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This reads like a very rosy picture of what these firms actually do. Surely they are secretive and tight lipped about all the money being made in low risk trade
by adave 4y ago
This reads like a very rosy picture of what these firms actually do. Surely they are secretive and tight lipped about all the money being made in low risk trades.
There are known loopholes that market makers get to exploit since they help keep the casino going. No need to make its a noble profession or compare to impact to actual economy or mankind.
These are the worst of the worst when its comes to exploitative and manipulative behavior to make money over retail trades just as a Hedge fund selling CDO's to pension funds.
- hawk_ 4y ago> to make money over retail trades You can call them vampire squid from hell but they don't exactly take money from retail, they tighten spreads for them if anything.
- md_ 4y agoWouldn't electronic front running take money from regular folks? Perhaps not from retail trades, but from mutual/index funds, pension funds, etc.
- thw09j9m 4y agoFront running is illegal. However, making a better price prediction than the rest of the market and trading on it is not the same thing as front running. [1] https://www.investopedia.com/terms/f/frontrunning.asp#:~:text=Front%2Drunning%20is%20illegal%20and,publicize%20the%20reasoning%20behind%20it https://www.investopedia.com/terms/f/frontrunning.asp#:~:tex....
- md_ 4y agoHmm, I don't think that answers the question. See https://www.nyujlb.org/single-post/2017/11/27/high-frequency-trading-electronic-frontrunning-and-structural-insider-trading-under-the-e https://www.nyujlb.org/single-post/2017/11/27/high-frequency... (which is EU-specific). I think https://www.cnbc.com/2014/04/03/high-frequency-traders-cant-front-run-anyonecommentary.html https://www.cnbc.com/2014/04/03/high-frequency-traders-cant-... is suggesting that this is similarly legal in the US. Again, not an expert.
- thw09j9m 4y agoGenerally, illegal trading resolves around the idea of trading on non-public information. And front running falls under that category (access to order data that other participants do not). However, HFT's do not trade on non-public information. Every participant has access to the same market data. I could start my own "HFT firm" tomorrow; I would just be incredibly unsuccessful at it because I don't have the finances or computing resources to execute.
- md_ 4y agoRight. I think we're saying the same thing?
- thw09j9m 4y agoI think I'm missing the connection between how HFT's trade and how it takes money away from regular people.
- md_ 4y agoThis is a pretty widely discussed question, and while I think the empirical evidence is so far unclear, there are some obvious theoretical models where costs for large institutional investors (like pension funds) go up. E.g. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2238516 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2238516. Pinging (https://www.finra.org/investors/insights/getting-speed-high-frequency-trading https://www.finra.org/investors/insights/getting-speed-high-...) would be an example such strategy.
- carnitine 4y agoMarket makers and retail traders have aligned incentives. Stop scaremongering.
- thw09j9m 4y ago> There are known loopholes that market makers get to exploit since they help keep the casino going. Like what? I work at an HFT and I'd love to deliver a new strategy to my manager.