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It’s my naive understanding that HFT makes money at the direct expense of other market participants. Is this not a downside? I’m genuinely curious to the argume
by tmn 3y ago
It’s my naive understanding that HFT makes money at the direct expense of other market participants. Is this not a downside? I’m genuinely curious to the arguments against this.
- qeternity 3y agoYou can’t state it’s at the expense without stating how.
- Ekaros 3y agoThey make money/"wealth". That must come from either the seller or buyer or both. Unless existence of HFT directly leads to higher appreciation of assets traded.
- qeternity 3y agoAll trading is zero sum. If I own shares in a company for 20 years, that means someone else who sold them to me doesn’t own those shares and doesn’t earn those returns.
- rcxdude 3y agoIn the absence of a market maker (human or algorithmic), a much larger fraction of the value of a transaction is effectively randomly distributed between the buyer and seller. And it turns out buyers and sellers don't really like this much, and are happy to pay a small fraction of the transaction for a more predictable outcome.
- bobbylarrybobby 3y agoEven if you're right about the market, HFTs will make you a little less right for no reason other than that they've invested billions of dollars into being faster than you.
- lotsofpulp 3y agoAnd they will give you a little more liquidity.
- qeternity 3y agoWhat are you talking about?
- growse 3y agoThey're providing service at a cost. Like many service providers, to a lot of people the service provided is worth more than the cost.
- civilitty 3y ago> Like many service providers, to a lot of people the service provided is worth more than the cost. Does the average trader whose orders these HFT firms fill actually have a choice in the matter? Certainly big institutions do with desk trading, but to my knowledge the vast majority of us do not have any choice in who fills an order or whether to wait a little longer not to participate in market making.
- growse 3y agoSure, you can trade OTC. Just phone your friends / neighbours and ask if they want to buy your stuff. Maybe put an ad in the local paper.
- civilitty 3y agoThen HFT firms aren't service providers that I have the option of associating with, I'm actually forced to use them in order to participate in the public stock exchange. Nice stock you have there, it'd be a shame if ya couldn't sell it...
- growse 3y agoWhat is "the public stock exchange"? They're all private entities with their own membership rules. You can buy/sell the same instrument at hundreds of different venues, no-one's forcing you to use any specific market. Take your pick. Start your own.
- Dylan16807 3y agoThere are massive barriers and costs to selling stocks that way, and you know it. This is like saying you have the free choice not to have a phone number or email address. Yeah, technically you do, but effectively you have to use the system. And for the most part you get that from private entities too.
- rcxdude 3y agoHFT replaces massive floors of human traders doing basically the same job but at much lower cost. The competition between HFT firms for microseconds isn't particularly useful to anyone else but what they do (reduce the spread between buying and selling and the price difference between markets) is useful to most market participants not planning to extract money from the market in the same way HFT firms do.
- consilient 3y ago> HFT replaces massive floors of human traders doing basically the same job but at much lower cost. HFT is just one form of algorithmic trading, they're not the same thing.