4 ms·

This is more specific and useful. But it is still fairly hand-wavy. How is this efficiency measured? Is "market efficiency" really nothing more than the aver

This is more specific and useful. But it is still fairly hand-wavy. How is this efficiency measured? Is "market efficiency" really nothing more than the average USD to conduct a trade? Or the number of microseconds? (In either case it isn't an efficiency, efficiency is always a unitless number between 0 and 1.) 401k is a great indicator, but I'm not sure it makes HFT look very good. The median trade time is more than 1000x faster than in 1990. But people's 401ks are not doing 1000x better. Did we hit a point of diminishing returns long ago? If so, is HFT pointless? I feel like you are conflating HFT with electronic trading. Electronic trading can be HFT or slow, either way it is cheap and cuts the middleman out.

consz 9y ago
If you want something more specific, how about something like the following -- for a fixed number of shares N that you want to buy (or sell), the average "cost" (as measured by the difference between the price you pay and the midpoint between the best bid and offer) of performing that transaction has gone down (true whether you buy all N shares in one order or across a block of time T).
gnaritas 9y ago
You're asking all the wrong questions. HFT is just trading really fast, we live in a free country, some people want to trade really fast because they've found it profitable to take on the risk of doing so, it doesn't matter one bit if you or anyone else thinks it's pointless, you have no right to tell someone else they're trading too fast. They aren't hurting you, they're making your trades cheaper, they're making it easier for you to get into and out of any position you're in by being there to buy or sell exactly at the moment you want to buy or sell, and you're complaining about what? You don't even know. You seem to have this backwards notion that they need to justify their existence, they don't, they're just traders executing their rights to buy and sell like everyone else. It's those like you seeking to regulate HFT that need to justify yourselves. You don't even understand what HFT is really as you're asking basic questions like what does market efficiency mean and does HFT help it, and you think you're in a position to question someone else's trading habits? Really? HFT doesn't need to look good, those of you trying to punish them need to show some actual evidence they're doing something bad, but they're not and you can't. Efficiency in a market means things are priced accurately and you're not getting ripped off when you buy or sell; if you find that vague and hand wavy, well, sorry but that's what it means and you should be able to understand that without further explanation. HFT traders make the price more accurate benefiting you and everyone else, they don't need to justify themselves, you need to justify your witch hunt against them. HFT is a form of electronic trading, I'm not conflating them, they're just different forms of using tech to trade and there's valid reason at all to single either of them out as bad. HFT are market makers, they're providing you and everyone else liquidity for a vastly smaller fee than you've been provided it ever before. So say thank you to HFT, enjoy your cheaper trades and increased liquidity, and go find a real problem to complain about instead of attacking those who make your life better.
- keenerd 9y ago
  I think you are misunderstanding my point. You say HFT is good and it does good things. Okay... how good? For the sheer amount of money and effort involved it had better be pretty good. (For things this big, yes, they do need to justify their existence.) So we should quantify how good it is. We should know the ROI for all speeds of trading. At what point do the improvements become lost in the noise and it is just a bunch of financial masturbation? > Efficiency in a market means things are priced accurately and you're not getting ripped off when you buy or sell; if you find that vague and hand wavy, well, sorry but that's what it means and you should be able to understand that without further explanation. I'm unable to find hard numbers and neither can you; by that metric we understand it equally well. You have a religious faith in finance. I don't. I need evidence. Would you buy my pill that helps you lose weight if I'm not going to tell you how much the pill costs or how much weight you lose? I've based my whole career on selling this pill and can spout endless platitudes, you should believe me. > So say thank you to HFT, enjoy your cheaper trades and increased liquidity, and go find a real problem to complain about instead of attacking those who make your life better. More platitudes. Finance lives and dies by numbers. If the most brilliant minds on the planet, moving trillions of dollars, can't nail down a metric for how good of a job they are doing, I'm inclined to suspect they aren't doing a good job.

consz 9y ago

If you want something more specific, how about something like the following -- for a fixed number of shares N that you want to buy (or sell), the average "cost" (as measured by the difference between the price you pay and the midpoint between the best bid and offer) of performing that transaction has gone down (true whether you buy all N shares in one order or across a block of time T).

gnaritas 9y ago

You're asking all the wrong questions. HFT is just trading really fast, we live in a free country, some people want to trade really fast because they've found it profitable to take on the risk of doing so, it doesn't matter one bit if you or anyone else thinks it's pointless, you have no right to tell someone else they're trading too fast. They aren't hurting you, they're making your trades cheaper, they're making it easier for you to get into and out of any position you're in by being there to buy or sell exactly at the moment you want to buy or sell, and you're complaining about what? You don't even know. You seem to have this backwards notion that they need to justify their existence, they don't, they're just traders executing their rights to buy and sell like everyone else. It's those like you seeking to regulate HFT that need to justify yourselves. You don't even understand what HFT is really as you're asking basic questions like what does market efficiency mean and does HFT help it, and you think you're in a position to question someone else's trading habits? Really? HFT doesn't need to look good, those of you trying to punish them need to show some actual evidence they're doing something bad, but they're not and you can't. Efficiency in a market means things are priced accurately and you're not getting ripped off when you buy or sell; if you find that vague and hand wavy, well, sorry but that's what it means and you should be able to understand that without further explanation. HFT traders make the price more accurate benefiting you and everyone else, they don't need to justify themselves, you need to justify your witch hunt against them. HFT is a form of electronic trading, I'm not conflating them, they're just different forms of using tech to trade and there's valid reason at all to single either of them out as bad. HFT are market makers, they're providing you and everyone else liquidity for a vastly smaller fee than you've been provided it ever before. So say thank you to HFT, enjoy your cheaper trades and increased liquidity, and go find a real problem to complain about instead of attacking those who make your life better.

keenerd 9y ago
I think you are misunderstanding my point. You say HFT is good and it does good things. Okay... how good? For the sheer amount of money and effort involved it had better be pretty good. (For things this big, yes, they do need to justify their existence.) So we should quantify how good it is. We should know the ROI for all speeds of trading. At what point do the improvements become lost in the noise and it is just a bunch of financial masturbation? > Efficiency in a market means things are priced accurately and you're not getting ripped off when you buy or sell; if you find that vague and hand wavy, well, sorry but that's what it means and you should be able to understand that without further explanation. I'm unable to find hard numbers and neither can you; by that metric we understand it equally well. You have a religious faith in finance. I don't. I need evidence. Would you buy my pill that helps you lose weight if I'm not going to tell you how much the pill costs or how much weight you lose? I've based my whole career on selling this pill and can spout endless platitudes, you should believe me. > So say thank you to HFT, enjoy your cheaper trades and increased liquidity, and go find a real problem to complain about instead of attacking those who make your life better. More platitudes. Finance lives and dies by numbers. If the most brilliant minds on the planet, moving trillions of dollars, can't nail down a metric for how good of a job they are doing, I'm inclined to suspect they aren't doing a good job.