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My initial comment was discussing speculative trading in general, but since you mostly brought up some common anti-HFT tropes I might as well address them. > M

My initial comment was discussing speculative trading in general, but since you mostly brought up some common anti-HFT tropes I might as well address them. > Many HFT jump out when things get volatile, when liquidity is actually required. Do you have a citation on that? If you look the preliminary Q1 results of Virtu Financial [0] (only publicly traded HFT) they seem to be doing more trading than ever in these volatile markets. > Ultimately HFT is doing nothing of societal value, the race down to zero is never-ending and we are wasting huge amounts of resources on a totally pointless march towards zero. HFT is a mature industry. Latencies have mostly stabilized, and profitability is way down in the last few years. Many firms are merging/consolidating. So in the past few years society is actually spending fewer resources - both financially and from a human capital standpoint on HFT than it did in the past. > Exchanges should introduce random delays to allow market participants who really want to hedge / buy / sell, then we can shift some of the resources to the real world. IEX is doing something relatively similar to that for a few years now. They have ~3% of US equities market share. People have the option of trading there but they mostly choose not to. > The system is hugely inefficient. The costs as latencies get lower are ever higher, for an extremely similar end result. The law of diminishing returns. Due to consolidation, costs are actually decreasing. Could it be that the market is... working? [0] - https://ir.virtu.com/press-releases/press-release-details/2020/Virtu-Announces-450-Million-of-Additional-Broker-Dealer-Borrowing-Capacity-and-Preliminary-Quarter-to-Date-Results/default.aspx https://ir.virtu.com/press-releases/press-release-details/20...

amiga_500 6y ago
I'm certain HFT vols are up in the volatility. Not sure that proves or disproves anything. HFT is hugely expensive to maintain. Staffing and equipment costs are massive. HFT choose not to trade on exchanges with delays because they want to exploit latency advantages. That's why govt should regulate this on all exchanges to just wipe it out. Consolidation is not good because it will collapse into a monopoly. Which will require regulation also, because markets do not "work" on their own. I'll check back later, going for a walk outside now. ---- Here is my reply, despite not replying for 40 minutes, I've put something about capitalism on HN which immediately gets you a fake "you're submitting too fast". Cannot post any more after that because HN doesn't like discussion unless it's about a tiny window that they agree with. Perhaps someone flagged my comment - if so they make this board a far more boring place to be. --- HFT != electronic trading. Many firms are automating front-to-back, that is unequivocally a good thing. HFT is latency arb.
- traderthrow454 6y ago
  > I'm certain HFT vols are up in the volatility. Not sure that proves or disproves anything. You said that HFTs jump out when things get volatile. But then I show you evidence that they trade more in high volatility. Do you not see the contradiction? > HFT is hugely expensive to maintain. Staffing and equipment costs are massive. HFT firm equipment costs are a few racks of high end servers and some expensive networking equipment, and a few dozen to few hundred highly paid engineers. Before HFT there were literally _thousands_ of human traders working at different banks doing the same work by hand. Sure in an absolute sense HFT is expensive, but relative to the alternative it is cheap. > HFT choose not to trade on exchanges with delays because they want to exploit latency advantages. That's why govt should regulate this on all exchanges to just wipe it out. If HFT is so bad, then the non-HFT market participants should choose to trade at the delay exchanges that make it harder for HFTs. But they choose not to, generally, because the liquidity - and thus trading costs are higher than trading at the non-delay exchanges. > Consolidation is not good because it will collapse into a monopoly. Which will require regulation also, because markets do not "work" on their own. First you say that HFT is bad because costs are high, but now you say that falling costs are bad because it will lead to monopoly - do you see the contradiction? For what its worth, Although there are fewer firms there is still a lot of competition among the remaining firms.
  - twic 6y ago
    > You said that HFTs jump out when things get volatile. But then I show you evidence that they trade more in high volatility. Do you not see the contradiction? We should distinguish between volatility at different timescales. An HFT might well be very active over a volatile month, but may still turn off over a very volatile second. I've always assumed that the "HFTs jump out during volatility" complaint was about the latter; it means that when some shocking news hits the market, the HFT firms providing most of the liquidity pull it, and so the manually-entered market orders wanging around end up moving the market further, exacerbating the volatility. Maybe that's not what people are actually complaining about, though. > HFT firm equipment costs are a few racks of high end servers and some expensive networking equipment And FPGAs. FPGA development is really not cheap.
twic 6y ago
> If you look the preliminary Q1 results of Virtu Financial [0] (only publicly traded HFT) they seem to be doing more trading than ever in these volatile markets. Similar story from Flow Traders: https://www.flowtraders.com/sites/flow-traders/files/quarterly_results/2020/Flow%20Traders%20Q120%20Trading%20Update.pdf https://www.flowtraders.com/sites/flow-traders/files/quarter...
- amiga_500 6y ago
  Everyone is, volumes are hugely up. The point about liquidity is during the sudden market shifts, not over a quarter!
  - auntienomen 6y ago
    Perhaps you don't follow the news? This was a quarter rich in sudden market shifts.
    - amiga_500 6y ago
      Thanks, I do follow the news. If you read the threads above again you will see that both posters are fully aware of elevated volume, and the distinction was between HFT melting away during short periods of vol and wider "liquidity" from HFT. So what seemed like a quick drive by wasn't actually correct.

amiga_500 6y ago

I'm certain HFT vols are up in the volatility. Not sure that proves or disproves anything. HFT is hugely expensive to maintain. Staffing and equipment costs are massive. HFT choose not to trade on exchanges with delays because they want to exploit latency advantages. That's why govt should regulate this on all exchanges to just wipe it out. Consolidation is not good because it will collapse into a monopoly. Which will require regulation also, because markets do not "work" on their own. I'll check back later, going for a walk outside now. ---- Here is my reply, despite not replying for 40 minutes, I've put something about capitalism on HN which immediately gets you a fake "you're submitting too fast". Cannot post any more after that because HN doesn't like discussion unless it's about a tiny window that they agree with. Perhaps someone flagged my comment - if so they make this board a far more boring place to be. --- HFT != electronic trading. Many firms are automating front-to-back, that is unequivocally a good thing. HFT is latency arb.

traderthrow454 6y ago
> I'm certain HFT vols are up in the volatility. Not sure that proves or disproves anything. You said that HFTs jump out when things get volatile. But then I show you evidence that they trade more in high volatility. Do you not see the contradiction? > HFT is hugely expensive to maintain. Staffing and equipment costs are massive. HFT firm equipment costs are a few racks of high end servers and some expensive networking equipment, and a few dozen to few hundred highly paid engineers. Before HFT there were literally _thousands_ of human traders working at different banks doing the same work by hand. Sure in an absolute sense HFT is expensive, but relative to the alternative it is cheap. > HFT choose not to trade on exchanges with delays because they want to exploit latency advantages. That's why govt should regulate this on all exchanges to just wipe it out. If HFT is so bad, then the non-HFT market participants should choose to trade at the delay exchanges that make it harder for HFTs. But they choose not to, generally, because the liquidity - and thus trading costs are higher than trading at the non-delay exchanges. > Consolidation is not good because it will collapse into a monopoly. Which will require regulation also, because markets do not "work" on their own. First you say that HFT is bad because costs are high, but now you say that falling costs are bad because it will lead to monopoly - do you see the contradiction? For what its worth, Although there are fewer firms there is still a lot of competition among the remaining firms.
- twic 6y ago
  > You said that HFTs jump out when things get volatile. But then I show you evidence that they trade more in high volatility. Do you not see the contradiction? We should distinguish between volatility at different timescales. An HFT might well be very active over a volatile month, but may still turn off over a very volatile second. I've always assumed that the "HFTs jump out during volatility" complaint was about the latter; it means that when some shocking news hits the market, the HFT firms providing most of the liquidity pull it, and so the manually-entered market orders wanging around end up moving the market further, exacerbating the volatility. Maybe that's not what people are actually complaining about, though. > HFT firm equipment costs are a few racks of high end servers and some expensive networking equipment And FPGAs. FPGA development is really not cheap.

twic 6y ago

> If you look the preliminary Q1 results of Virtu Financial [0] (only publicly traded HFT) they seem to be doing more trading than ever in these volatile markets. Similar story from Flow Traders: https://www.flowtraders.com/sites/flow-traders/files/quarterly_results/2020/Flow%20Traders%20Q120%20Trading%20Update.pdf https://www.flowtraders.com/sites/flow-traders/files/quarter...

amiga_500 6y ago
Everyone is, volumes are hugely up. The point about liquidity is during the sudden market shifts, not over a quarter!
- auntienomen 6y ago
  Perhaps you don't follow the news? This was a quarter rich in sudden market shifts.
  - amiga_500 6y ago
    Thanks, I do follow the news. If you read the threads above again you will see that both posters are fully aware of elevated volume, and the distinction was between HFT melting away during short periods of vol and wider "liquidity" from HFT. So what seemed like a quick drive by wasn't actually correct.