3 ms·

> Kind of disappointing to see HN devolve into this. Agree, but to both sides of the above discussion. The other guys literally just says "you don't understand

by Maxion 3y ago

> Kind of disappointing to see HN devolve into this. Agree, but to both sides of the above discussion. The other guys literally just says "you don't understand". And I have to say, I don't understand either. If there's someone here who actually understands HFT and has done it, it would be nice to hear your thoughts on the matter. What do YOU think would happen if we placed and arbitrary minimum tick rate at say 1 second? 1 microsecond? 1 nanoescond? 1 femtosecond? Why would the US securitieis market collapse? Would it collapse? Why do we need extreme liquidity at the nanosecond level? Where can I get a loan for a nanosecond?

growse 3y ago
The reason why I think statements like "hey, lets just quantize the market" is that it ignores all the other stuff that you now need to decide. It's half a solution. As mentioned elsewhere, lets say you quantize. How do you decide which of two orders that arrive within the same interval at the same volume and price gets filled? Unless your proposal to quantize the market also acknowledges that there's now significant, basic questions to be answered about how a matching engine would even work, then it's not a serious proposal. It betrays the fact that the proposer hasn't fully thought through the impact of what they're suggesting. But, to answer your question: Quantizing the market will aggregate and dilute market information into the size of your interval. The enforced delay between your order and execution will fundamentally add some uncertainty and risk into every trade, which will increase spreads and the cost of trading. This will obviously happen less at smaller intervals, but I find it hard to see any offsetting benefit whatsoever. What'll actually happen is that no-one will place orders until just before the interval boundary, so you either have an open order book (and still have an arms race so that you can see the book, process it and submit an order before the deadline), or you have a closed book, in which case you're now running a dark pool. (People tried dark pools, and discovered liquidity fell through the floor, and the thing that market customers really want to be able to do is trade. So they invited a bunch of HFTs to come along and participate in the dark pools, and everyone's now wondering what the point was). Finally, unless you form a World Government, you'll discover that different markets will end up operating on different quantizing intervals and rules, which will lead to enormous structural arbitrage opportunities across different venues. > Why would the US securitieis market collapse? Would it collapse? Of course not. We used to have high latencies and high costs in the olden days. I think it was worse then. > Why do we need extreme liquidity at the nanosecond level Because I want to come to market and buy right now based on the available information in the universe right now. I don't want the risk that something will change in the next 500ms (or whatever) factored into my price.

by Maxion 3y ago

growse 3y ago

The reason why I think statements like "hey, lets just quantize the market" is that it ignores all the other stuff that you now need to decide. It's half a solution. As mentioned elsewhere, lets say you quantize. How do you decide which of two orders that arrive within the same interval at the same volume and price gets filled? Unless your proposal to quantize the market also acknowledges that there's now significant, basic questions to be answered about how a matching engine would even work, then it's not a serious proposal. It betrays the fact that the proposer hasn't fully thought through the impact of what they're suggesting. But, to answer your question: Quantizing the market will aggregate and dilute market information into the size of your interval. The enforced delay between your order and execution will fundamentally add some uncertainty and risk into every trade, which will increase spreads and the cost of trading. This will obviously happen less at smaller intervals, but I find it hard to see any offsetting benefit whatsoever. What'll actually happen is that no-one will place orders until just before the interval boundary, so you either have an open order book (and still have an arms race so that you can see the book, process it and submit an order before the deadline), or you have a closed book, in which case you're now running a dark pool. (People tried dark pools, and discovered liquidity fell through the floor, and the thing that market customers really want to be able to do is trade. So they invited a bunch of HFTs to come along and participate in the dark pools, and everyone's now wondering what the point was). Finally, unless you form a World Government, you'll discover that different markets will end up operating on different quantizing intervals and rules, which will lead to enormous structural arbitrage opportunities across different venues. > Why would the US securitieis market collapse? Would it collapse? Of course not. We used to have high latencies and high costs in the olden days. I think it was worse then. > Why do we need extreme liquidity at the nanosecond level Because I want to come to market and buy right now based on the available information in the universe right now. I don't want the risk that something will change in the next 500ms (or whatever) factored into my price.