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I'm not convinced this is any less moral than e.g. George Soros famously exploiting Britain's central bank[0], HFT firms building their own microwave towers to

by strken 6y ago

I'm not convinced this is any less moral than e.g. George Soros famously exploiting Britain's central bank[0], HFT firms building their own microwave towers to do arbitrage and totally-not-front-running a fraction of a second faster[1], or basically anything other strategy that's lauded as brilliant when a rich man does it. [0] https://www.forbes.com/sites/steveschaefer/2015/07/07/forbes-flashback-george-soros-british-pound-euro-ecb/?sh=2289a3b66131 https://www.forbes.com/sites/steveschaefer/2015/07/07/forbes... [1] https://www.bloomberg.com/news/features/2019-03-08/the-gazillion-dollar-standoff-over-two-high-frequency-trading-towers https://www.bloomberg.com/news/features/2019-03-08/the-gazil...

astrange 6y ago
Flash Boys sold front running as something bad for regular people, but you can only front run someone like Goldman Sachs. A retail trader just makes one trade at a time, he isn’t trading in multiple blocks and has nothing to front run. All HFT does for you is fulfill your trade in less than a day and get some market making fees.
- tomatocracy 6y ago
  I haven't read Flash Boys but if it describes HFT as front running then it's just incorrect. "Front running" doesn't just mean "getting there quicker than someone else". It is a specific conflict of interest problem where the same people or firm are acting in more than one capacity - agent and principal or agent for different parties - at the same time (eg I see large customer order coming in then trade for myself/my firm before I trade for the client, potentially moving the market for them which would hurt them if our trades are both in the same direction).
darawk 6y ago
Then you don't understand this, or any of the things you listed. George Soros noticed a mismatch of fundamental value. He pushed the price towards its fundamental value. These traders are pushing the price away from fundamental value, and they are doing so at the expense of other, later retail traders.
- strken 6y ago
  You seem to be equating "is moral" with "moves prices towards the fundamental value of the underlying asset", which is an interesting position to take. That being said, if you're worried about pushing prices away from fundamental value, how about negative crude prices?
  - darawk 6y ago
    > You seem to be equating "is moral" with "moves prices towards the fundamental value of the underlying asset", which is an interesting position to take I didn't say anything about morality. This is a purely functional argument. When something is sold for its fundamental value, nobody loses. That's why its good for society for things to transact at their intrinsic value. > That being said, if you're worried about pushing prices away from fundamental value, how about negative crude prices? It was crude futures that were negative. Crude oil has storage costs. Those costs rarely overwhelm the value of the asset, but in particular circumstances they can. That is what happened when crude futures went negative. It seems illogical, but if you actually understand it, it all makes sense and fits neatly inside an intrinsic value narrative.
    - strken 6y ago
      > I didn't say anything about morality. The original claim was that squeezing an ill-advised short wasn't less moral than deliberately collapsing a currency and taking $1bn of funds from a government, or engaging in sketchy HFT practices. You said "then you don't understand this, or any of the things listed", implying that you believe that squeezing the short WAS less moral. > Crude oil has storage costs. Those costs rarely overwhelm the value of the asset, but in particular circumstances they can. "Storage costs" is a convenient and inoffensive way to say "the few remaining buyers with enough spare capacity smelled blood in the water and were able to price gouge".
      - darawk 6y ago
        > The original claim was that squeezing an ill-advised short wasn't less moral than deliberately collapsing a currency and taking $1bn of funds from a government, or engaging in sketchy HFT practices. You said "then you don't understand this, or any of the things listed", implying that you believe that squeezing the short WAS less moral. Sure. But you don't need morality to make the point. I will make that point though: things trading at their intrinsic value is more moral than not doing so, because it means nobody loses. > "Storage costs" is a convenient and inoffensive way to say "the few remaining buyers with enough spare capacity smelled blood in the water and were able to price gouge". Err. No. It means the storage capacity was completely gone, and people were scrambling to find new storage capacity. It doesn't seem like you're very familiar with how these things work.

by strken 6y ago

astrange 6y ago

Flash Boys sold front running as something bad for regular people, but you can only front run someone like Goldman Sachs. A retail trader just makes one trade at a time, he isn’t trading in multiple blocks and has nothing to front run. All HFT does for you is fulfill your trade in less than a day and get some market making fees.

tomatocracy 6y ago
I haven't read Flash Boys but if it describes HFT as front running then it's just incorrect. "Front running" doesn't just mean "getting there quicker than someone else". It is a specific conflict of interest problem where the same people or firm are acting in more than one capacity - agent and principal or agent for different parties - at the same time (eg I see large customer order coming in then trade for myself/my firm before I trade for the client, potentially moving the market for them which would hurt them if our trades are both in the same direction).

darawk 6y ago

Then you don't understand this, or any of the things you listed. George Soros noticed a mismatch of fundamental value. He pushed the price towards its fundamental value. These traders are pushing the price away from fundamental value, and they are doing so at the expense of other, later retail traders.

strken 6y ago
You seem to be equating "is moral" with "moves prices towards the fundamental value of the underlying asset", which is an interesting position to take. That being said, if you're worried about pushing prices away from fundamental value, how about negative crude prices?
- darawk 6y ago
  > You seem to be equating "is moral" with "moves prices towards the fundamental value of the underlying asset", which is an interesting position to take I didn't say anything about morality. This is a purely functional argument. When something is sold for its fundamental value, nobody loses. That's why its good for society for things to transact at their intrinsic value. > That being said, if you're worried about pushing prices away from fundamental value, how about negative crude prices? It was crude futures that were negative. Crude oil has storage costs. Those costs rarely overwhelm the value of the asset, but in particular circumstances they can. That is what happened when crude futures went negative. It seems illogical, but if you actually understand it, it all makes sense and fits neatly inside an intrinsic value narrative.
  - strken 6y ago
    > I didn't say anything about morality. The original claim was that squeezing an ill-advised short wasn't less moral than deliberately collapsing a currency and taking $1bn of funds from a government, or engaging in sketchy HFT practices. You said "then you don't understand this, or any of the things listed", implying that you believe that squeezing the short WAS less moral. > Crude oil has storage costs. Those costs rarely overwhelm the value of the asset, but in particular circumstances they can. "Storage costs" is a convenient and inoffensive way to say "the few remaining buyers with enough spare capacity smelled blood in the water and were able to price gouge".
    - darawk 6y ago
      > The original claim was that squeezing an ill-advised short wasn't less moral than deliberately collapsing a currency and taking $1bn of funds from a government, or engaging in sketchy HFT practices. You said "then you don't understand this, or any of the things listed", implying that you believe that squeezing the short WAS less moral. Sure. But you don't need morality to make the point. I will make that point though: things trading at their intrinsic value is more moral than not doing so, because it means nobody loses. > "Storage costs" is a convenient and inoffensive way to say "the few remaining buyers with enough spare capacity smelled blood in the water and were able to price gouge". Err. No. It means the storage capacity was completely gone, and people were scrambling to find new storage capacity. It doesn't seem like you're very familiar with how these things work.