5 ms·

Because while they shaved 600ms of your execution time they also lowered your spread by 50 basis points, making it cheaper for you to unload your bond holdings

by lrm242 17y ago

Because while they shaved 600ms of your execution time they also lowered your spread by 50 basis points, making it cheaper for you to unload your bond holdings on the market.

cwp 17y ago
So? That's that's a tiny benefit, even to me, let alone society at large. Our society already has very efficient allocation of resources. Devoting significant resources to increasing that efficiency by tiny amounts is just a waste. I'd prefer Carter devoted his intellect to making it cheaper to put cargo into low-earth orbit, than to making it cheaper to sell bonds.
- xxzz 17y ago
  A tiny benefit multiplied by a billion people and several trillion dollars per day suddenly isn't so tiny anymore.
  - cwp 17y ago
    The difference in benefit I'm talking about is qualitative, not quantitative. I'd rather have a cure for cancer than a thousand years of narrower bond spreads. And when I'm on my death bed, I hope I can look back on my life and say that I contributed to something more meaningful than the bond market.
losvedir 17y ago
Making it cheaper for WHO to unload their bond holdings? The person who buys and holds for some time wouldn't notice the fractionally smaller spread. The majority of trading today is done automatically, and it's all this trading that sees the benefit. But, again, how useful is this sort of trading? Surely at some point it must move from "efficiently pricing securities" to gambling with the froth. How would trading change if the goal weren't to flip your security to someone else a bit down the road, but to hold it for its intrinsic value, as higher transaction costs would encourage?
- lrm242 17y ago
  Please define flipping a security when you're holding a futures contract for the near month. You need to step back and understand the totality of the complex financial markets before you presume to understand peoples motivations by dictating to them how long they should hold a financial instrument. People use the markets for varying motivations and their holding periods are one, of many things, that vary.
  - losvedir 17y ago
    Why are you holding the contract? You're an airline hedging against rising oil prices? You're a multinational corporation locking in a reasonable exchange rate when dealing with overseas manufacturers? You're a speculator who thinks the market isn't properly anticipating the impact of a weather pattern? All these seem fairly reasonable to me. I define a "flipper" as someone whose sole purpose in owning a security is to pass it off at a higher price to another "flipper" down the road. It was an offhand comment and my terms were non-standard, I apologize. I wasn't so much defining "flipper" by the length of time one holds a security, but the motivation for doing so. If most of the trading boils down to huge groups of firms selling back and forth to each other, it doesn't seem to matter to me whether the spreads shrink or not. It's a zero sum game and it's just a matter of one side ekeing out more money or the other.
    - yummyfajitas 17y ago
      What you call "flipper" is normally called a "speculator". Also, speculators add value to the market because they push prices toward the true values. If an asset is expected to be more valuable in the future, speculators will buy it now, raise the prices, thereby encouraging consumers of that asset to use less of it. This ensures that more is available for future use. Also, speculators also add liquidity for consumers. Unless demand for a long hedge exactly matches demand for a short hedge, you need speculators to pick up the slack.
      - dhume 17y ago
        Also, speculators add value to the market because they push prices toward the true values. Like what the people flipping houses did to housing prices?

by lrm242 17y ago

Because while they shaved 600ms of your execution time they also lowered your spread by 50 basis points, making it cheaper for you to unload your bond holdings on the market.

cwp 17y ago

So? That's that's a tiny benefit, even to me, let alone society at large. Our society already has very efficient allocation of resources. Devoting significant resources to increasing that efficiency by tiny amounts is just a waste. I'd prefer Carter devoted his intellect to making it cheaper to put cargo into low-earth orbit, than to making it cheaper to sell bonds.

xxzz 17y ago
A tiny benefit multiplied by a billion people and several trillion dollars per day suddenly isn't so tiny anymore.
- cwp 17y ago
  The difference in benefit I'm talking about is qualitative, not quantitative. I'd rather have a cure for cancer than a thousand years of narrower bond spreads. And when I'm on my death bed, I hope I can look back on my life and say that I contributed to something more meaningful than the bond market.

losvedir 17y ago

Making it cheaper for WHO to unload their bond holdings? The person who buys and holds for some time wouldn't notice the fractionally smaller spread. The majority of trading today is done automatically, and it's all this trading that sees the benefit. But, again, how useful is this sort of trading? Surely at some point it must move from "efficiently pricing securities" to gambling with the froth. How would trading change if the goal weren't to flip your security to someone else a bit down the road, but to hold it for its intrinsic value, as higher transaction costs would encourage?

lrm242 17y ago
Please define flipping a security when you're holding a futures contract for the near month. You need to step back and understand the totality of the complex financial markets before you presume to understand peoples motivations by dictating to them how long they should hold a financial instrument. People use the markets for varying motivations and their holding periods are one, of many things, that vary.
- losvedir 17y ago
  Why are you holding the contract? You're an airline hedging against rising oil prices? You're a multinational corporation locking in a reasonable exchange rate when dealing with overseas manufacturers? You're a speculator who thinks the market isn't properly anticipating the impact of a weather pattern? All these seem fairly reasonable to me. I define a "flipper" as someone whose sole purpose in owning a security is to pass it off at a higher price to another "flipper" down the road. It was an offhand comment and my terms were non-standard, I apologize. I wasn't so much defining "flipper" by the length of time one holds a security, but the motivation for doing so. If most of the trading boils down to huge groups of firms selling back and forth to each other, it doesn't seem to matter to me whether the spreads shrink or not. It's a zero sum game and it's just a matter of one side ekeing out more money or the other.
  - yummyfajitas 17y ago
    What you call "flipper" is normally called a "speculator". Also, speculators add value to the market because they push prices toward the true values. If an asset is expected to be more valuable in the future, speculators will buy it now, raise the prices, thereby encouraging consumers of that asset to use less of it. This ensures that more is available for future use. Also, speculators also add liquidity for consumers. Unless demand for a long hedge exactly matches demand for a short hedge, you need speculators to pick up the slack.
    - dhume 17y ago
      Also, speculators add value to the market because they push prices toward the true values. Like what the people flipping houses did to housing prices?