4 ms·

Most of these efforts are aimed at taking advantage of lags in information flow, often within the very trading systems on which the trades are occurring. They a

Most of these efforts are aimed at taking advantage of lags in information flow, often within the very trading systems on which the trades are occurring. They are exploits, not essential market-making. Noise, not signal. What's the right timeframe? Something based on the time it takes for humans to reason about a price. Not a day, but certainly not milliseconds, either.

voldacar 7y ago
If they were noise, they would not be profitable strategies.
- vannevar 7y ago
  Noise compared to the signal actually needed for a market to function. Markets functioned nicely on much, much longer timeframes in the past.
  - infinite8s 7y ago
    They also had much higher transaction and information costs.
- ggggtez 7y ago
  I don't want to get caught up in arguing what is noise in the mathematical sense. I think the parent is refering to the fact that the arbitrage traders are not adding any real value by making these trades this fast. The market would adjust in miliseconds. Who really wants to let some guy who built a 825 mile cable be a rent seeker on every trade for all eternity? https://www.businessinsider.com/chicago-stock-exchange-responding-to-high-speed-traders-2016-8 https://www.businessinsider.com/chicago-stock-exchange-respo...
  - wbl 7y ago
    He's not a rent seeker. Absent his existence, the people on both sides of the trade would be harmed by crossing a bigger spread.
mlthoughts2018 7y ago
Is the human allowed to use pencil & paper when reasoning about the stock? A graphing calculator? A spreadsheet program? A numerical SDE solver? By what rule do you propose limiting other people’s free choice to use computing resources to accelerate the time scale of reasoning about a price?
- vannevar 7y ago
  The "free choice" argument is a charade: the only people with the "freedom" (ie, wealth) to win that race are "people" like Goldman Sachs. On the whole, it's just another legal mechanism for pumping money from the poor to the wealthy. Modern markets could not exist without regulation, which by definition limits freedoms. We're just talking about a sensible regulation that eliminates a pointless misdirection of resources, not unlike laws against gambling.
  - gpderetta 7y ago
    A lot of HTF shops are comparatively tiny companies (in the order of hundreds or less employees). Large hedge funds and investment banks are relatively late players to the game.
  - mlthoughts2018 7y ago
    You didn’t address my comment at all. This just seems like some unfounded normative assertions about some other thing entirely.
tomp 7y ago
By “taking advantage of lags in information flow” you’re actually disseminating information and reducing the lag.
- MagnumOpus 7y ago
  The social value or reducing the price dissemination lag from a microsecond to 110 ns is zero. Hence why the billions of resources going into it are a greater waste than even bitcoin.

voldacar 7y ago

If they were noise, they would not be profitable strategies.

vannevar 7y ago
Noise compared to the signal actually needed for a market to function. Markets functioned nicely on much, much longer timeframes in the past.
- infinite8s 7y ago
  They also had much higher transaction and information costs.
ggggtez 7y ago
I don't want to get caught up in arguing what is noise in the mathematical sense. I think the parent is refering to the fact that the arbitrage traders are not adding any real value by making these trades this fast. The market would adjust in miliseconds. Who really wants to let some guy who built a 825 mile cable be a rent seeker on every trade for all eternity? https://www.businessinsider.com/chicago-stock-exchange-responding-to-high-speed-traders-2016-8 https://www.businessinsider.com/chicago-stock-exchange-respo...
- wbl 7y ago
  He's not a rent seeker. Absent his existence, the people on both sides of the trade would be harmed by crossing a bigger spread.

mlthoughts2018 7y ago

Is the human allowed to use pencil & paper when reasoning about the stock? A graphing calculator? A spreadsheet program? A numerical SDE solver? By what rule do you propose limiting other people’s free choice to use computing resources to accelerate the time scale of reasoning about a price?

vannevar 7y ago
The "free choice" argument is a charade: the only people with the "freedom" (ie, wealth) to win that race are "people" like Goldman Sachs. On the whole, it's just another legal mechanism for pumping money from the poor to the wealthy. Modern markets could not exist without regulation, which by definition limits freedoms. We're just talking about a sensible regulation that eliminates a pointless misdirection of resources, not unlike laws against gambling.
- gpderetta 7y ago
  A lot of HTF shops are comparatively tiny companies (in the order of hundreds or less employees). Large hedge funds and investment banks are relatively late players to the game.
- mlthoughts2018 7y ago
  You didn’t address my comment at all. This just seems like some unfounded normative assertions about some other thing entirely.

tomp 7y ago

By “taking advantage of lags in information flow” you’re actually disseminating information and reducing the lag.

MagnumOpus 7y ago
The social value or reducing the price dissemination lag from a microsecond to 110 ns is zero. Hence why the billions of resources going into it are a greater waste than even bitcoin.