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Adding a little bit of friction to vast, interconnected networks of automated high speed trades doesn't seem like the worst thing in the world to me. It seems l

by davi 16y ago

Adding a little bit of friction to vast, interconnected networks of automated high speed trades doesn't seem like the worst thing in the world to me. It seems like it might dampen otherwise wildly oscillatory behavior from the system.

yummyfajitas 16y ago
Why do you feel that raising the bid/ask spread to $0.25 will prevent wildly oscillatory behavior? If anything, it will probably increase strange behavior. If you want to buy shares, you'll either need to pay a largish premium or else you'll need to wait a while. Fun fact: for the most part, prices have stabilized and spreads have narrowed as HFT has entered the game.
- _delirium 16y ago
  If everyone, even the huge institutional players, has to deal with non-zero bid/ask spreads, it does reduce incentive to spend a lot of effort exploiting tiny arbitrage opportunities with huge-volume trades, which could stabilize things overall. Admittedly, it's something economists disagree on.
  - yummyfajitas 16y ago
    It also reduces the incentive to engage in market making. This makes it more difficult to buy/sell stocks when you want to, and generally makes all trading (even the long term speculation which Cuban favors) more difficult.
  - hugh3 16y ago
    Arbitrage-exploiters do the worthwhile task of removing arbitrage. Putting arbitrage back into the market, visible to everybody but which everybody will sit on their hands until it becomes worth the 25 cent fee to exploit, seems like a way to create more instability.
    - _delirium 16y ago
      It can add instability though, if the arbitrage-exploiting is too large a proportion of the market. If 95%+ of trades are trades based on statistical market patterns, which are themselves created by those same 95%+ of trades, you get weird feedback loops that have more to do with chaotic systems and attractors than with supply or demand.
      - hugh3 16y ago
        Looking at prices of any given share for any day other than Thursday (was it Thursday?) would you say that such instability and big feedback loops are a big problem?
AKSHAYUDAYBHAT 16y ago
Yes it would mostly dampen, but in certain case the systems might go out of control. Since no one know what are the parts of the systems its very hard to predict.

by davi 16y ago

yummyfajitas 16y ago

Why do you feel that raising the bid/ask spread to $0.25 will prevent wildly oscillatory behavior? If anything, it will probably increase strange behavior. If you want to buy shares, you'll either need to pay a largish premium or else you'll need to wait a while. Fun fact: for the most part, prices have stabilized and spreads have narrowed as HFT has entered the game.

_delirium 16y ago
If everyone, even the huge institutional players, has to deal with non-zero bid/ask spreads, it does reduce incentive to spend a lot of effort exploiting tiny arbitrage opportunities with huge-volume trades, which could stabilize things overall. Admittedly, it's something economists disagree on.
- yummyfajitas 16y ago
  It also reduces the incentive to engage in market making. This makes it more difficult to buy/sell stocks when you want to, and generally makes all trading (even the long term speculation which Cuban favors) more difficult.
- hugh3 16y ago
  Arbitrage-exploiters do the worthwhile task of removing arbitrage. Putting arbitrage back into the market, visible to everybody but which everybody will sit on their hands until it becomes worth the 25 cent fee to exploit, seems like a way to create more instability.
  - _delirium 16y ago
    It can add instability though, if the arbitrage-exploiting is too large a proportion of the market. If 95%+ of trades are trades based on statistical market patterns, which are themselves created by those same 95%+ of trades, you get weird feedback loops that have more to do with chaotic systems and attractors than with supply or demand.
    - hugh3 16y ago
      Looking at prices of any given share for any day other than Thursday (was it Thursday?) would you say that such instability and big feedback loops are a big problem?

AKSHAYUDAYBHAT 16y ago

Yes it would mostly dampen, but in certain case the systems might go out of control. Since no one know what are the parts of the systems its very hard to predict.