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There are some good arguments that the entire point of HFT is to manipulate the market by front running people who are trying to make actual transactions. Here
by edoo 7y ago
There are some good arguments that the entire point of HFT is to manipulate the market by front running people who are trying to make actual transactions. Here is a cool video of a few hundredths of a second: https://www.youtube.com/watch?v=K4ENWtfeYp8 https://www.youtube.com/watch?v=K4ENWtfeYp8
- WJW 7y agoThere are many purposes for HFT, most of which have nothing to do with front running. Market making is an entirely legal and moral activity which benefits "people who are trying to make actual transactions" and happens to gain a lot from better tech.
- pixl97 7y agoThen add the caveat "outside regulatory frameworks" to the orginal statement.
- tzs 7y ago> Market making is an entirely legal and moral activity which benefits "people who are trying to make actual transactions" and happens to gain a lot from better tech. Does that require HFT, or just T?
- DuskStar 7y agoThe HF bit lets prices be adjusted faster, which means bid-ask spreads can be narrower. That's the theory, anyways.
- ATsch 7y agoMarket making is indeed a useful activity, in isolation. And market making is indeed technically what HFT companies do. However, pouring unspeakable amounts of money, watts and person-hours into completely unnecessary and wasteful infrastructure just because emergent properties of a system mean that billion dollar companies and their owners can make a lot of money by being a picosecond faster than each other in an eternal battle is of extremely questionable utility. What exactly do we as a society get in exchange?
- bigtiger 7y agoWe get markets that are incredibly fair and nearly frictionless on a global scale.
- ATsch 7y agoHow much fairer and frictionlessier do they become for every picosecond? Is there a limit to fairness and frictionlessyness? Arguing about HFT feels like you're questioning people about why they're spending billions on excavating single, individual sand grains and the defense you get is "well, sand is an incredibly important building material. It is used in concrete, and we wouldn't have modern society without it". Sure that's true, but why is it that nobody can tell me how what you're doing is actually necessary for that.
- rini17 7y agoWith market "liquidity" that evaporates in milliseconds exactly when it's needed most...
- KSteffensen 7y agoAlso, from a control engineering point of view, a lot more unstable.
- spookthesunset 7y agoBetter HFT than bitcoin...
- edoo 7y agoIt is illegal to offer a security for sale that you have no intention of selling. I'm pretty sure the way they make money is to flash out orders and see if there is a response for the now unavailable security, allowing them pricing signals they wouldn't otherwise have. The basic solutions people offer are often of the theme "require the order to live long enough for others to actually trade on it".
- bigtiger 7y ago> I'm pretty sure the way they make money is to flash out orders and see if there is a response for the now unavailable security No. Market event A is seen to correlate strongly with market event B. The correlation is so obvious that multiple participants compete to make the B trade first in reaction to A. It's part of having a healthy market, electronic or otherwise.
- refurb 7y agoIt’s amazing when people are vehemently against something and take a strong moral stand, but you dig a little bit and realize that their basic facts are wrong about the issue.