3 ms·
Saving one microsecond is rewarded the same as saving one millisecond, as long as you beat out the next best guy. There are vast diminishing returns to society
by cma 6y ago
Saving one microsecond is rewarded the same as saving one millisecond, as long as you beat out the next best guy. There are vast diminishing returns to society but the winner is still rewarded the same so incentivized to make it faster and faster, ultimately burning away energy and misallocating capital until the reward is exhausted, and then repeating each time a new generation of hardware is out.
- giantrobot 6y agoNot quite, you're forgetting the T in HFT. If everyone was just buying securities a microsecond vs a millisecond might not matter much. What happens is a lot of HFTs act as market makers. They arbitrage positions they create which screws over any non-HFTs. It also moves the price of securities for no reason which affects everyone holding that security. There's also been plenty of cases of HFTs doing front-running and spoofing. The effects of HFTs aren't limited to HFT vs traditional traders. Their artificial arbitrage affects people's retirement funds and the like. It wouldn't be so bad if they were just making money off other traders but instead they're making money off everyone with money in the markets.
- zozbot234 6y ago> It also moves the price of securities for no reason which affects everyone holding that security. Huh? It's narrowing bid-ask spreads, which is beneficial to other market actors. There's nothing "artificial" in it other than betting that the price fundamentals won't move against them, like any other market maker.
- wglb 6y ago> screws over any non-HFT Not true. The HFTs are often market makers and are PAID to be in the market by the exchanges at all times so that others have something to trade.
- cma 6y agoI should clarify I'm referring to pure latency arbitrage stuff and not all HFT.