5 ms·

>A position should be a position and not a matter of beating the other guy to a momentary, transitory state You are arguing to shut down the whole stock market

>A position should be a position and not a matter of beating the other guy to a momentary, transitory state You are arguing to shut down the whole stock market then. Even value investors like Buffet are in the business of beating the other guy to understanding that given stock is over or under valued. As for transitory state, the point of the stock market is to reflect what is thought to be the 'true' value of a company at any given time.

wisty 15y ago
If you added a little random noise to order timestamps, traders would have less incentive optimize for speed and would direct their efforts elsewhere.
- pasbesoin 15y ago
  An interesting idea for a less invasive / technically transformative change. (And a new meaning for the term "jittery market". ;-)
pasbesoin 15y ago
No, I'm arguing for a clock cycle that presents an inherent limit on transitory gaming and also allows smaller participants to compete on an equal footing (at least, with regard to order processing). Once a minute, or something else. That's something the big brains can sort out -- earn those salaries in a productive endeavor, for a change. Nickle and diming retirement investments does not, in my perspective, contribute qualitatively to society. (A bit baldly, and narrowly, stated, but a significant part of my point.) Of course, in an increasingly global marketplace of trading, this probably does not have legs. I see the market as connecting investors with investments. Spending heavily to leverage momentary arbitrage does not, in my perspective, add significantly to the base function of the market. Such a stepped clock might also allow/aid some monitoring and capping of flash changes -- the continuing dread of many, that an unbalanced algorithm or combination will take the market down.
- paperwork 15y ago
  I guess I don't understand why 'transitory gaming' is a bad thing in the stock market. I agree that it is immoral for Enron to reduce the supply of electricity, while towns are having brown-outs, just to raise the price. The same is true of hoarding much needed commodities, just to raise their price. I'm not even a big fan of speculatively buying up domain names. However, stocks can not be consumed. For most people, there is no reason to transact in the financial market other than financial gain. I don't see how this type of trading automated trading harms retirement investments. High frequency exists because exchanges now allow electronic transactions and automated matching. Algorithmic trading (which generally means automating the execution of large number of shares, such as institutional (retirement funds) orders) have also greatly benefited from same opportunities. If the complaint is that when retirement funds buy or sell large number of shares, HF guys come in and pick them off -- this is no different from regular day traders (or even professional traders). In fact, large trades have no "right of way" in the stock market. If you are buying a million shares of some stock, other traders will react and raise the bid. This is not a subversion of how the market works, this is the essence of price discovery and how the market is supposed to work. >I see the market as connecting investors with investments. Spending heavily to leverage momentary arbitrage does not, in my perspective, add significantly to the base function of the market. But does it take away from the base function? Just because some rich guy is spending money on computers, routers, programmers and mathematicians does not mean the market is negatively effected. Surely the burden is on the critics to prove why HF is bad.
  - pasbesoin 15y ago
    I'll stew on this for a bit. Thanks for the response and the encouragement to think further on the topic.
- andylei 15y ago
  > Nickle and diming retirement investments does not, in my perspective, contribute qualitatively to society actually, study after study shows that algorithmic traders improve things for "retirement investors". more algo trading leads to lower spreads, which decreases trading costs for long term investors. think about who value investors had to buy from before algo traders. they bought from human market makers who were ridiculous inefficient, and as a result, had to charge huge spreads. these spreads have a material (negative) impact on investment returns for value investors.

wisty 15y ago

If you added a little random noise to order timestamps, traders would have less incentive optimize for speed and would direct their efforts elsewhere.

pasbesoin 15y ago
An interesting idea for a less invasive / technically transformative change. (And a new meaning for the term "jittery market". ;-)

pasbesoin 15y ago

No, I'm arguing for a clock cycle that presents an inherent limit on transitory gaming and also allows smaller participants to compete on an equal footing (at least, with regard to order processing). Once a minute, or something else. That's something the big brains can sort out -- earn those salaries in a productive endeavor, for a change. Nickle and diming retirement investments does not, in my perspective, contribute qualitatively to society. (A bit baldly, and narrowly, stated, but a significant part of my point.) Of course, in an increasingly global marketplace of trading, this probably does not have legs. I see the market as connecting investors with investments. Spending heavily to leverage momentary arbitrage does not, in my perspective, add significantly to the base function of the market. Such a stepped clock might also allow/aid some monitoring and capping of flash changes -- the continuing dread of many, that an unbalanced algorithm or combination will take the market down.

paperwork 15y ago
I guess I don't understand why 'transitory gaming' is a bad thing in the stock market. I agree that it is immoral for Enron to reduce the supply of electricity, while towns are having brown-outs, just to raise the price. The same is true of hoarding much needed commodities, just to raise their price. I'm not even a big fan of speculatively buying up domain names. However, stocks can not be consumed. For most people, there is no reason to transact in the financial market other than financial gain. I don't see how this type of trading automated trading harms retirement investments. High frequency exists because exchanges now allow electronic transactions and automated matching. Algorithmic trading (which generally means automating the execution of large number of shares, such as institutional (retirement funds) orders) have also greatly benefited from same opportunities. If the complaint is that when retirement funds buy or sell large number of shares, HF guys come in and pick them off -- this is no different from regular day traders (or even professional traders). In fact, large trades have no "right of way" in the stock market. If you are buying a million shares of some stock, other traders will react and raise the bid. This is not a subversion of how the market works, this is the essence of price discovery and how the market is supposed to work. >I see the market as connecting investors with investments. Spending heavily to leverage momentary arbitrage does not, in my perspective, add significantly to the base function of the market. But does it take away from the base function? Just because some rich guy is spending money on computers, routers, programmers and mathematicians does not mean the market is negatively effected. Surely the burden is on the critics to prove why HF is bad.
- pasbesoin 15y ago
  I'll stew on this for a bit. Thanks for the response and the encouragement to think further on the topic.
andylei 15y ago
> Nickle and diming retirement investments does not, in my perspective, contribute qualitatively to society actually, study after study shows that algorithmic traders improve things for "retirement investors". more algo trading leads to lower spreads, which decreases trading costs for long term investors. think about who value investors had to buy from before algo traders. they bought from human market makers who were ridiculous inefficient, and as a result, had to charge huge spreads. these spreads have a material (negative) impact on investment returns for value investors.