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Someone downvoted you. I also think that getting rid of large arbitration opportunities as soon as possible is good for markets, as they behave “nearer” the id

Someone downvoted you. I also think that getting rid of large arbitration opportunities as soon as possible is good for markets, as they behave “nearer” the ideal no-arbitration model. But that is just my opinion.

MagnumOpus 6y ago
And what is the big-picture economic difference between getting rid of arbitrage opportunities with a millisecond (in the old times) or within a nanosecond? Because that's what we are talking about, not about inefficiencies remaining for hours.
- pfortuny 6y ago
  That is just a property of competition, nothing to do with HFT per se.
- Arnt 6y ago
  There's a hidden assumption in your statement. AIUI, you think that HFT has driven various numbers far down, the rest of us benefit from them being driven down, but don't benefit significantly from them being driven as far down as HFT actually has done. Right? I can agree with that. The hidden assumption is that if HFT hadn't done that, then something else would have come along to drive those numbers down, but not as far. If so, then the benefit to the rest of us would have been much the same as it actually is. You may be right, but I don't see what that "something else" could be. It would have to be something where some actor benefits from quick reaction and low spread, right? AFAICT, that must be either HFT or something indistinguishable from HFT. Something with the same traits, blamed by the same people for the same reasons.
  - maest 6y ago
    You can impose a floor beyond which lower latencies no longer provide an advantage by replacing the current continuous auction market with a periodic, blind auction. That is, have a market where orders accummulate in the order book and every, say, 15 seconds, the order book is crossed and trades are made.
    - pfortuny 6y ago
      You can do a lot of things with norms and regulations but, in the end, why not let the market organize itself? Also, timing (as per your example) is very very very difficult to keep exactly. On the other hand, I think a kind of relation between prize of an operation and its energetic cost would be beneficial (like ---as an example--- forcing an operation to compute a hash of proportional difficulty, or whatever). But this is a different problem.
      - maest 6y ago
        A free market solution doesn't really work when it comes to exchanges, as they are natural monopolies. You've had some attempts from newcomers to break into the space, but with extremely limited success.
        kasey_junk 6y ago
        Actually prior to governmental action the markets were quite fragmented. In the 70s in response to securities law they started consolidating. Then in response to further law they started fragmenting again in the 2000s. I’m not largely a free market is the only solution person but this is a very bad example of ‘natural’ monopolies.
        maest 6y ago
        Liquidity begets liquidty, so it makes economic sense for exchanges to consolidate in a completely free market.
        kasey_junk 6y ago
        It makes sense all things being equal, but that isn’t the case. Even in the old consolidated system you had differentiation between the exchanges in the form of exchange rules which led to Nasdaq specializing in different listings than NYSE. If you look at the commodities exchanges they were even more specialized and splintered until legal interventions made those specializations less valuable. It was governmental intervention that made liquidity the only factor in exchange choice.

MagnumOpus 6y ago

And what is the big-picture economic difference between getting rid of arbitrage opportunities with a millisecond (in the old times) or within a nanosecond? Because that's what we are talking about, not about inefficiencies remaining for hours.

pfortuny 6y ago
That is just a property of competition, nothing to do with HFT per se.
Arnt 6y ago
There's a hidden assumption in your statement. AIUI, you think that HFT has driven various numbers far down, the rest of us benefit from them being driven down, but don't benefit significantly from them being driven as far down as HFT actually has done. Right? I can agree with that. The hidden assumption is that if HFT hadn't done that, then something else would have come along to drive those numbers down, but not as far. If so, then the benefit to the rest of us would have been much the same as it actually is. You may be right, but I don't see what that "something else" could be. It would have to be something where some actor benefits from quick reaction and low spread, right? AFAICT, that must be either HFT or something indistinguishable from HFT. Something with the same traits, blamed by the same people for the same reasons.
- maest 6y ago
  You can impose a floor beyond which lower latencies no longer provide an advantage by replacing the current continuous auction market with a periodic, blind auction. That is, have a market where orders accummulate in the order book and every, say, 15 seconds, the order book is crossed and trades are made.
  - pfortuny 6y ago
    You can do a lot of things with norms and regulations but, in the end, why not let the market organize itself? Also, timing (as per your example) is very very very difficult to keep exactly. On the other hand, I think a kind of relation between prize of an operation and its energetic cost would be beneficial (like ---as an example--- forcing an operation to compute a hash of proportional difficulty, or whatever). But this is a different problem.
    - maest 6y ago
      A free market solution doesn't really work when it comes to exchanges, as they are natural monopolies. You've had some attempts from newcomers to break into the space, but with extremely limited success.
      - kasey_junk 6y ago
        Actually prior to governmental action the markets were quite fragmented. In the 70s in response to securities law they started consolidating. Then in response to further law they started fragmenting again in the 2000s. I’m not largely a free market is the only solution person but this is a very bad example of ‘natural’ monopolies.
        maest 6y ago
        Liquidity begets liquidty, so it makes economic sense for exchanges to consolidate in a completely free market.
        kasey_junk 6y ago
        It makes sense all things being equal, but that isn’t the case. Even in the old consolidated system you had differentiation between the exchanges in the form of exchange rules which led to Nasdaq specializing in different listings than NYSE. If you look at the commodities exchanges they were even more specialized and splintered until legal interventions made those specializations less valuable. It was governmental intervention that made liquidity the only factor in exchange choice.