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> absolutely. If anything investors provide for liquidity of the market. No, no, no. "providing liquidity" is not a good thing unless liquidity is actually a p

> absolutely. If anything investors provide for liquidity of the market. No, no, no. "providing liquidity" is not a good thing unless liquidity is actually a problem almost everywhere people talk about this. The "liquidity" provided by high-frequency traders in the stock market does not benefit anyone but themselves. For everyone else the difference between trading in minutes and hours (or even days) is near-meaningless. And they don't provide liquidity for seldom traded stocks. And on the housing market they are not providing liquidity for the market in general. They are buying and then renting those properties out. Since they are all-cash offers they often trump "regular" buyers out of the market, even when offering the same price. Again, the only ones who benefit by this are those investors themselves. These investors are one of the major forces pushing up the prices, the are part of the problem, not the solution.

throwaway_4ever 4y ago
Liquidity is a huge problem in real estate. Right now, every single person forfeits 5-6% of their home value every time they exchange homes. That's $20k on average. Reducing the spread on homes by providing liquidity would be a huge financial boon to all classes except realtors.
- notch656a 4y ago
  Is that true if you sell your home yourself? I've never bought a home, but I know I can transfer a title to a vehicle without forfeiting anything beyond the sales tax and the $50 title fee. Is there no way to sell/buy real estate directly like that using cash transactions direct between parties?
  - throwaway_4ever 4y ago
    No, I misspoke by saying “every single person.” It’s true that direct off-market sales can avoid paying realtors and two parties agree amongst themselves. Depending on jurisdiction it’s around $2k for all the title transfer, notary, and other fees. But this is quite uncommon.
    - yunohn 4y ago
      It’s only uncommon because people know they can get higher bids in the open market, and use a broker to facilitate deals. If housing prices weren’t always going up, that could change.
thaumasiotes 4y ago
> The "liquidity" provided by high-frequency traders in the stock market does not benefit anyone but themselves. For everyone else the difference between trading in minutes and hours (or even days) is near-meaningless. That liquidity is also what's driving the price of executing a retail trade to or below zero. You used to have to pay fees whenever you bought or sold stock.
- notch656a 4y ago
  Can you explain why that's true? I understand why it would be true if the broker provides that liquidity for you and settles the trade immediately, while taking the risk that on his end it may settle at a different time and place. But If I just put an order directly on the exchange book using full collateralized cash in my trading account, why would that cost my broker more? Wouldn't this liquidity thesis mean that brokers should charge more for stock trades that have less liquidity? To be honest, I just figured they were able to eliminate fees by front running and/or selling my trading information.
  - thaumasiotes 4y ago
    The broker isn't selling your trading information. He is selling the opportunity to trade with you, and quantitative traders will pay him for that, because you are -- in all likelihood -- really bad at trading stocks. The professionals are so convinced that you have no idea what you're doing that they're happy to give you better-than-market prices, because the market is going to move against you anyway. (And of course, on average they are correct.) You could make an argument of the form "HFTs have made trading so cheap that people are hurting themselves more than they used to, and we need to bring the price of trading back up so that people won't be tempted". But that is a pretty different argument than "HFTs don't provide any value". They clearly do. When you place an order to buy or sell stock, you pay lower fees and you get better prices than you otherwise would, because you look just like a million idiots.
    - mrep 4y ago
      Yes, see https://www.kalzumeus.com/2019/6/26/how-brokerages-make-money/ https://www.kalzumeus.com/2019/6/26/how-brokerages-make-mone...

throwaway_4ever 4y ago

Liquidity is a huge problem in real estate. Right now, every single person forfeits 5-6% of their home value every time they exchange homes. That's $20k on average. Reducing the spread on homes by providing liquidity would be a huge financial boon to all classes except realtors.

notch656a 4y ago
Is that true if you sell your home yourself? I've never bought a home, but I know I can transfer a title to a vehicle without forfeiting anything beyond the sales tax and the $50 title fee. Is there no way to sell/buy real estate directly like that using cash transactions direct between parties?
- throwaway_4ever 4y ago
  No, I misspoke by saying “every single person.” It’s true that direct off-market sales can avoid paying realtors and two parties agree amongst themselves. Depending on jurisdiction it’s around $2k for all the title transfer, notary, and other fees. But this is quite uncommon.
  - yunohn 4y ago
    It’s only uncommon because people know they can get higher bids in the open market, and use a broker to facilitate deals. If housing prices weren’t always going up, that could change.

thaumasiotes 4y ago

> The "liquidity" provided by high-frequency traders in the stock market does not benefit anyone but themselves. For everyone else the difference between trading in minutes and hours (or even days) is near-meaningless. That liquidity is also what's driving the price of executing a retail trade to or below zero. You used to have to pay fees whenever you bought or sold stock.

notch656a 4y ago
Can you explain why that's true? I understand why it would be true if the broker provides that liquidity for you and settles the trade immediately, while taking the risk that on his end it may settle at a different time and place. But If I just put an order directly on the exchange book using full collateralized cash in my trading account, why would that cost my broker more? Wouldn't this liquidity thesis mean that brokers should charge more for stock trades that have less liquidity? To be honest, I just figured they were able to eliminate fees by front running and/or selling my trading information.
- thaumasiotes 4y ago
  The broker isn't selling your trading information. He is selling the opportunity to trade with you, and quantitative traders will pay him for that, because you are -- in all likelihood -- really bad at trading stocks. The professionals are so convinced that you have no idea what you're doing that they're happy to give you better-than-market prices, because the market is going to move against you anyway. (And of course, on average they are correct.) You could make an argument of the form "HFTs have made trading so cheap that people are hurting themselves more than they used to, and we need to bring the price of trading back up so that people won't be tempted". But that is a pretty different argument than "HFTs don't provide any value". They clearly do. When you place an order to buy or sell stock, you pay lower fees and you get better prices than you otherwise would, because you look just like a million idiots.
  - mrep 4y ago
    Yes, see https://www.kalzumeus.com/2019/6/26/how-brokerages-make-money/ https://www.kalzumeus.com/2019/6/26/how-brokerages-make-mone...