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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'

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
  the market allocates better, the hot allocates faster. the information (prices) is better because its more current.

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
the market allocates better, the hot allocates faster. the information (prices) is better because its more current.