3 ms·

Given that randomization need only apply to orders placed simultaneously at identical prices, I don't see how it would increase market frictions enough to signi

Given that randomization need only apply to orders placed simultaneously at identical prices, I don't see how it would increase market frictions enough to significantly limit their utility in price discovery, long-term investing, and the raising of capital. Individuals and corporations aren't making tradable decisions at subsecond intervals.

growse 3y ago
By simultaneously, I assume you mean "within one time interval". I suspect you'd be surprised how many orders at the same price can happen in a very very short time window. As for price discovery, a lot of information can happen in one second. Quantizing just adds risk, which adds cost, which harms everyone. > Individuals and corporations aren't making tradable decisions at subsecond intervals. No, but they're benefitting significantly from the fact that the cost of trading is now minuscule compared to what it used to be.
- cosmojg 3y ago
  > Quantizing just adds risk, which adds cost, which harms everyone. No, it adds risk at the scale of the quantum, adding cost for those trading at the scale of the quantum, harming a very small subset of traders who would normally benefit from trading at or below the scale of the quantum, like HFT firms and short-term market makers. Should such institutions cease to exist because the cost of trading at such scales becomes prohibitively expensive, I highly doubt that society will suffer.
  - growse 3y ago
    We already have evidence from history (where trading latencies and intervals were much higher) that the spreads become much higher as trading frequency goes down. The spread represents the amount of uncertainty and risk associated with a price. Every bip away from the midpoint your bid/ask sits is pure cost to the participant, and that's true for all participants. Even if I only come to market once a year to splurge my bonus on GME, I'm worse off paying 20c over the midpoint than I am paying 1c.
    - Maxion 3y ago
      > We already have evidence from history (where trading latencies and intervals were much higher) that the spreads become much higher as trading frequency goes down. Would this really hold true linearly across trading frequencies? As we get to shorter and shorter delays, the technological cost for participating in HFT will just keep going up (e.g. building your own microwave transmission towers et. al. sillyness), decreasing the amount of potential participants. Won't this at some point start having the opposite effect - limiting participants in the market to those with enough cash to play? Wouldn't there be some theoretical level of trading delay that should be regulated in order to ensure optimal liquidity as well as market participation?
    - Dylan16807 3y ago
      > We already have evidence from history (where trading latencies and intervals were much higher) that the spreads become much higher as trading frequency goes down. Okay, can you please use this evidence to say how much the interval has to increase for spreads to increase by 1 cent?

growse 3y ago

By simultaneously, I assume you mean "within one time interval". I suspect you'd be surprised how many orders at the same price can happen in a very very short time window. As for price discovery, a lot of information can happen in one second. Quantizing just adds risk, which adds cost, which harms everyone. > Individuals and corporations aren't making tradable decisions at subsecond intervals. No, but they're benefitting significantly from the fact that the cost of trading is now minuscule compared to what it used to be.

cosmojg 3y ago
> Quantizing just adds risk, which adds cost, which harms everyone. No, it adds risk at the scale of the quantum, adding cost for those trading at the scale of the quantum, harming a very small subset of traders who would normally benefit from trading at or below the scale of the quantum, like HFT firms and short-term market makers. Should such institutions cease to exist because the cost of trading at such scales becomes prohibitively expensive, I highly doubt that society will suffer.
- growse 3y ago
  We already have evidence from history (where trading latencies and intervals were much higher) that the spreads become much higher as trading frequency goes down. The spread represents the amount of uncertainty and risk associated with a price. Every bip away from the midpoint your bid/ask sits is pure cost to the participant, and that's true for all participants. Even if I only come to market once a year to splurge my bonus on GME, I'm worse off paying 20c over the midpoint than I am paying 1c.
  - Maxion 3y ago
    > We already have evidence from history (where trading latencies and intervals were much higher) that the spreads become much higher as trading frequency goes down. Would this really hold true linearly across trading frequencies? As we get to shorter and shorter delays, the technological cost for participating in HFT will just keep going up (e.g. building your own microwave transmission towers et. al. sillyness), decreasing the amount of potential participants. Won't this at some point start having the opposite effect - limiting participants in the market to those with enough cash to play? Wouldn't there be some theoretical level of trading delay that should be regulated in order to ensure optimal liquidity as well as market participation?
  - Dylan16807 3y ago
    > We already have evidence from history (where trading latencies and intervals were much higher) that the spreads become much higher as trading frequency goes down. Okay, can you please use this evidence to say how much the interval has to increase for spreads to increase by 1 cent?