4 ms·

capital deteriorates and becomes obsolete so executives are constantly maintaining and optimizing their businesses as they respond to market conditions. These t

capital deteriorates and becomes obsolete so executives are constantly maintaining and optimizing their businesses as they respond to market conditions. These trades are how the market chooses who is better and worse at this constant maintenance/optimization. unfortunately capital isn't something you can set up and allow to run indefinitely.

wrs 6y ago
I’m pretty sure it can be allowed to run unattended for several milliseconds at least.
- chordalkeyboard 6y ago
  it can but this is "late" capitalism, we are at a point where capital that updated every year was outcompeted by capital that updated every quarter, which was outcompeted by capital that updated every month, and so on. Each time this happened there were efficiency gains that required everyone to keep up or go out of business, and the efficiency gains resulted in surpluses that were allocated somewhere in the economy. If we turned back the clock then these businesses would become less efficient and we would have to sink more resources into them to continue the same output. Iterative optimization resulted in smaller and smaller (and more frequent) corrections.
ska 6y ago
I see where you are going here, but it seems to be many orders off magnitude off in time relative to HFT.
- chordalkeyboard 6y ago
  its highly counterintuitive to see the modern system in the same terms as the capital markets of last millennium. and I'm convinced the system isn't perfect, I'm sure there are things that should be changed. I'm merely suggesting that the market sped up as people learned to do market stuff faster, and that market stuff is ultimately a process of allocating capital resources.
  - ska 6y ago
    Ok, I get that - I don't think it really addresses my concern/question about whether or not this is far in the range of diminishing utility. Put it another way, if the number of HFT trades were suddenly cut in half, what 1st order impacts would be felt by people outside those markets? The heart of the "but we're providing liquidity" argument is that this is a service provided that has real value outside the market. If that's not true the particular argument falls apart, doesn't it?
    - chordalkeyboard 6y ago
      > far in the range of diminishing utility. it probably is because of distortions in the flow of money > Put it another way, if the number of HFT trades were suddenly cut in half, what 1st order impacts would be felt by people outside those markets? it would probably result in capital markets taking longer to account for changes in the market/world such as shortages. Then the capital markets that weren't subject to the restriction would be more competitive as a whole. Depending on the specifics, it might open the door to people with relevant information (who weren't hf traders) to begin to make some of those trades. > The heart of the "but we're providing liquidity" argument is that this is a service provided that has real value outside the market. If that's not true the particular argument falls apart, doesn't it? I don't use the liquidity form of the argument because I think it focuses on the wrong things. Capital markets affect the rest of the markets by optimizing the creation and maintenance of capital. All consumer goods rely on capital. So policies that make the capital markets less efficient would have broad downstream effect in commodities markets, essentially there would be in aggregate fewer goods.
  - erik_seaberg 6y ago
    I haven’t seen any claims that HFT is allocating capital in better directions. They’re mostly reacting to the same signal and trying to trade the same asset at the same price, right? That’s the only case where the latency matters, because the market uses order time to break ties.
    - chordalkeyboard 6y ago

wrs 6y ago

I’m pretty sure it can be allowed to run unattended for several milliseconds at least.

chordalkeyboard 6y ago
it can but this is "late" capitalism, we are at a point where capital that updated every year was outcompeted by capital that updated every quarter, which was outcompeted by capital that updated every month, and so on. Each time this happened there were efficiency gains that required everyone to keep up or go out of business, and the efficiency gains resulted in surpluses that were allocated somewhere in the economy. If we turned back the clock then these businesses would become less efficient and we would have to sink more resources into them to continue the same output. Iterative optimization resulted in smaller and smaller (and more frequent) corrections.

ska 6y ago

I see where you are going here, but it seems to be many orders off magnitude off in time relative to HFT.

chordalkeyboard 6y ago
its highly counterintuitive to see the modern system in the same terms as the capital markets of last millennium. and I'm convinced the system isn't perfect, I'm sure there are things that should be changed. I'm merely suggesting that the market sped up as people learned to do market stuff faster, and that market stuff is ultimately a process of allocating capital resources.
- ska 6y ago
  Ok, I get that - I don't think it really addresses my concern/question about whether or not this is far in the range of diminishing utility. Put it another way, if the number of HFT trades were suddenly cut in half, what 1st order impacts would be felt by people outside those markets? The heart of the "but we're providing liquidity" argument is that this is a service provided that has real value outside the market. If that's not true the particular argument falls apart, doesn't it?
  - chordalkeyboard 6y ago
    > far in the range of diminishing utility. it probably is because of distortions in the flow of money > Put it another way, if the number of HFT trades were suddenly cut in half, what 1st order impacts would be felt by people outside those markets? it would probably result in capital markets taking longer to account for changes in the market/world such as shortages. Then the capital markets that weren't subject to the restriction would be more competitive as a whole. Depending on the specifics, it might open the door to people with relevant information (who weren't hf traders) to begin to make some of those trades. > The heart of the "but we're providing liquidity" argument is that this is a service provided that has real value outside the market. If that's not true the particular argument falls apart, doesn't it? I don't use the liquidity form of the argument because I think it focuses on the wrong things. Capital markets affect the rest of the markets by optimizing the creation and maintenance of capital. All consumer goods rely on capital. So policies that make the capital markets less efficient would have broad downstream effect in commodities markets, essentially there would be in aggregate fewer goods.
- erik_seaberg 6y ago
  I haven’t seen any claims that HFT is allocating capital in better directions. They’re mostly reacting to the same signal and trying to trade the same asset at the same price, right? That’s the only case where the latency matters, because the market uses order time to break ties.
  - chordalkeyboard 6y ago