6 ms·
This is ridiculous. Market authorities should disallow sub-centisecond trades, and allocate the trades that fall on the same centisecond at random. That would s
by d--b 9y ago
This is ridiculous. Market authorities should disallow sub-centisecond trades, and allocate the trades that fall on the same centisecond at random. That would save a lot of people a lot of time and money...
- motoboi 9y agoWhat is so bad about it in your oppinion?
- d--b 9y agoFinancial markets are meant for people to exchange financial products. People don't think very fast. So there is absolutely no value for actual market participants to be able to do sub-millisecond trades. If 2 person read the same news and send a trade order at the same hundredth of second, who wins the trade should be attributed at random, not to whoever is closest to the exchange. Super fast trades only allow high frequency trading firms to skim the market...
- dsacco 9y ago> Financial markets are meant for people to exchange financial products. People don't think very fast. So there is absolutely no value for actual market participants to be able to do sub-millisecond trades. Who are all the market participants? How do you know there is no value in sub-millisecond trades? Why is trading different from the many other computational tasks humans strive to shave milliseconds off of that they can't possibly notice? > If 2 person read the same news and send a trade order at the same hundredth of second, who wins the trade should be attributed at random, not to whoever is closest to the exchange. Why? > Super fast trades only allow high frequency trading firms to skim the market... Is your claim that HFT does not provide any value to the market?
- d--b 9y ago> Why is trading different from the many other computational tasks humans strive to shave milliseconds off of that they can't possibly notice? Because trading execution is not the critical path in the execution of a financial strategy!!!! > why? Because the intention of the traders in the same and it is impossible to measure correctly who had the idea first. > Is your claim that HFT does not provide any value to the market? Yes!!!
- dsacco 9y ago> Because trading execution is not the critical path in the execution of a financial strategy!!!! Okay, so what is? > Because the intention of the traders in the same and it is impossible to measure correctly who had the idea first. Why do we want to reward the person who had the idea first? Why is that a more optimal reward mechanism than whoever arrives first? > >Is your claim that HFT does not provide any value to the market? Yes!!! You implicitly admitted that HFT does provide sub-second liquidity benefits elsewhere in this thread, but questioned why we'd want sub-millisecond liquidity. Can you illustrate why we'd want one and not the other (what is especially beneficial or harmful about one versus the other)?
- poikniok 9y agoJust wanted to say you are awesome, actually having the energy to argue with all the people who neither understand how markets work, nor how HFT works.
- d--b 9y agoI just replied elsewhere on your last point: 1. non HFT traders are the fundamental players in the market, without them, HFT traders wouldn't exist. The exchange itself wouldn't exist. The exchange's objective is to connect non HFT traders. 2. subsecond liquidity is useful because non-HFT traders want their orders to be done as fast as possible: they want to their orders to feel immediate. 3. non HFT traders do not care about submillisecond liquidity because the timeframes in which they invest is much larger. 4. submillisecond liquidity is harmful because it incentivize HFT firms to stupidly race to reach the exchange without adding any value for the non HFT traders, while at some point the exchange has to say "we received these 2 orders at the same time".
- MichaelGG 9y agoIf they cared, they'd allow micropenny pricing. This would force competition on price instead of just time.
- d--b 9y agoNot sure that'd help. I think that would make the problem worse, because actual market participants don't care about micro pennies. When you buy a stock from your banker, you don't care that you buy it at 65 or 65.00001. Same thing for time, you don't care that you send the order at 15:14:25.0000001 or 15:14:25.5 Markets should be tailored to the needs of its users.
- 21 9y ago> Markets should be tailored to the needs of its users. Well, they are. HFTs do 70% of the volume, so the markets are tailored to their needs.
- ben0x539 9y agoWhy stop there and not disallow sub-minute trades?
- d--b 9y agobecause the price needs to move faster than that. If your exchange provides price updates every minute, all your traders are going to flee your exchange for a market place that's more liquid.
- dsacco 9y ago> That would save a lot of people a lot of time and money... Who, exactly?
- d--b 9y agoFor non HFT: it would help them not being front runned by the HFT guys, which means they would trade at fairer price and not have to worry about investigating when they're being screwed. (see flash boys) For HFT: they wouldn't have to spend all that time and energy trying to be as close to the market as possible.
- dsacco 9y ago> For non HFT: it would help them not being front runned by the HFT guys, which means they would trade at fairer price and not have to worry about investigating when they're being screwed. (see flash boys) Can you describe, in your own words (i.e. not pointing me to an article or book), why HFT constitutes front-running?
- d--b 9y agoHFT does not constitute front running in itself, it's just the simplest example of a HFT strategy that screws the market. I've seen it happen with my own eyes. So, since you seem to think I'm just a BSer, here goes what I saw: A trader is looking to buy X futures at a certain price P. There is nothing happening on that market, the order book has been stable for minutes. The trader clicks to buy the futures at market price (which the trader assume is P). Immediately, the price goes up by 1 tick (P+dP), and the trader gets filled at P+dP. Immediately after that, the price goes back down to P. The whole thing last ed 1 ms. What happened is that the order got sent to multiple exchanges at the same time. And on it arrived first on an exchange where it has not been executed. But HFT traders saw the change in the order book on that exchange and "front ran" the order to all the other exchanges, buying everything lying around at P to make the price go up by dP, and selling to the trader at P+dP. So that is annoying (and illegal). Strategies used by HFT are usually legal, but all tend to use the same mechanism: - look at what's happening with the price / order book - guess what kind of operations are happening - execute operations that benefit from the operations that should happen afterwards.
- jgalt212 9y agoI'd take it even further. run a random allocated match no more often than each second. No retail or non-HFT institutional investor would notice the difference in execution time. Of course, if you do that retail investors would no longer have access to $5 stock trades and actually have to pay for the "fair" services they are receiving. Probably some other cost as well to be absorbed under this model.
- vostok 9y ago> Market authorities should disallow sub-centisecond trades, and allocate the trades that fall on the same centisecond at random. This is similar to, but strictly worse than pro-rata allocation as used in quite a few products in the US. Pro-rata allocation has its own set of problems, namely that you encourage people to quote in larger size just in the hopes of getting a partial fill. There's also a larger speed advantage under this model because participants who are able to enter orders at the end of the centisecond time period will earn outsized profits. My estimate is that your proposed market model actually rewards speed to a greater extent than the current market structure. You also haven't demonstrated that pure price-time priority is bad in any way.
- d--b 9y agoLook, my view is that people put too much energy in shaving off microseconds to get to the exchange. This has no benefit for the non HFT traders in general. At some point, the exchange HAS to say that it received the orders at the same time. Currently that resolution is something like 1 ten millionth of a second. My opinion is that in making that time resolution coarser, we would avoid having people racing to trade in micro seconds, and spend all that stupid energy in being super fast.
- vostok 9y agoHave you considered that one or both parts of your view might be incorrect? Regardless, let's assume that your view is correct. Did you read my response? I explained why your proposal would still involve people racing to trade in microseconds. I also claimed, but didn't prove that your proposal would reward fast traders to a greater extent than the current system.
- derefr 9y ago> At some point, the exchange HAS to say that it received the orders at the same time. This part of the GP's view is definitely correct: at some (theoretical) point, the exchange will be operating in Planck-time units, which are quantized.