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I work in HFT and HFT is not front running. And no, the liquidity would not be there without HFT market makers It's kind of weird that people have such strong

by smabie 6y ago

I work in HFT and HFT is not front running. And no, the liquidity would not be there without HFT market makers It's kind of weird that people have such strong opinions about things they know very little about.

zabzonk 6y ago
So before there was HFT there was no liquidity?
- lucaspauker 6y ago
  There were still market makers that provided liquidity. Algorithms can just do it faster than people.
  - rcxdude 6y ago
    And cheaper
  - newdude 6y ago
    I don't get it. Reminds me of a blog post were the guy discussed a Portuguese stock, construction industry if my memory does not fail me, that has a "very low" trading volume. When I looked up the stock, (I think the stock was very expensive), trading volume was like 1 Share every 6 months or so. Yes, I guess you could call this "very low" trading volume. So where would HTF come in here?
    - smabie 6y ago
      An HFT would list buy and sell orders on the book so that if you wanted to buy or sell, you always could.
  - RhysU 6y ago
    I want so many people in these threads to travel back in time so that they can tut-tut the market makers for wearing lifts in their shoes.
- rcxdude 6y ago
  Much less, and it was more expensive. The total cost of market making has gone down substantially with HFT, mostly because a small firm replaces a large army of floor traders.
newdude 6y ago
Would you be so kind to explain to me in what way a HTF can provide "liquidity", especially liquidity that would not be there in the first place? By the way, since the tremendous inflow of cash into index ETF, some stocks are bascially traded only by ETFs and HTF without many other market participants. I mean, what could possibly go wrong? https://www.zerohedge.com/news/2017-04-09/horseman-global-unveils-new-shorting-philosophy-using-etf-flows-catalyst https://www.zerohedge.com/news/2017-04-09/horseman-global-un...
- smabie 6y ago
  HFT market makers can quote tighter spreads because they take on less risk. They can take on less risk for some combination of two factors: their speed, and the accuracy of their trading models. Depending on the firm, a different trade off is taken, with some executing obvious strategies the fastest, and others operating at a relatively slow pace, but using much more complex and nuanced strategies. Since market makers quote orders on the book much more often than taking orders off the book (takers have to pay and makers get paid on almost all exchanges), they provide tons of liquidity. For most securities, there are very few natural buyers and sellers of a security, so they would find it very hard to transact without an intermediary market maker. All electronic market makers are HFTers compared to regular market participants, but they run a very diverse set of strategies, with some operating at much closer to human speeds when compared to the fastest of the bunch. Market makers provide better price and execution than traditional human market makers, and are a net positive to the market ecosystem, at least in regards to retail investors (the institional traders do sometimes get fucked).

by smabie 6y ago

zabzonk 6y ago

So before there was HFT there was no liquidity?

lucaspauker 6y ago
There were still market makers that provided liquidity. Algorithms can just do it faster than people.
- rcxdude 6y ago
  And cheaper
- newdude 6y ago
  I don't get it. Reminds me of a blog post were the guy discussed a Portuguese stock, construction industry if my memory does not fail me, that has a "very low" trading volume. When I looked up the stock, (I think the stock was very expensive), trading volume was like 1 Share every 6 months or so. Yes, I guess you could call this "very low" trading volume. So where would HTF come in here?
  - smabie 6y ago
    An HFT would list buy and sell orders on the book so that if you wanted to buy or sell, you always could.
- RhysU 6y ago
  I want so many people in these threads to travel back in time so that they can tut-tut the market makers for wearing lifts in their shoes.
rcxdude 6y ago
Much less, and it was more expensive. The total cost of market making has gone down substantially with HFT, mostly because a small firm replaces a large army of floor traders.

newdude 6y ago

Would you be so kind to explain to me in what way a HTF can provide "liquidity", especially liquidity that would not be there in the first place? By the way, since the tremendous inflow of cash into index ETF, some stocks are bascially traded only by ETFs and HTF without many other market participants. I mean, what could possibly go wrong? https://www.zerohedge.com/news/2017-04-09/horseman-global-unveils-new-shorting-philosophy-using-etf-flows-catalyst https://www.zerohedge.com/news/2017-04-09/horseman-global-un...

smabie 6y ago
HFT market makers can quote tighter spreads because they take on less risk. They can take on less risk for some combination of two factors: their speed, and the accuracy of their trading models. Depending on the firm, a different trade off is taken, with some executing obvious strategies the fastest, and others operating at a relatively slow pace, but using much more complex and nuanced strategies. Since market makers quote orders on the book much more often than taking orders off the book (takers have to pay and makers get paid on almost all exchanges), they provide tons of liquidity. For most securities, there are very few natural buyers and sellers of a security, so they would find it very hard to transact without an intermediary market maker. All electronic market makers are HFTers compared to regular market participants, but they run a very diverse set of strategies, with some operating at much closer to human speeds when compared to the fastest of the bunch. Market makers provide better price and execution than traditional human market makers, and are a net positive to the market ecosystem, at least in regards to retail investors (the institional traders do sometimes get fucked).