7 ms·

Am I the only one who thinks HFT should be forbidden? Stocks and investments are a nice thing to have, since you can buy a share of a company you believe in, th

Am I the only one who thinks HFT should be forbidden? Stocks and investments are a nice thing to have, since you can buy a share of a company you believe in, they get the money, do stuff, you get dividends and in the end can sell the stock after some time too. HFT changes these "beliefs in company" to "beliefs that the stock will go up", and the timeframe of those "beliefs" is sometimes in milliseconds. This turns classic "investment" into a computer game with a lot of real money.

Loughla 3y ago
Honestly, I don't understand how they're legal, either. HFT just seems like the most naked of naked cash grabs in finance.
- lxgr 3y ago
  This seems to be a common sentiment – but do you know what HFTs actually do, and why it works? I was pretty skeptical too, but the more I look into it, the more it just boils down to market making (providing liquidity) and arbitrage (improving price quality across exchanges). There might be dirty tricks there too – I'm only speaking for legal trading practices here. And if an HFT makes its profit using illegal methods, what's the difference between that and other financial crimes like insider trading, collusion to frontrunning etc.? I don't really get the (to me somewhat irrational/uninformed) focus on HFTs, when things like payment for order flow probably "siphons off" just as much from retail investors' trades.
willis936 3y ago
What would that look like? If you rate limit stock exchanges to something like 1 update per minute then there will likely be the same amount of networking and computation going on to speculate on the next update and calculate optimal plays. It just moves it to behind closed doors where it is harder to know if shenanigans are going on. It would take a heavier hand to push against this problem. I'm all for it, I'm just not clever enough or knowledgeable enough to know what would be a good regulation that would fly in congress.
- Terr_ 3y ago
  > What would that look like? One attempt is the exchange IEX [0] which introduced a ~350 microsecond delay to everything simply by running incoming order data through a ~60km loop of fiber-optic cable. Perhaps not the most, er, featureful solution, but it's very easy to audit and argue that there are no biases or backdoors. [0] https://en.wikipedia.org/wiki/IEX https://en.wikipedia.org/wiki/IEX
  - vgatherps 3y ago
    If everybody is exactly 350us slower, then it’s still the same game. Iex also offers a variety of (dark) order types that can pull back without the 350us delay if iex believes the incoming flow will be toxic
    - Terr_ 3y ago
      > If everybody is exactly 350us slower, then it’s still the same game. IANATrader, but I don't think that's entirely true. Yes, it won't stop Carol from getting information from somewhere and then running in front of Alice to the same exchange. [0] However even fixed-delays [1] can still create uncertainty about what price your order may actually execute at when it hits the server, which is something HFTs rely on more heavily than other traders, since their strategy depends on high-certainty that they will have a small positive margin on every trade. __ [0] I find it geeky-amusing to write (i.e. IEX) or (ex: IEX) because it feels like the start of a mental tounge-twister. [1] Can't edit my original post anymore, but apparently there's another 350μs on the outbound path too.
      - vgatherps 3y ago
        > However even fixed-delays [1] can still create uncertainty about what price your order may actually execute at when it hits the server, which is something HFTs rely on more heavily than other traders, since their strategy depends on high-certainty that they will have a small positive margin on every trade This is also true on every single other exchange, albeit to a smaller degree. You have a larger queue of possible things that may have happened, but this issue exists everywhere. No exchange has instant entry. On a very short timescale things are very jumpy - nothing happens for a while, and then everything happens all at once. The queuing problem tends to be more of “did another hft beat me to the same event”, not general random other events, so queues like IEXs tend to be emptyish anyways.
deleted 3y ago
[deleted]
542458 3y ago
> since you can buy a share of a company you believe in I don't think this is generally true. Stock trading isn't charity, it's done to make a profit. Almost trading is done on the basis of second order effects, and has been for as long as there's been a stock market. Stocks aren't given value by the company being profitable, they're given value by what other people are willing to pay for them (okay, yes, dividends also factor in, but many companies don't pay dividends and people still assign value to those stocks).
- ajsnigrutin 3y ago
  Well sure it's for profit, but what exactly do we (the society) get if we allow millisecond investments in our companies? Compared to classic, long-term investments.
  - EMM_386 3y ago
    The common answer will be "liquidity". The honest answer is probably nothing.
    - jfengel 3y ago
      Is liquidity even a real answer? The HFTs only work because the market would be made a moment later. A buyer and a seller already exist. If they didn't, it wouldn't be high-frequency trading. it would just be "trading". As far as I can tell, it neither benefits us, nor costs us. It siphons off a tiny fraction of money, too small to notice, but large enough in aggregate. Some parasite gets to survive, which is annoying if you look directly at it, but ignorable if you don't.
      - lxgr 3y ago
        > The HFTs only work because the market would be made a moment later. A buyer and a seller already exist. Not at all. If you, for whatever reason, need to sell right now, putting in a market order in an illiquid market can cost you a lot. It can be discussed how big the contribution of HFTs to market making really is (large companies or exchanges often employ dedicated market makers, I believe?), but the benefit of market making itself should hopefully be obvious.
criddell 3y ago
> you can buy a share of a company you believe in, they get the money, do stuff I think that's only true for IPO shares which often aren't available to retail investors/gamblers like me.
- lxgr 3y ago
  > I think that's only true for IPO shares Not quite: By buying shares in a company, you positively influence its share price, which reduces cost of capital for the company (in case it needs it). Arguably, the difference in impact (in terms of enabling/steering companies to do things) between the IPO and secondary market these days is probably negligible compared to any two single private funding rounds.
ajmurmann 3y ago
Eric Ries with his Long Term Stock Exchange for me really nailed this issue. HFT is the epitome of all the reasons why the LTSE is great.
marcell 3y ago
What's the actual harm of HFT for the average person? I can set a $ limit on my orders, so I don't pay more than I want. Why should I care if some HFT guy scrapes 0.01% value off each trade?
- beirut_bootleg 3y ago
  It scrapes that % every trade, every millisecond, thousands of times over. That adds up, and all that money has to come from somewhere.
  - lend000 3y ago
    That's the price you pay for liquidity, and the alternative (paying a difference in price far more than 0.01%) makes everyone worse off except other people competing in the markets. The money HFT's make comes from other people trading the zero sum short term trading game, not you (assuming you are longer term investor or non-participant in the market), so why should you or others in your situation get worked up about it? It seems like either a demonization of that which people do not understand, a class warfare sort of vibe, or both.
    - quickthrowman 3y ago
      It’s weird to be how much some people hate market makers and traders who apply arbitrage strategies. I don’t think there would be as much hatred for HFTs if people understood what it is they do. They make markets on securities and arbitrage things. For example, creating units of SPY when it gets too far above NAV to bring the NAV back in line with the index. I’m sure there are more strategies I’m unaware of, but it’s not like Millionaire HFT man is picking the pockets of retail traders, there’s real money to be made elsewhere.
      - lend000 3y ago
        I agree; it's as abstract as software but you can't really go to school to learn about it. It's more of an indictment of the tribal nature of humans and today's popular political narratives than of the intelligence of the OP's, who I assume are very smart. Deep-rooted emotions like jealousy and fear of the unknown can lead to shallow dismissals of complex and important systems. It would be slightly amusing to see some sort of HFT ban, only to see people speedrun re-inventing HFT as numerous problems unfold, like dad putting in a market order for AAPL on a day it had a VWAP of $185 and having his trade execute at an average price of $690. Or more serious problems like shortages and surpluses of commodities in different locations due to bad price information.
Xcelerate 3y ago
I have a suspicion that at some point, an HFT group will obtain a brief but substantial lead in machine learning (a la RenTech, but on a shorter timeframe) that allows them to suck a decent amount of money out of the stock market before anyone else can respond or close the gap. We probably won’t get any sort of regulation until after that happens.
- vgatherps 3y ago
  Hft groups are about 15-20 years ahead of you on that
cortesoft 3y ago
In a healthy market, HFTs serve as market makers, and allow normal traders to have faith that prices will be consistent at all exchanges. If there is enough competition, an HFT will have very low profit.
- deleted 3y ago
  [deleted]
elif 3y ago
HFT isn't even that harmful. What's harmful is brokerages that hold large portions of financial instruments who take advantage of customers' live buying and selling with delayed swaps, intentional front running, etc. This is how the stock market was bullied before HFT, options markets, trading bots, etc enabled 'everyone' to do skeezy arbitrage and not just market makers. The only meaningful way to limit the efficacy of these modern trading styles would be purposeful market friction through minimum holding times, circuit breakers, etc. You can't just legislate that people mustnt have low ping.. it's impossible to enforce. And those market friction mechanisms can create scary market conditions like backlogs, etc and guess what, enable market making brokerages to do internal swaps etc. in spite of the friction and essentially be the only ones able to bypass restrictions.
- bjelkeman-again 3y ago
  Wouldn’t a financial transaction tax be the friction required? https://en.wikipedia.org/wiki/Financial_transaction_tax https://en.wikipedia.org/wiki/Financial_transaction_tax
  - cvalka 3y ago
    Yes.
- strictnein 3y ago
  > HFT isn't even that harmful. What's harmful is brokerages that hold large portions of financial instruments who take advantage of customers' live buying and selling with delayed swaps, intentional front running, etc HFT does very similar things, except it's even more opaque to those not doing it. Large financial firms and exchanges sell their order data to HFTs. If you're interested in a deeper dive on what they're doing, a book like Flash Boys will explain how there's a lot more going on than just a quicker network connection.
- phkahler 3y ago
  >> The only meaningful way to limit the efficacy of these modern trading styles would be purposeful market friction through minimum holding times, circuit breakers, etc So I occasionally try to think of a reason to have a guaranteed delay due to signal propagation delay to/from Mars. Would there be a use for putting an automated exchange there? Maybe, but then whomever gates the orders could monitor and predict what will happen 40 minutes out or whatever. Need TLS from trader to exchange or something.
tails4e 3y ago
I agree. HFT goes against the original ethos of a market open to all. Instead of trading on the merit of a given company, it simply reinforces the market is increasingly gamified and unfair. It's like futures, no ones cares about the commodity being traded, or that doing so can really hurt people and business that rely on that item, it's just another item to be gambled.
- lxgr 3y ago
  > Instead of trading on the merit of a given company, it simply reinforces the market What you're proposing is actually not a ban on HFT, it's a ban on investment strategies other than value investing. How would you implement that in practice? Have every investor swear under oath that they do believe in the company's inherent value, regardless of the rest of the market's behavior? > HFT goes against the original ethos of a market open to all. What "original ethos" is that? And even if it existed, wouldn't excluding certain investors go against it much more?
  - wiz21c 3y ago
    The how is not the issue, the why is. And for the how, just limit the number of transactions one can do per second or the money one can exchange per second. Then everyone will have to be smart instead of being the one with the best connection. Or split the markets in "Joe invests" market and "Bigcorp" invests. Whatever scheme is defined as "stock exchange" can surely be fixed by another scheme. Humans have been inventing games and agreed to rules for centuries, it's not like it's something we can't do.
  - tails4e 3y ago
    Excluding the investors that have literally paid for an advantage sounds fair to me (buying real estate closer to thr exchange because every ns counts).
lend000 3y ago
Where do you think all your liquidity comes from when you want to buy or sell some instrument? The difference in price isn't all that substantial if all you do is buy now, sell when cash is needed in retirement, but if you're that kind of general index investor, one could argue that your contribution to markets is actually negative (whereas HFT is helpful by making prices better and spreads tighter). Buying SPX makes no differentiation between bad and good companies in the index and allocates money based on current prices (which are mainly calculated by HFT's who did the legwork to get to the current point).
CameronNemo 3y ago
If you have not already looked into it, the Long Term Stock Exchange (LTSE) is trying to buck this trend and cater to patient capital.
pravus 3y ago
> HFT changes these "beliefs in company" to "beliefs that the stock will go up" No, this is the part most everyone gets wrong about HFT. These systems make money off of volume, not price. They don't care if the price is going up or down. All they care about is that they can capture a small price delta by facilitating a trade faster than someone else and they are willing to do so for smaller fractions of a cent which makes them more attractive to all market participants, including you and your retirement funds. Their concerns are orthogonal to investors and they compete with other HFT firms and market makers.
anigbrowl 3y ago
No. It's garbage, trading is supposed to serve human needs and should take place on human timescales. If I had a magic wand I'd randomly fuzz the timing of trades to remove a lot of incentives for HFT and some other kinds of automated trading, which are not much more than banging on a known deficiency in a slot machine. Proponents argue that HFT and other such innovations provide liquidity to markets; my skeptical take is that this is a nice technical-sounding term for traders with cash to lowball falling asset prices.
- anon-3988 3y ago
  If you want to buy an apple stock now at say 185$ (at time of writing). What gives you the confidence that you can buy it at this price? 1. You could put a limit order at 185$ or lower. But maybe no one is putting a sell order at this price? So you are stuck waiting for some time, maybe never if the price keeps going up? 2. You could put it at 190$ to trigger a trade but you risk buying 5$ more than what you originally wanted if people already cleaned up the book from 185$ to 190$. The only reason you can definitively say that an apple stock is worth exactly 185$ right now is liquidity/depth of the market. Because there are enough players in the game that is willing to make miniscule amount of profit in very short amount of time.
  - anigbrowl 3y ago
    Yeah, that's the cost of doing business. If your business model depends on many many transactions with tiny margins, don't be a trader but become an exchange.
mxkopy 3y ago
HFT is one of the only ways you can make money directly by making computers go faster. Gaming and edge computing are the other ways.
lxgr 3y ago
> HFT changes these "beliefs in company" to "beliefs that the stock will go up", and the timeframe of those "beliefs" is sometimes in milliseconds. None of this prevents you from investing using whatever long-term paradigm you prefer. The effects of HFT on that investment style are negligible.
alphanullmeric 3y ago
Why should consenting individuals be forbidden from playing computer games with their own money?
deleted 3y ago
[deleted]
gpm 3y ago
Suppose I a (hypothetical) very low frequency value based trader buy a million dollars worth of Apple. Apple should go up in price slightly, because someone (me) just made a big bet that it's going to do well. The market does this automatically. TSMC should also go up in price very slightly, because Apple doing well makes it more likely that TSMC (a major vendor of theirs) will also do well, and the market just learned that Apple is slightly more likely to do well, so it also just learned that TSMC is more likely to do well. In other words the companies performance is correlated, so the stock prices should be as well. By my understanding HFT is the mechanism by which the market can make TSMC go up slightly as well. High frequency traders can react to the information that apple is going to do better (as per it's increased stock price) and buy a bit of TSMC. This seems like it should make the market more accurate, and if you buy that the market accurately assigning values to a company is a good thing, seems like a good thing.
- chrismorgan 3y ago
  But for you to buy a million dollars worth of Apple, someone sold a million dollars worth of Apple, right?
  - deleted 3y ago
    [deleted]
  - throwaway744678 3y ago
    Or 1 million people sold $1 worth of Apple. If you want to execute a large trade, you'd probably have to buy from several sellers, and (my limited understanding of the market is that) you'd do so by matching sell orders in ascending order, thus pushing the market value up.
  - gpm 3y ago
    Sure, but assume for the hypothetical that the counter parties were a list of existing "I'll sell this much at this price" orders. I.e. they were existing information that the market already took into account.
FpUser 3y ago
Rather than prohibiting maybe HFT should be separate org and shareholders would have option to reallocate their shares from one to the other.
anon-3988 3y ago
I am pretty sure HFT is the only reason the average joe can trade in the first place and can definitely say that X's stock is worth Y price. Otherwise you would have to trust the broker to give you a correct estimate.

Loughla 3y ago

Honestly, I don't understand how they're legal, either. HFT just seems like the most naked of naked cash grabs in finance.

lxgr 3y ago
This seems to be a common sentiment – but do you know what HFTs actually do, and why it works? I was pretty skeptical too, but the more I look into it, the more it just boils down to market making (providing liquidity) and arbitrage (improving price quality across exchanges). There might be dirty tricks there too – I'm only speaking for legal trading practices here. And if an HFT makes its profit using illegal methods, what's the difference between that and other financial crimes like insider trading, collusion to frontrunning etc.? I don't really get the (to me somewhat irrational/uninformed) focus on HFTs, when things like payment for order flow probably "siphons off" just as much from retail investors' trades.

willis936 3y ago

What would that look like? If you rate limit stock exchanges to something like 1 update per minute then there will likely be the same amount of networking and computation going on to speculate on the next update and calculate optimal plays. It just moves it to behind closed doors where it is harder to know if shenanigans are going on. It would take a heavier hand to push against this problem. I'm all for it, I'm just not clever enough or knowledgeable enough to know what would be a good regulation that would fly in congress.

Terr_ 3y ago
> What would that look like? One attempt is the exchange IEX [0] which introduced a ~350 microsecond delay to everything simply by running incoming order data through a ~60km loop of fiber-optic cable. Perhaps not the most, er, featureful solution, but it's very easy to audit and argue that there are no biases or backdoors. [0] https://en.wikipedia.org/wiki/IEX https://en.wikipedia.org/wiki/IEX
- vgatherps 3y ago
  If everybody is exactly 350us slower, then it’s still the same game. Iex also offers a variety of (dark) order types that can pull back without the 350us delay if iex believes the incoming flow will be toxic
  - Terr_ 3y ago
    > If everybody is exactly 350us slower, then it’s still the same game. IANATrader, but I don't think that's entirely true. Yes, it won't stop Carol from getting information from somewhere and then running in front of Alice to the same exchange. [0] However even fixed-delays [1] can still create uncertainty about what price your order may actually execute at when it hits the server, which is something HFTs rely on more heavily than other traders, since their strategy depends on high-certainty that they will have a small positive margin on every trade. __ [0] I find it geeky-amusing to write (i.e. IEX) or (ex: IEX) because it feels like the start of a mental tounge-twister. [1] Can't edit my original post anymore, but apparently there's another 350μs on the outbound path too.
    - vgatherps 3y ago
      > However even fixed-delays [1] can still create uncertainty about what price your order may actually execute at when it hits the server, which is something HFTs rely on more heavily than other traders, since their strategy depends on high-certainty that they will have a small positive margin on every trade This is also true on every single other exchange, albeit to a smaller degree. You have a larger queue of possible things that may have happened, but this issue exists everywhere. No exchange has instant entry. On a very short timescale things are very jumpy - nothing happens for a while, and then everything happens all at once. The queuing problem tends to be more of “did another hft beat me to the same event”, not general random other events, so queues like IEXs tend to be emptyish anyways.

deleted 3y ago

[deleted]

542458 3y ago

> since you can buy a share of a company you believe in I don't think this is generally true. Stock trading isn't charity, it's done to make a profit. Almost trading is done on the basis of second order effects, and has been for as long as there's been a stock market. Stocks aren't given value by the company being profitable, they're given value by what other people are willing to pay for them (okay, yes, dividends also factor in, but many companies don't pay dividends and people still assign value to those stocks).

ajsnigrutin 3y ago
Well sure it's for profit, but what exactly do we (the society) get if we allow millisecond investments in our companies? Compared to classic, long-term investments.
- EMM_386 3y ago
  The common answer will be "liquidity". The honest answer is probably nothing.
  - jfengel 3y ago
    Is liquidity even a real answer? The HFTs only work because the market would be made a moment later. A buyer and a seller already exist. If they didn't, it wouldn't be high-frequency trading. it would just be "trading". As far as I can tell, it neither benefits us, nor costs us. It siphons off a tiny fraction of money, too small to notice, but large enough in aggregate. Some parasite gets to survive, which is annoying if you look directly at it, but ignorable if you don't.
    - lxgr 3y ago
      > The HFTs only work because the market would be made a moment later. A buyer and a seller already exist. Not at all. If you, for whatever reason, need to sell right now, putting in a market order in an illiquid market can cost you a lot. It can be discussed how big the contribution of HFTs to market making really is (large companies or exchanges often employ dedicated market makers, I believe?), but the benefit of market making itself should hopefully be obvious.

criddell 3y ago

> you can buy a share of a company you believe in, they get the money, do stuff I think that's only true for IPO shares which often aren't available to retail investors/gamblers like me.

lxgr 3y ago
> I think that's only true for IPO shares Not quite: By buying shares in a company, you positively influence its share price, which reduces cost of capital for the company (in case it needs it). Arguably, the difference in impact (in terms of enabling/steering companies to do things) between the IPO and secondary market these days is probably negligible compared to any two single private funding rounds.

ajmurmann 3y ago

Eric Ries with his Long Term Stock Exchange for me really nailed this issue. HFT is the epitome of all the reasons why the LTSE is great.

marcell 3y ago

What's the actual harm of HFT for the average person? I can set a $ limit on my orders, so I don't pay more than I want. Why should I care if some HFT guy scrapes 0.01% value off each trade?

beirut_bootleg 3y ago
It scrapes that % every trade, every millisecond, thousands of times over. That adds up, and all that money has to come from somewhere.
- lend000 3y ago
  That's the price you pay for liquidity, and the alternative (paying a difference in price far more than 0.01%) makes everyone worse off except other people competing in the markets. The money HFT's make comes from other people trading the zero sum short term trading game, not you (assuming you are longer term investor or non-participant in the market), so why should you or others in your situation get worked up about it? It seems like either a demonization of that which people do not understand, a class warfare sort of vibe, or both.
  - quickthrowman 3y ago
    It’s weird to be how much some people hate market makers and traders who apply arbitrage strategies. I don’t think there would be as much hatred for HFTs if people understood what it is they do. They make markets on securities and arbitrage things. For example, creating units of SPY when it gets too far above NAV to bring the NAV back in line with the index. I’m sure there are more strategies I’m unaware of, but it’s not like Millionaire HFT man is picking the pockets of retail traders, there’s real money to be made elsewhere.
    - lend000 3y ago
      I agree; it's as abstract as software but you can't really go to school to learn about it. It's more of an indictment of the tribal nature of humans and today's popular political narratives than of the intelligence of the OP's, who I assume are very smart. Deep-rooted emotions like jealousy and fear of the unknown can lead to shallow dismissals of complex and important systems. It would be slightly amusing to see some sort of HFT ban, only to see people speedrun re-inventing HFT as numerous problems unfold, like dad putting in a market order for AAPL on a day it had a VWAP of $185 and having his trade execute at an average price of $690. Or more serious problems like shortages and surpluses of commodities in different locations due to bad price information.

Xcelerate 3y ago

I have a suspicion that at some point, an HFT group will obtain a brief but substantial lead in machine learning (a la RenTech, but on a shorter timeframe) that allows them to suck a decent amount of money out of the stock market before anyone else can respond or close the gap. We probably won’t get any sort of regulation until after that happens.

vgatherps 3y ago
Hft groups are about 15-20 years ahead of you on that

cortesoft 3y ago

In a healthy market, HFTs serve as market makers, and allow normal traders to have faith that prices will be consistent at all exchanges. If there is enough competition, an HFT will have very low profit.

deleted 3y ago
[deleted]

elif 3y ago

HFT isn't even that harmful. What's harmful is brokerages that hold large portions of financial instruments who take advantage of customers' live buying and selling with delayed swaps, intentional front running, etc. This is how the stock market was bullied before HFT, options markets, trading bots, etc enabled 'everyone' to do skeezy arbitrage and not just market makers. The only meaningful way to limit the efficacy of these modern trading styles would be purposeful market friction through minimum holding times, circuit breakers, etc. You can't just legislate that people mustnt have low ping.. it's impossible to enforce. And those market friction mechanisms can create scary market conditions like backlogs, etc and guess what, enable market making brokerages to do internal swaps etc. in spite of the friction and essentially be the only ones able to bypass restrictions.

bjelkeman-again 3y ago
Wouldn’t a financial transaction tax be the friction required? https://en.wikipedia.org/wiki/Financial_transaction_tax https://en.wikipedia.org/wiki/Financial_transaction_tax
- cvalka 3y ago
  Yes.
strictnein 3y ago
> HFT isn't even that harmful. What's harmful is brokerages that hold large portions of financial instruments who take advantage of customers' live buying and selling with delayed swaps, intentional front running, etc HFT does very similar things, except it's even more opaque to those not doing it. Large financial firms and exchanges sell their order data to HFTs. If you're interested in a deeper dive on what they're doing, a book like Flash Boys will explain how there's a lot more going on than just a quicker network connection.
phkahler 3y ago
>> The only meaningful way to limit the efficacy of these modern trading styles would be purposeful market friction through minimum holding times, circuit breakers, etc So I occasionally try to think of a reason to have a guaranteed delay due to signal propagation delay to/from Mars. Would there be a use for putting an automated exchange there? Maybe, but then whomever gates the orders could monitor and predict what will happen 40 minutes out or whatever. Need TLS from trader to exchange or something.

tails4e 3y ago

I agree. HFT goes against the original ethos of a market open to all. Instead of trading on the merit of a given company, it simply reinforces the market is increasingly gamified and unfair. It's like futures, no ones cares about the commodity being traded, or that doing so can really hurt people and business that rely on that item, it's just another item to be gambled.

lxgr 3y ago
> Instead of trading on the merit of a given company, it simply reinforces the market What you're proposing is actually not a ban on HFT, it's a ban on investment strategies other than value investing. How would you implement that in practice? Have every investor swear under oath that they do believe in the company's inherent value, regardless of the rest of the market's behavior? > HFT goes against the original ethos of a market open to all. What "original ethos" is that? And even if it existed, wouldn't excluding certain investors go against it much more?
- wiz21c 3y ago
  The how is not the issue, the why is. And for the how, just limit the number of transactions one can do per second or the money one can exchange per second. Then everyone will have to be smart instead of being the one with the best connection. Or split the markets in "Joe invests" market and "Bigcorp" invests. Whatever scheme is defined as "stock exchange" can surely be fixed by another scheme. Humans have been inventing games and agreed to rules for centuries, it's not like it's something we can't do.
- tails4e 3y ago
  Excluding the investors that have literally paid for an advantage sounds fair to me (buying real estate closer to thr exchange because every ns counts).

lend000 3y ago

Where do you think all your liquidity comes from when you want to buy or sell some instrument? The difference in price isn't all that substantial if all you do is buy now, sell when cash is needed in retirement, but if you're that kind of general index investor, one could argue that your contribution to markets is actually negative (whereas HFT is helpful by making prices better and spreads tighter). Buying SPX makes no differentiation between bad and good companies in the index and allocates money based on current prices (which are mainly calculated by HFT's who did the legwork to get to the current point).

CameronNemo 3y ago

If you have not already looked into it, the Long Term Stock Exchange (LTSE) is trying to buck this trend and cater to patient capital.

pravus 3y ago

> HFT changes these "beliefs in company" to "beliefs that the stock will go up" No, this is the part most everyone gets wrong about HFT. These systems make money off of volume, not price. They don't care if the price is going up or down. All they care about is that they can capture a small price delta by facilitating a trade faster than someone else and they are willing to do so for smaller fractions of a cent which makes them more attractive to all market participants, including you and your retirement funds. Their concerns are orthogonal to investors and they compete with other HFT firms and market makers.

anigbrowl 3y ago

No. It's garbage, trading is supposed to serve human needs and should take place on human timescales. If I had a magic wand I'd randomly fuzz the timing of trades to remove a lot of incentives for HFT and some other kinds of automated trading, which are not much more than banging on a known deficiency in a slot machine. Proponents argue that HFT and other such innovations provide liquidity to markets; my skeptical take is that this is a nice technical-sounding term for traders with cash to lowball falling asset prices.

anon-3988 3y ago
If you want to buy an apple stock now at say 185$ (at time of writing). What gives you the confidence that you can buy it at this price? 1. You could put a limit order at 185$ or lower. But maybe no one is putting a sell order at this price? So you are stuck waiting for some time, maybe never if the price keeps going up? 2. You could put it at 190$ to trigger a trade but you risk buying 5$ more than what you originally wanted if people already cleaned up the book from 185$ to 190$. The only reason you can definitively say that an apple stock is worth exactly 185$ right now is liquidity/depth of the market. Because there are enough players in the game that is willing to make miniscule amount of profit in very short amount of time.
- anigbrowl 3y ago
  Yeah, that's the cost of doing business. If your business model depends on many many transactions with tiny margins, don't be a trader but become an exchange.

mxkopy 3y ago

HFT is one of the only ways you can make money directly by making computers go faster. Gaming and edge computing are the other ways.

lxgr 3y ago

> HFT changes these "beliefs in company" to "beliefs that the stock will go up", and the timeframe of those "beliefs" is sometimes in milliseconds. None of this prevents you from investing using whatever long-term paradigm you prefer. The effects of HFT on that investment style are negligible.

alphanullmeric 3y ago

Why should consenting individuals be forbidden from playing computer games with their own money?

deleted 3y ago

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gpm 3y ago

Suppose I a (hypothetical) very low frequency value based trader buy a million dollars worth of Apple. Apple should go up in price slightly, because someone (me) just made a big bet that it's going to do well. The market does this automatically. TSMC should also go up in price very slightly, because Apple doing well makes it more likely that TSMC (a major vendor of theirs) will also do well, and the market just learned that Apple is slightly more likely to do well, so it also just learned that TSMC is more likely to do well. In other words the companies performance is correlated, so the stock prices should be as well. By my understanding HFT is the mechanism by which the market can make TSMC go up slightly as well. High frequency traders can react to the information that apple is going to do better (as per it's increased stock price) and buy a bit of TSMC. This seems like it should make the market more accurate, and if you buy that the market accurately assigning values to a company is a good thing, seems like a good thing.

chrismorgan 3y ago
But for you to buy a million dollars worth of Apple, someone sold a million dollars worth of Apple, right?
- deleted 3y ago
  [deleted]
- throwaway744678 3y ago
  Or 1 million people sold $1 worth of Apple. If you want to execute a large trade, you'd probably have to buy from several sellers, and (my limited understanding of the market is that) you'd do so by matching sell orders in ascending order, thus pushing the market value up.
- gpm 3y ago
  Sure, but assume for the hypothetical that the counter parties were a list of existing "I'll sell this much at this price" orders. I.e. they were existing information that the market already took into account.

FpUser 3y ago

Rather than prohibiting maybe HFT should be separate org and shareholders would have option to reallocate their shares from one to the other.

anon-3988 3y ago

I am pretty sure HFT is the only reason the average joe can trade in the first place and can definitely say that X's stock is worth Y price. Otherwise you would have to trust the broker to give you a correct estimate.