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Remember when Sanders proposed a small fee on every trade on Wall Street to discourage high frequency trading and to recoup some value from the market? Remembe

by Pxtl 9y ago

Remember when Sanders proposed a small fee on every trade on Wall Street to discourage high frequency trading and to recoup some value from the market? Remember how he was widely pronounced deranged for suggesting that there should be a fee associated with trades? How it would destroy the market? Funny, that.

QAPereo 9y ago
Common sense and basic regulations to protect people and economies have no place in this laughable economy. What you're describing, what Sanders proposed, would put a dent in the profits of some of the wealthiest, most powerful, and most soulless people in the world. Of course it was shot down, that's one way to tell that he was cutting close to the bone.
- stcredzero 9y ago
  would put a dent in the profits of some of the wealthiest, most powerful, This is most certainly factual. and most soulless people in the world. This is a factually unsupportable adhominem. Sentiment that contributes to outrage on social media is a form of cultural pollution. People use it for short term gain, but it's a kind of externality which is tearing society apart. (FWIW, I dislike this situation as well.) (Yes, this is obligatory: https://www.youtube.com/watch?v=rE3j_RHkqJc https://www.youtube.com/watch?v=rE3j_RHkqJc )
  - jorjordandan 9y ago
    Outrage is a form of cultural pollution? So no one should ever be outraged by peoples actions? Or only in the right circumstances? Who gets to say when its justified, if ever?
    - thanatropism 9y ago
      All of those questions apply to air pollution.
      - jorjordandan 9y ago
        That's true. I guess the difference is that outrage has a function, and can have a utility, so I don't think it's a good metaphor. Viewing it as just 'pollution' implies that it has no value. It's only 'pollution' to those who don't agree with the outrage.
        stcredzero 9y ago
        That's true. I guess the difference is that outrage has a function, and can have a utility, so I don't think it's a good metaphor CO2 is the best analogy. There needs to be a certain amount for the utility. Too much and too little are detrimental. Viewing it as just 'pollution' implies that it has no value. This is an all-or-nothing fallacy. It's the amount produced which is the issue in the analogy. In reality, there are also finer grained quality issues. To further demonstrate the application of your fallacy, I would agree that there are problems with under-prosecution of certain crimes. https://www.youtube.com/watch?v=rHMGbtGGdbQ https://www.youtube.com/watch?v=rHMGbtGGdbQ However, when the outrage which has reached a fever pitch such that people start calling for abrogation of Innocent Until Proven Guilty based on inherent characteristics, something has gone wrong. Our culture has known, since the times in which the Magna Carta was written, that the protection of the individual from arbitrary imprisonment and prosecution is essential to prevent totalitarian abuses of power. Outrage is easy to over use, its over-use is readily rewarded and such over-use is clearly everywhere, even despite the fact that it's only the excesses of the "other side" that are easily discerned.
        jorjordandan 9y ago
        >This is an all-or-nothing fallacy Not really. Pollution is uniformly unwanted by definition (without you changing the goalposts to CO2, which is naturally occurring, and the naturally occurring CO2 would not be considered as pollution, whereas human created CO2 would). In fact, let's stick with the wikipedia definition: "Pollution is the introduction of contaminants into the natural environment that cause adverse change." Outrage, on the other hand, may be very much wanted, or even required. I'm not defending ALL outrage. I'm defending that some outrage may occasionally be warranted. You saw an all or nothing fallacy where there was none. To recap - Argument: Outrage is cultural pollution. My Response: All pollution is unwanted, some outrage may be occasionally wanted or warranted. Your response: Saying pollution has no value is an all-or-nothing fallacy! The worst kind of bad reasoning is the false accusation of a fallacy. Because the person making that claim should know better.
    - stcredzero 9y ago
      Outrage is a form of cultural pollution? On the 21st century internet, an alarmingly large portion of it is. Some outrage is justified, clearly. However, the incentive structures online are so extremely skewed in favor of producing outrage, we need a new form of skepticism. I was once outraged by the notion, "Pics, or it didn't happen!" But on reflection, I realized that the new incentive structures made the rewarding of internet fakery far too likely. Young people, realizing this, reacted in a rational way! As with "pics or it didn't happen" this is going to be hard for many to hear, but there needs to be a more rational approach online. As it is, the lowered bar for producing online commentary and media has meant a general drop in quality, and this extends to commentary and media produced for activism and activism itself.
harryh 9y ago
Fees on trading would not meaningfully discourage high frequency trading and would just be passed on to buyers and sellers of stock in the form of larger bid/ask spreads.
- dm3 9y ago
  Something like a minimum holding time is a more reasonable approach. However, there's not a clear cut answer in any case.
  - harryh 9y ago
    Before you start talking about what would be effective in reducing the amount of high frequency trading you have to make the case that reducing HFT is a good goal in the first place. This is a challenging case to make.
    - Jweb_Guru 9y ago
      Why is it challenging? What conceivable valuable function does front-running serve?
      - dsacco 9y ago
        High frequency trading is not front running. It's becoming truly kafkaesque how often this claim comes up on Hacker News.
        theseatoms 9y ago
        Or kafkaesque how often these separate concepts are conflated in popular usage.
      - harryh 9y ago
        First you have to tell me what you think front running means. Originally front running had a very specific definition: Someone who has a fiduciary responsibility to me cannot use my trading interests to execute their own trades before they execute my trades. This sort of thing is clearly wrong because it can result in someone I've hired delivering subpar execution prices to me. However the term has expanded a lot over the years to mean a lot of different things to a lot of different people. So what does it mean to you?
jstanley 9y ago
What you call "recouping some value from the market", others call "stealing some value from the market".
javajosh 9y ago
I've always thought a better solution would be a voluntary market "quantization" at some reasonable human-scale time frame. It would be a little random (to avoid gaming), so all put and asks get resolved "about every hour". There would probably have to be a law to prevent people from running markets at faster time-scales on top of this.
- sseveran 9y ago
  This has existed in various forms for more than 10 years. Nasdaq I believe has 3 or 4 discrete intraday crosses in addition to the opening and closing cross. You don't want it to be random since participants need certainty about when the cross will occur. In addition there are a variety of venues that allow block trading in various forms that market participants can use.
- harryh 9y ago
  This solves fewer problems than you might think. 1) Let's say that trades are resolved at time X. Participants have every incentive to submit all bids/asks as close to time X as possible (microseconds possibly). 2) How do you handle a mismatched number of bids/asks at a given price? Resolving this difficulty without creating bigger problems than the problem you were trying to eliminate is challenging. 3) I'm just a regular guy who wants to buy $1000 of stock as part of my monthly savings plan. With an up to date market I can just buy and sell at the market price and not worry about it. But now I have to be afraid that there has been some big news event in the past hour that will make this hours price much different than last hours. One of the biggest services markets provide is up to date pricing information. Why do you want to take that away from me?
  - zo1 9y ago
    1) You only get to see and make a potential buy/bid for last hour's bid/asks, only. 2) The system itself resolves it. Either it prevents you from making a buy/bid for something that was already "fulfilled" (though this would leak information). Or it accepts them sequentially, and refunds you at the end of the hour. 3) We're not taking that away from you. We'd be taking it away from everyone. You are welcome to see last hour's trades and try trade on it. Additional points: 2) Another option. If your order didn't make it, the system can simply let it "stay" on on the system to be fulfilled in the future. If someone wants to take you up on the offer you made, they'll do it in the next hour, or any subsequent hour.
walkingolof 9y ago
A variant on the Tobin Tax https://en.wikipedia.org/wiki/Tobin_tax https://en.wikipedia.org/wiki/Tobin_tax
dsacco 9y ago
Your comment, while snarky, isn't a refutable statement. As it stands you seem to be endorsing some position, which I'm inferring is in favor of Sanders and maybe in opposition to HFT. I can't really tell what you're getting at precisely though. > Remember how he was widely pronounced deranged for suggesting that there should be a fee associated with trades? How it would destroy the market? Who said this, specifically? What is your point in bringing it up? > Remember when Sanders proposed a small fee on every trade on Wall Street to discourage high frequency trading and to recoup some value from the market? I'm getting the sense that you'd be in favor of this - can you tell me why, in your own words, you believe we should be trying to "recoup value" from the activities of high frequency traders?
- Pxtl 9y ago
  It's mostly about how skimming a tiny bit of cash off of every trade is perfectly good for the exchanges to do to john Q public, but heaven help us if real traders have to put up with that. I have no idea if Sanders' plan was good or not, I'm more grousing about how critically important principles of how the market is supposed to work seem to vary depending on whether you're talking about consumer-level investments vs. institutional investors.
  - jstanley 9y ago
    I still don't get what you're trying to say. Who is "skimming a tiny bit of cash off of every trade"? Do you buy into the notion that HFT is somehow so fast that it can travel back in time and jump ahead of orders that have just executed?
    - deleted 9y ago
      [deleted]
    - JetSpiegel 9y ago
      Why is it OK for the exchange to charge fees from every trade motivated by profit, but if the government does it to redistribute, it is somehow labelled as "market distortions"? Either fees on every trade distort the market, and in that case the exchange is distorting the market, or they don't have appreciable effects and the government can levy that tax. My opinion is that this a political opinion, and pretending that this is an economic concern is just a smokescreen.
corporateslave3 9y ago
You are aware that HFT is essentially dead? It isnt profitable anymore and most of those firms are failing. Trading situations that allow for easy outsized profits like that disappear very fast.
- lin_lin 9y ago
  Is this true? Any links? Not doubting you, just interested.
  - corporateslave3 9y ago
    Source is I work in the industry. Look at the price of VirtuFinancial stock, who was at one time a premier HFT firm. The amount of disinformation surrounding HFT is staggering.
    - keenerd 9y ago
      Unrelated, but I have a question for you. I've been unable to find a good answer for how exactly HFT benefits the average person. Stuff like antibiotics, electric lights, refrigeration, washing machines, phones, computers all have all led to direct and immediate quality of life improvements. Often on the order of a tenfold improvement for that activity, and they are easily within reach of the majority of the population. What would become 10x worse for the average person if HFT were to vanish overnight? Would mortgage rates massively spike? Would bond rates plummet? Is there some quantifiable financial thing that would regress to whatever terrible situation we were in back in 1990 before HFT was substantial?
      - corporateslave3 9y ago
        Right now the newest investment strategies are taking alternative data sets, like mining website data, and using it to predict stock prices. What value does that provide to the average guy? Nothing but market efficiency. It's just how the industry works.
rramdin 9y ago
Sanders lacks fundamental understanding of the stock market, indicated by his unsubstantiated refrain "the business model of Wall Street is fraud." First, there are already per-trade regulatory fees, so this isn't a novel idea. Second, this is necessarily a regressive tax: wider spreads mean worse prices for the ultimate owner of stocks; that tax is applied whether trades are retail (you and me), institutional (big Wall Street firms, i.e. IEX's clients), or HFT (small tech firms).
- lightbyte 9y ago
  >Second, this is necessarily a regressive tax You're putting your own ideas into his mouth. Nobody said anything about the fee being a flat fee, or that it would apply to every single trade in existence.
  - pdeuchler 9y ago
    I'm saying this as a Sanders supporter, but maybe he should have been more specific and detailed about his proposals then. My two biggest frustrations with Sanders were 1) his inability to understand that it was going to take more than just mere backbone and higher taxes to reform wall street and 2) his foreign policy
    - lightbyte 9y ago
      >but maybe he should have been more specific and detailed about his proposals then. I'll agree with you there, his proposals were very similar to Trump's in that they did not have much substance, just broad ideas.
- Chardok 9y ago
  Your reasoning seems to ignore the evidence in this article; there does seem to be a business model of fraud and, even if he did lack a fundamental understanding of the stock market, I would hope we could all agree that action needs to be taken to regulate and restrict these illegal practices. Perhaps it would not be the specific terms Sanders was describing, but unfortunately he was the only viable candidate that ostensibly wanted to do so.
alpos 9y ago
I suspect this debate was/is largely conducted by uninformed parties. There already is a small fee imposed on every trade due to gov't regulation. https://www.sec.gov/fast-answers/answerssec31htm.html https://www.sec.gov/fast-answers/answerssec31htm.html At best, there could be a meaningful debate over increasing the appropriation to the SEC and adding new regulation mandates for them. The question over whether we should have transaction fees should already be settled by the fact that the SEC is currently funded by such fees.
- jcranberry 9y ago
  IIRC, the bill he proposed had taxes on the value of trades, such as 1% per stock per trade, .05% (maybe off by OOM) on options, etc.

by Pxtl 9y ago

QAPereo 9y ago

Common sense and basic regulations to protect people and economies have no place in this laughable economy. What you're describing, what Sanders proposed, would put a dent in the profits of some of the wealthiest, most powerful, and most soulless people in the world. Of course it was shot down, that's one way to tell that he was cutting close to the bone.

stcredzero 9y ago
would put a dent in the profits of some of the wealthiest, most powerful, This is most certainly factual. and most soulless people in the world. This is a factually unsupportable adhominem. Sentiment that contributes to outrage on social media is a form of cultural pollution. People use it for short term gain, but it's a kind of externality which is tearing society apart. (FWIW, I dislike this situation as well.) (Yes, this is obligatory: https://www.youtube.com/watch?v=rE3j_RHkqJc https://www.youtube.com/watch?v=rE3j_RHkqJc )
- jorjordandan 9y ago
  Outrage is a form of cultural pollution? So no one should ever be outraged by peoples actions? Or only in the right circumstances? Who gets to say when its justified, if ever?
  - thanatropism 9y ago
    All of those questions apply to air pollution.
    - jorjordandan 9y ago
      That's true. I guess the difference is that outrage has a function, and can have a utility, so I don't think it's a good metaphor. Viewing it as just 'pollution' implies that it has no value. It's only 'pollution' to those who don't agree with the outrage.
      - stcredzero 9y ago
        That's true. I guess the difference is that outrage has a function, and can have a utility, so I don't think it's a good metaphor CO2 is the best analogy. There needs to be a certain amount for the utility. Too much and too little are detrimental. Viewing it as just 'pollution' implies that it has no value. This is an all-or-nothing fallacy. It's the amount produced which is the issue in the analogy. In reality, there are also finer grained quality issues. To further demonstrate the application of your fallacy, I would agree that there are problems with under-prosecution of certain crimes. https://www.youtube.com/watch?v=rHMGbtGGdbQ https://www.youtube.com/watch?v=rHMGbtGGdbQ However, when the outrage which has reached a fever pitch such that people start calling for abrogation of Innocent Until Proven Guilty based on inherent characteristics, something has gone wrong. Our culture has known, since the times in which the Magna Carta was written, that the protection of the individual from arbitrary imprisonment and prosecution is essential to prevent totalitarian abuses of power. Outrage is easy to over use, its over-use is readily rewarded and such over-use is clearly everywhere, even despite the fact that it's only the excesses of the "other side" that are easily discerned.
        jorjordandan 9y ago
        >This is an all-or-nothing fallacy Not really. Pollution is uniformly unwanted by definition (without you changing the goalposts to CO2, which is naturally occurring, and the naturally occurring CO2 would not be considered as pollution, whereas human created CO2 would). In fact, let's stick with the wikipedia definition: "Pollution is the introduction of contaminants into the natural environment that cause adverse change." Outrage, on the other hand, may be very much wanted, or even required. I'm not defending ALL outrage. I'm defending that some outrage may occasionally be warranted. You saw an all or nothing fallacy where there was none. To recap - Argument: Outrage is cultural pollution. My Response: All pollution is unwanted, some outrage may be occasionally wanted or warranted. Your response: Saying pollution has no value is an all-or-nothing fallacy! The worst kind of bad reasoning is the false accusation of a fallacy. Because the person making that claim should know better.
  - stcredzero 9y ago
    Outrage is a form of cultural pollution? On the 21st century internet, an alarmingly large portion of it is. Some outrage is justified, clearly. However, the incentive structures online are so extremely skewed in favor of producing outrage, we need a new form of skepticism. I was once outraged by the notion, "Pics, or it didn't happen!" But on reflection, I realized that the new incentive structures made the rewarding of internet fakery far too likely. Young people, realizing this, reacted in a rational way! As with "pics or it didn't happen" this is going to be hard for many to hear, but there needs to be a more rational approach online. As it is, the lowered bar for producing online commentary and media has meant a general drop in quality, and this extends to commentary and media produced for activism and activism itself.

harryh 9y ago

Fees on trading would not meaningfully discourage high frequency trading and would just be passed on to buyers and sellers of stock in the form of larger bid/ask spreads.

dm3 9y ago
Something like a minimum holding time is a more reasonable approach. However, there's not a clear cut answer in any case.
- harryh 9y ago
  Before you start talking about what would be effective in reducing the amount of high frequency trading you have to make the case that reducing HFT is a good goal in the first place. This is a challenging case to make.
  - Jweb_Guru 9y ago
    Why is it challenging? What conceivable valuable function does front-running serve?
    - dsacco 9y ago
      High frequency trading is not front running. It's becoming truly kafkaesque how often this claim comes up on Hacker News.
      - theseatoms 9y ago
        Or kafkaesque how often these separate concepts are conflated in popular usage.
    - harryh 9y ago
      First you have to tell me what you think front running means. Originally front running had a very specific definition: Someone who has a fiduciary responsibility to me cannot use my trading interests to execute their own trades before they execute my trades. This sort of thing is clearly wrong because it can result in someone I've hired delivering subpar execution prices to me. However the term has expanded a lot over the years to mean a lot of different things to a lot of different people. So what does it mean to you?

jstanley 9y ago

What you call "recouping some value from the market", others call "stealing some value from the market".

javajosh 9y ago

I've always thought a better solution would be a voluntary market "quantization" at some reasonable human-scale time frame. It would be a little random (to avoid gaming), so all put and asks get resolved "about every hour". There would probably have to be a law to prevent people from running markets at faster time-scales on top of this.

sseveran 9y ago
This has existed in various forms for more than 10 years. Nasdaq I believe has 3 or 4 discrete intraday crosses in addition to the opening and closing cross. You don't want it to be random since participants need certainty about when the cross will occur. In addition there are a variety of venues that allow block trading in various forms that market participants can use.
harryh 9y ago
This solves fewer problems than you might think. 1) Let's say that trades are resolved at time X. Participants have every incentive to submit all bids/asks as close to time X as possible (microseconds possibly). 2) How do you handle a mismatched number of bids/asks at a given price? Resolving this difficulty without creating bigger problems than the problem you were trying to eliminate is challenging. 3) I'm just a regular guy who wants to buy $1000 of stock as part of my monthly savings plan. With an up to date market I can just buy and sell at the market price and not worry about it. But now I have to be afraid that there has been some big news event in the past hour that will make this hours price much different than last hours. One of the biggest services markets provide is up to date pricing information. Why do you want to take that away from me?
- zo1 9y ago
  1) You only get to see and make a potential buy/bid for last hour's bid/asks, only. 2) The system itself resolves it. Either it prevents you from making a buy/bid for something that was already "fulfilled" (though this would leak information). Or it accepts them sequentially, and refunds you at the end of the hour. 3) We're not taking that away from you. We'd be taking it away from everyone. You are welcome to see last hour's trades and try trade on it. Additional points: 2) Another option. If your order didn't make it, the system can simply let it "stay" on on the system to be fulfilled in the future. If someone wants to take you up on the offer you made, they'll do it in the next hour, or any subsequent hour.

walkingolof 9y ago

A variant on the Tobin Tax https://en.wikipedia.org/wiki/Tobin_tax https://en.wikipedia.org/wiki/Tobin_tax

dsacco 9y ago

Your comment, while snarky, isn't a refutable statement. As it stands you seem to be endorsing some position, which I'm inferring is in favor of Sanders and maybe in opposition to HFT. I can't really tell what you're getting at precisely though. > Remember how he was widely pronounced deranged for suggesting that there should be a fee associated with trades? How it would destroy the market? Who said this, specifically? What is your point in bringing it up? > Remember when Sanders proposed a small fee on every trade on Wall Street to discourage high frequency trading and to recoup some value from the market? I'm getting the sense that you'd be in favor of this - can you tell me why, in your own words, you believe we should be trying to "recoup value" from the activities of high frequency traders?

Pxtl 9y ago
It's mostly about how skimming a tiny bit of cash off of every trade is perfectly good for the exchanges to do to john Q public, but heaven help us if real traders have to put up with that. I have no idea if Sanders' plan was good or not, I'm more grousing about how critically important principles of how the market is supposed to work seem to vary depending on whether you're talking about consumer-level investments vs. institutional investors.
- jstanley 9y ago
  I still don't get what you're trying to say. Who is "skimming a tiny bit of cash off of every trade"? Do you buy into the notion that HFT is somehow so fast that it can travel back in time and jump ahead of orders that have just executed?
  - deleted 9y ago
    [deleted]
  - JetSpiegel 9y ago
    Why is it OK for the exchange to charge fees from every trade motivated by profit, but if the government does it to redistribute, it is somehow labelled as "market distortions"? Either fees on every trade distort the market, and in that case the exchange is distorting the market, or they don't have appreciable effects and the government can levy that tax. My opinion is that this a political opinion, and pretending that this is an economic concern is just a smokescreen.

corporateslave3 9y ago

You are aware that HFT is essentially dead? It isnt profitable anymore and most of those firms are failing. Trading situations that allow for easy outsized profits like that disappear very fast.

lin_lin 9y ago
Is this true? Any links? Not doubting you, just interested.
- corporateslave3 9y ago
  Source is I work in the industry. Look at the price of VirtuFinancial stock, who was at one time a premier HFT firm. The amount of disinformation surrounding HFT is staggering.
  - keenerd 9y ago
    Unrelated, but I have a question for you. I've been unable to find a good answer for how exactly HFT benefits the average person. Stuff like antibiotics, electric lights, refrigeration, washing machines, phones, computers all have all led to direct and immediate quality of life improvements. Often on the order of a tenfold improvement for that activity, and they are easily within reach of the majority of the population. What would become 10x worse for the average person if HFT were to vanish overnight? Would mortgage rates massively spike? Would bond rates plummet? Is there some quantifiable financial thing that would regress to whatever terrible situation we were in back in 1990 before HFT was substantial?
    - corporateslave3 9y ago
      Right now the newest investment strategies are taking alternative data sets, like mining website data, and using it to predict stock prices. What value does that provide to the average guy? Nothing but market efficiency. It's just how the industry works.

rramdin 9y ago

Sanders lacks fundamental understanding of the stock market, indicated by his unsubstantiated refrain "the business model of Wall Street is fraud." First, there are already per-trade regulatory fees, so this isn't a novel idea. Second, this is necessarily a regressive tax: wider spreads mean worse prices for the ultimate owner of stocks; that tax is applied whether trades are retail (you and me), institutional (big Wall Street firms, i.e. IEX's clients), or HFT (small tech firms).

lightbyte 9y ago
>Second, this is necessarily a regressive tax You're putting your own ideas into his mouth. Nobody said anything about the fee being a flat fee, or that it would apply to every single trade in existence.
- pdeuchler 9y ago
  I'm saying this as a Sanders supporter, but maybe he should have been more specific and detailed about his proposals then. My two biggest frustrations with Sanders were 1) his inability to understand that it was going to take more than just mere backbone and higher taxes to reform wall street and 2) his foreign policy
  - lightbyte 9y ago
    >but maybe he should have been more specific and detailed about his proposals then. I'll agree with you there, his proposals were very similar to Trump's in that they did not have much substance, just broad ideas.
Chardok 9y ago
Your reasoning seems to ignore the evidence in this article; there does seem to be a business model of fraud and, even if he did lack a fundamental understanding of the stock market, I would hope we could all agree that action needs to be taken to regulate and restrict these illegal practices. Perhaps it would not be the specific terms Sanders was describing, but unfortunately he was the only viable candidate that ostensibly wanted to do so.

alpos 9y ago

I suspect this debate was/is largely conducted by uninformed parties. There already is a small fee imposed on every trade due to gov't regulation. https://www.sec.gov/fast-answers/answerssec31htm.html https://www.sec.gov/fast-answers/answerssec31htm.html At best, there could be a meaningful debate over increasing the appropriation to the SEC and adding new regulation mandates for them. The question over whether we should have transaction fees should already be settled by the fact that the SEC is currently funded by such fees.

jcranberry 9y ago
IIRC, the bill he proposed had taxes on the value of trades, such as 1% per stock per trade, .05% (maybe off by OOM) on options, etc.