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http://www.thebigquestions.com/2014/04/21/high-frequency-rentseeking/ http://www.thebigquestions.com/2014/04/21/high-frequency-ren... This seems pretty convinc

http://www.thebigquestions.com/2014/04/21/high-frequency-rentseeking/ http://www.thebigquestions.com/2014/04/21/high-frequency-ren... This seems pretty convincing to me. The argument is that, based on the amount that firms are willing to spend on fiberoptic cables to perform hft, they put an extremely high value on hft. On the other hand, reasonable back-of-the-envelope calculations show that the social benefit of making the trade slightly faster are much less than the private cost. This indicates that almost all of the private benefit from hft comes from value accruing to the hft firm at the expense of other hft firms. We therefore expect to see overinvestment in hft. What about this do you find objectionable?

harryh 9y ago
HFT has drastically reduced the costs of trading and improved the returns of nearly all investors especially retail investors like you and me. These benefits are huge. This blog post ignores them. Here is Vanguard's CEO on the topic: http://www.cnbc.com/2014/04/25/vanguard-chief-defends-high-frequency-trading-firms.html http://www.cnbc.com/2014/04/25/vanguard-chief-defends-high-f... That blog post also makes a mistake of claiming that the advantage of these sorts of fiber optic cables is to let people complete their trades faster. That is not the case. They enable people to execute their trades at better prices. The way he is looking at this issue is almost silly.
pdeuchler 9y ago
The entire argument is extrapolation based on the cost for a firm to lay optic cable, are you serious? Do we really measure the social good of Google by how much capital they put into their fancy server clock syncing (the exact name of the project escapes me)? How did we get to a point where "reasonable back of the envelope calculations" are what people seriously consider when trying to develop economic policy for the biggest economy in the world?

harryh 9y ago

HFT has drastically reduced the costs of trading and improved the returns of nearly all investors especially retail investors like you and me. These benefits are huge. This blog post ignores them. Here is Vanguard's CEO on the topic: http://www.cnbc.com/2014/04/25/vanguard-chief-defends-high-frequency-trading-firms.html http://www.cnbc.com/2014/04/25/vanguard-chief-defends-high-f... That blog post also makes a mistake of claiming that the advantage of these sorts of fiber optic cables is to let people complete their trades faster. That is not the case. They enable people to execute their trades at better prices. The way he is looking at this issue is almost silly.

pdeuchler 9y ago

The entire argument is extrapolation based on the cost for a firm to lay optic cable, are you serious? Do we really measure the social good of Google by how much capital they put into their fancy server clock syncing (the exact name of the project escapes me)? How did we get to a point where "reasonable back of the envelope calculations" are what people seriously consider when trying to develop economic policy for the biggest economy in the world?