risk transferral is a benefit. Take for example, the dairy farmer who sells his milk to a company (a middleman) that transports it, pasteurizes it, bottles it and on-sells it to a supermarket chain. In this case, you would probably tell me that you can see what service they provide - they add value by pasteurizing and bottling the milk, which they specialize in. Which is true. But there is a hidden value too - they take risk away from the farmer. The milk could spoil, the trucks could breakdown, the vats be contaminated, the supermarkets cancel their orders. All of these are risks that the farmer would have to bear if the farmer wanted to bottle their own milk, take it to a market and sell it. Part of the service provided is to take risk away from the farmer and be paid for it. That is all a market maker does. They offer you the opportunity to dispose of your risk (the risk that the financial instrument you hold may move against you in the time it takes you to find a buyer or seller) instantly by paying a very (very) small fee to do so.