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I work in HFT. A lot of the folk we've hired came from places like Twitter, Facebook and other social media tech firms. Its not hard to make the argument that

I work in HFT. A lot of the folk we've hired came from places like Twitter, Facebook and other social media tech firms. Its not hard to make the argument that social media is just as toxic or even worse. On the other hand, due to advancements in trading tech, I've seen commissions drop to zero. I've see better price discovery available to professional and retail traders and there has been a lot of people introduced to stock markets because it was accessible via their phone. This is not a perfect world. HFT and Fintech are not godly, but its not without merit.

bboygravity 3y ago
Better price discovery? You've got to be joking. There is no price discovery. Source: GME in Januari 2021 when the buy button was turned off for household investors only, while the rest of the market (shorts) where allowed to keep trading. That and the fact that the stock moved the way it did with the trade volume it had tells me all I need to know about price discovery: there is none.
Dylan16807 3y ago
> Its not hard to make the argument that social media is just as toxic or even worse. That's a very low bar. > better price discovery I expect that price discovery would be perfectly fine with a 1 second or 1 minute tick. Trading tech isn't going to regress. Low commissions are about automation more than anything else.
- SkipperCat 3y ago
  Even if there were 1 second ticks, there would be a race every second (or minute) to get in queue for specific trades. And therefore the speed race would continue as it is now. It would just happen on the edge of every second instead of continuously. As long as you have markets, you are going to have market makers and takers trying to get edge. It happens on Wall Street and also every other market place you can think of. I agree that there is rent seeking in this setup, but the overall value of free and open markets greatly overshadows that cost.
  - cosmojg 3y ago
    This is trivially solved by randomizing the queue for identically priced simultaneous orders.
    - SkipperCat 3y ago
      What happens when you have 10 bids against 2 asks? 8 orders are not going to get filled even though they were the first to transact. Some would call that not fair.
consilient 3y ago
> On the other hand, due to advancements in trading tech, I've seen commissions drop to zero. I've see better price discovery available to professional and retail traders and there has been a lot of people introduced to stock markets because it was accessible via their phone. Ok, but how much of that is due to HFT specifically? Or more relevantly to the article, ultra-low latency HFT? A bit of the price discovery, maybe, but retail commissions hit zero because Schwab decided to finish turning into a bank and their competitors had no choice but to follow.
pseudocomposer 3y ago
> On the other hand, due to advancements in trading tech, I've seen commissions drop to zero. I've see better price discovery available to professional and retail traders and there has been a lot of people introduced to stock markets because it was accessible via their phone. Enabling more people to move to the rent-seeking class is not really a net benefit to humanity. I would argue it’s quite the opposite.
hakfoo 3y ago
It seems like price discovery and liquidity are seen as undeniable good, but I've always been skeptical. Price discovery tends to be awkward for some institutions, because we're not great at pricing future value and resiliency. I've always blamed the "price discovery" mentality for the breakdown of the conglomerate model in the US markets-- people don't want a GE or a Honeywell (or a Samsung), they want to buy the one unit that makes money TODAY, neglecting that the other units may be providing buffering for different economic conditions, or allow the bankroll of moonshot R&D that won't fit nicely on a single quarter's balance sheet. So now we've driven GE's stock price to near zero (note: this is why I should not have taken stock advice from my Mom) and finally split the company into a bunch of shards that can be independently price-discovered. Infinite liquidity seems to create a market with a significant amount of noise, and I'm not sure the noise has value here. The practical price may be $5, but you'll end up with a million back and forth trades chasing when it hits $4.99 or $5.01. The long term consensus got the price to $5, but HFT/infinite liquidity adds the noise. Maybe they got it to $5 faster, but I'm not sure even there. These are not actually investing in the business as a business, expecting the shares to go to $1 or $10, they're investing in it as a horserace, a psuedo-random event that lasts a couple of minutes they can handicap and hopefully pull a return from reliability. Dothey make meaningful contributions to corporate governance, when they hold the shares for less time than it would take to load the proxy voting website?
- jdsully 3y ago
  The problem with conglomerates is they tend to be inefficient over the long term. They use winning businesses to subsidize losing legacy businesses that management has an attachment too. This eliminates the pressure they would normally have to fix the underperforming business and investors lose some of the benefit of the well performing business that is siphoned off. Even tech isn’t immune to this, Amazon would be way more valuable if it split into separate retail and cloud businesses.
  - hakfoo 3y ago
    You trade flexibility for that promise of efficiency. Since AWS prints money, Amazon-Retail could afford to experiment with stuff. For example, I'd argue that Prime Video hit the market a few years ahead of viability, when we were still in the "I have Netflix and it has All The Things" era of the market. Now they've got a ready-to-go platform and content while other players scramble.

bboygravity 3y ago

Better price discovery? You've got to be joking. There is no price discovery. Source: GME in Januari 2021 when the buy button was turned off for household investors only, while the rest of the market (shorts) where allowed to keep trading. That and the fact that the stock moved the way it did with the trade volume it had tells me all I need to know about price discovery: there is none.

Dylan16807 3y ago

> Its not hard to make the argument that social media is just as toxic or even worse. That's a very low bar. > better price discovery I expect that price discovery would be perfectly fine with a 1 second or 1 minute tick. Trading tech isn't going to regress. Low commissions are about automation more than anything else.

SkipperCat 3y ago
Even if there were 1 second ticks, there would be a race every second (or minute) to get in queue for specific trades. And therefore the speed race would continue as it is now. It would just happen on the edge of every second instead of continuously. As long as you have markets, you are going to have market makers and takers trying to get edge. It happens on Wall Street and also every other market place you can think of. I agree that there is rent seeking in this setup, but the overall value of free and open markets greatly overshadows that cost.
- cosmojg 3y ago
  This is trivially solved by randomizing the queue for identically priced simultaneous orders.
  - SkipperCat 3y ago
    What happens when you have 10 bids against 2 asks? 8 orders are not going to get filled even though they were the first to transact. Some would call that not fair.

consilient 3y ago

> On the other hand, due to advancements in trading tech, I've seen commissions drop to zero. I've see better price discovery available to professional and retail traders and there has been a lot of people introduced to stock markets because it was accessible via their phone. Ok, but how much of that is due to HFT specifically? Or more relevantly to the article, ultra-low latency HFT? A bit of the price discovery, maybe, but retail commissions hit zero because Schwab decided to finish turning into a bank and their competitors had no choice but to follow.

pseudocomposer 3y ago

> On the other hand, due to advancements in trading tech, I've seen commissions drop to zero. I've see better price discovery available to professional and retail traders and there has been a lot of people introduced to stock markets because it was accessible via their phone. Enabling more people to move to the rent-seeking class is not really a net benefit to humanity. I would argue it’s quite the opposite.

hakfoo 3y ago

It seems like price discovery and liquidity are seen as undeniable good, but I've always been skeptical. Price discovery tends to be awkward for some institutions, because we're not great at pricing future value and resiliency. I've always blamed the "price discovery" mentality for the breakdown of the conglomerate model in the US markets-- people don't want a GE or a Honeywell (or a Samsung), they want to buy the one unit that makes money TODAY, neglecting that the other units may be providing buffering for different economic conditions, or allow the bankroll of moonshot R&D that won't fit nicely on a single quarter's balance sheet. So now we've driven GE's stock price to near zero (note: this is why I should not have taken stock advice from my Mom) and finally split the company into a bunch of shards that can be independently price-discovered. Infinite liquidity seems to create a market with a significant amount of noise, and I'm not sure the noise has value here. The practical price may be $5, but you'll end up with a million back and forth trades chasing when it hits $4.99 or $5.01. The long term consensus got the price to $5, but HFT/infinite liquidity adds the noise. Maybe they got it to $5 faster, but I'm not sure even there. These are not actually investing in the business as a business, expecting the shares to go to $1 or $10, they're investing in it as a horserace, a psuedo-random event that lasts a couple of minutes they can handicap and hopefully pull a return from reliability. Dothey make meaningful contributions to corporate governance, when they hold the shares for less time than it would take to load the proxy voting website?

jdsully 3y ago
The problem with conglomerates is they tend to be inefficient over the long term. They use winning businesses to subsidize losing legacy businesses that management has an attachment too. This eliminates the pressure they would normally have to fix the underperforming business and investors lose some of the benefit of the well performing business that is siphoned off. Even tech isn’t immune to this, Amazon would be way more valuable if it split into separate retail and cloud businesses.
- hakfoo 3y ago
  You trade flexibility for that promise of efficiency. Since AWS prints money, Amazon-Retail could afford to experiment with stuff. For example, I'd argue that Prime Video hit the market a few years ahead of viability, when we were still in the "I have Netflix and it has All The Things" era of the market. Now they've got a ready-to-go platform and content while other players scramble.