4 ms·

HFTs provide a lot of value to everyone by providing a lot of liquidity and reducing bid/ask spread giving a fairer price to everyone. > If a company is valuab

HFTs provide a lot of value to everyone by providing a lot of liquidity and reducing bid/ask spread giving a fairer price to everyone. > If a company is valuable now, it'll be valuable in 5 minutes. That’s not necessarily true.

DiscourseFan 3y ago
It just so happens that those who advocate and benefit directly from it are the ones who already have the power to make markets. The product of a company is based on its labor utilization, which doesn't change materially in the (very) short timespans of HFT. Liquidity aside, five minutes isn't going to make much of a difference when most people generally wait weeks or months to make major asset purchases like a car or a house, or to be approved for a small business loan. Only the ultra-wealthy car about milliseconds, because they can afford to make such vast and diverse trades in so little time.
- falcor84 3y ago
  Labor utilization is only one piece of a very big puzzle. Other pieces that change more quickly include commodity and supply chain costs, competitor activities, technological advances, and many other factors, all of which can change quite quickly in our globalized world.
  - adhesive_wombat 3y ago
    "Quite quickly" and "so quickly that a basement full of racks of FPGAs, point-to-point radios, transcontinental fibre runs and optical switches are required to extract our value" are maybe not exactly the same thing.
  - thfuran 3y ago
    What technological advances are occuring on millisecond timescales?
phpisthebest 3y ago
>>HFTs provide a lot of value to everyone I think we are going to have very different views as to what the terms "value" and "everyone" mean because HFT's provide no value at all to the everyday person on mainstreet just looking get by and maybe put 10% of their wages into the stock market for retirement. if by everyone you mean "the top 1%" and by value you mean "make lots of money at the expense of mainstreet investors" then sure.
- sgjohnson 3y ago
  > because HFT's provide no value at all to the everyday person If you participate in the stock market at all, you indirectly benefit from HFTs lowering the bid/ask spread and therefore getting a better price. Now matter how insignificant, but the benefit is there. Of course if we're dealing in millions, not thousands, then the benefit is more pronounced, but a couple of cents here or there still make a difference. At the very worst HFT firms are a net neutral. > "make lots of money at the expense of mainstreet investors" Can you elaborate on this further? I don't see how HFTs make money at the expense of mainstreet investors. HFTs make money on the expense of inefficiencies, therefore making the markets more efficient.
another_story 3y ago
I'd wager that without hfts liquidity would be just fine. Maybe smaller stocks wouldn't become the battleground for hft algos, but aside from that they're mostly penny skimming vultures that create the illusion of liquidity as they hop in and out of stuff at fractions of a second.
acjohnson55 3y ago
HFTs turn off their algorithms when the market gets particularly volatile and the liquidity vanishes at the moment it's actually needed.
fennecfoxy 3y ago
Idk I think technological progress/humanity would do a lot better in general without the parasitic effects of people making the markets/trading their "job". If someone writes some software, or grows some food, or balances some accounts, or paints a wall, they are all being endlessly more productive than someone who buys on a low and sells on a high and pockets the difference all within 100ms. Investment means support and confidence in a venture or resource. I think a lot of the financial industry's problems arise from the switch from "investment in business x because I like what they're doing and am confident they'll succeed" to the mantra of "investment in business x because I don't actually care about the company but the stock history tells me I can make a quick buck". Market stability is a thing of the past, no wonder we're constantly on the edge of a recession.

DiscourseFan 3y ago

It just so happens that those who advocate and benefit directly from it are the ones who already have the power to make markets. The product of a company is based on its labor utilization, which doesn't change materially in the (very) short timespans of HFT. Liquidity aside, five minutes isn't going to make much of a difference when most people generally wait weeks or months to make major asset purchases like a car or a house, or to be approved for a small business loan. Only the ultra-wealthy car about milliseconds, because they can afford to make such vast and diverse trades in so little time.

falcor84 3y ago
Labor utilization is only one piece of a very big puzzle. Other pieces that change more quickly include commodity and supply chain costs, competitor activities, technological advances, and many other factors, all of which can change quite quickly in our globalized world.
- adhesive_wombat 3y ago
  "Quite quickly" and "so quickly that a basement full of racks of FPGAs, point-to-point radios, transcontinental fibre runs and optical switches are required to extract our value" are maybe not exactly the same thing.
- thfuran 3y ago
  What technological advances are occuring on millisecond timescales?

phpisthebest 3y ago

>>HFTs provide a lot of value to everyone I think we are going to have very different views as to what the terms "value" and "everyone" mean because HFT's provide no value at all to the everyday person on mainstreet just looking get by and maybe put 10% of their wages into the stock market for retirement. if by everyone you mean "the top 1%" and by value you mean "make lots of money at the expense of mainstreet investors" then sure.

sgjohnson 3y ago
> because HFT's provide no value at all to the everyday person If you participate in the stock market at all, you indirectly benefit from HFTs lowering the bid/ask spread and therefore getting a better price. Now matter how insignificant, but the benefit is there. Of course if we're dealing in millions, not thousands, then the benefit is more pronounced, but a couple of cents here or there still make a difference. At the very worst HFT firms are a net neutral. > "make lots of money at the expense of mainstreet investors" Can you elaborate on this further? I don't see how HFTs make money at the expense of mainstreet investors. HFTs make money on the expense of inefficiencies, therefore making the markets more efficient.

another_story 3y ago

I'd wager that without hfts liquidity would be just fine. Maybe smaller stocks wouldn't become the battleground for hft algos, but aside from that they're mostly penny skimming vultures that create the illusion of liquidity as they hop in and out of stuff at fractions of a second.

acjohnson55 3y ago

HFTs turn off their algorithms when the market gets particularly volatile and the liquidity vanishes at the moment it's actually needed.

fennecfoxy 3y ago

Idk I think technological progress/humanity would do a lot better in general without the parasitic effects of people making the markets/trading their "job". If someone writes some software, or grows some food, or balances some accounts, or paints a wall, they are all being endlessly more productive than someone who buys on a low and sells on a high and pockets the difference all within 100ms. Investment means support and confidence in a venture or resource. I think a lot of the financial industry's problems arise from the switch from "investment in business x because I like what they're doing and am confident they'll succeed" to the mantra of "investment in business x because I don't actually care about the company but the stock history tells me I can make a quick buck". Market stability is a thing of the past, no wonder we're constantly on the edge of a recession.