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A lot of HF traders pull out in times like this for technological reasons. For example, most quotefeeds (such as Reuters, if my memory serves) have outdated tec

A lot of HF traders pull out in times like this for technological reasons. For example, most quotefeeds (such as Reuters, if my memory serves) have outdated technology that handles load really badly. When quotes are 5+ seconds slow, they're essentially useless, given that HF trading occurs on a millisecond timeframe. Most liquidity providers would love to be in the market when it's panicking, because this is a great time to make a lot of money, but can't be there if their data is bad and they're at risk of enormous losses.

mattmanser 16y ago
Reading this just makes me feel even more that the whole HF trading thing is the biggest con going out there.
- yummyfajitas 16y ago
  Hmm. Speculators choose to avoid a market which they feel is highly risky. For this, you believe they are con artists. Similarly, any person who doesn't put their retirement fund into junk bonds and penny stocks is also a con artist. After all, they are avoiding risky markets!
- starkfist 16y ago
  The biggest con out there is government employees making salaries that are on average double than private enterprise... but I guess that's a different discussion.
  - pw0ncakes 16y ago
    Actually, a much worse con, if you want to have this discussion, is that millions of private-sector corporate employees are getting paid peanuts for their work, compensated largely with a promise of future prosperity/advancement that will never come through. A much worse con is that the economic growth since 1975 has been siphoned off almost entirely by the increasingly entrenched upper classes, with consumer debt, a housing bubble, and student-loan debt bondage replacing wage increases to fuel the growth. A much worse con is an economy now plagued by individual insolvency and a widespread lack of trust, resulting from these catastrophic social changes. Do you really think that it's of benefit to society for some people to show up to work every day and take home Wal-Mart wages, instead of having real alternatives? A large share of this government waste goes to military contractors employed in completely unnecessary wars such as the multi-trillion-dollar mess in Iraq. Also, please cite your "on average double" statistic. If my memory serves me, the discrepancy is about 30% on average, mainly because private-sector pay is far more recession-sensitive. (The discrepancy would shrink, if not reverse, in a growing economy with a healthy private sector.) For the record, low-level government employees do make more while upper-level people make considerably less than they do in the private sector.
    - inferno0069 16y ago
      > Do you really think that it's of benefit to society for some people to show up to work every day and take home Wal-Mart wages, instead of having real alternatives? Given the prevalence of unemployment, yes Walmart jobs are better than at least one real alternative.
      - pw0ncakes 16y ago
        I would rather have a society where people are paid unemployment, even indefinitely, than one where they work under Wal-Mart conditions for Wal-Mart wages-- a circumstance that would be considered slavery by most societies dating back to ancient Greece, although we're afraid to admit that this arrangement is such today.
- pw0ncakes 16y ago
  It's not, at least not completely. Arbitrage and market-making are legitimate businesses that provide liquidity to markets, making it easier for other traders to get fair trades. (Whenever you trade, the fair value is assumed to be somewhere between the bid and ask, so you're paying about half the spread on every share you trade.) Of course, many hedge funds out there are scams that exist to take fees while taking ridiculous (and poorly-disclosed) risks with others' money, but not all of them are.
yummyfajitas 16y ago
It's not technical issues that cause HF to pull out. The exchanges are breaking a whole bunch of trades and algorithms can't predict which trades will be broken. So imagine an algorithm bought at the bottom and sold halfway up the recover of yesterday's spike. Their buy orders at the bottom get broken. Their sells halfway up do not. To meet their obligations, the algorithm must buy again at fully recovered prices. The process of breaking trades has turned a big profit into a big loss.

mattmanser 16y ago

Reading this just makes me feel even more that the whole HF trading thing is the biggest con going out there.

yummyfajitas 16y ago
Hmm. Speculators choose to avoid a market which they feel is highly risky. For this, you believe they are con artists. Similarly, any person who doesn't put their retirement fund into junk bonds and penny stocks is also a con artist. After all, they are avoiding risky markets!
starkfist 16y ago
The biggest con out there is government employees making salaries that are on average double than private enterprise... but I guess that's a different discussion.
- pw0ncakes 16y ago
  Actually, a much worse con, if you want to have this discussion, is that millions of private-sector corporate employees are getting paid peanuts for their work, compensated largely with a promise of future prosperity/advancement that will never come through. A much worse con is that the economic growth since 1975 has been siphoned off almost entirely by the increasingly entrenched upper classes, with consumer debt, a housing bubble, and student-loan debt bondage replacing wage increases to fuel the growth. A much worse con is an economy now plagued by individual insolvency and a widespread lack of trust, resulting from these catastrophic social changes. Do you really think that it's of benefit to society for some people to show up to work every day and take home Wal-Mart wages, instead of having real alternatives? A large share of this government waste goes to military contractors employed in completely unnecessary wars such as the multi-trillion-dollar mess in Iraq. Also, please cite your "on average double" statistic. If my memory serves me, the discrepancy is about 30% on average, mainly because private-sector pay is far more recession-sensitive. (The discrepancy would shrink, if not reverse, in a growing economy with a healthy private sector.) For the record, low-level government employees do make more while upper-level people make considerably less than they do in the private sector.
  - inferno0069 16y ago
    > Do you really think that it's of benefit to society for some people to show up to work every day and take home Wal-Mart wages, instead of having real alternatives? Given the prevalence of unemployment, yes Walmart jobs are better than at least one real alternative.
    - pw0ncakes 16y ago
      I would rather have a society where people are paid unemployment, even indefinitely, than one where they work under Wal-Mart conditions for Wal-Mart wages-- a circumstance that would be considered slavery by most societies dating back to ancient Greece, although we're afraid to admit that this arrangement is such today.
pw0ncakes 16y ago
It's not, at least not completely. Arbitrage and market-making are legitimate businesses that provide liquidity to markets, making it easier for other traders to get fair trades. (Whenever you trade, the fair value is assumed to be somewhere between the bid and ask, so you're paying about half the spread on every share you trade.) Of course, many hedge funds out there are scams that exist to take fees while taking ridiculous (and poorly-disclosed) risks with others' money, but not all of them are.

yummyfajitas 16y ago

It's not technical issues that cause HF to pull out. The exchanges are breaking a whole bunch of trades and algorithms can't predict which trades will be broken. So imagine an algorithm bought at the bottom and sold halfway up the recover of yesterday's spike. Their buy orders at the bottom get broken. Their sells halfway up do not. To meet their obligations, the algorithm must buy again at fully recovered prices. The process of breaking trades has turned a big profit into a big loss.