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> You said > * HTF provide liquidity. > * HTF beeing invited into markets formerly excluding them. > * Regulation attempts on HFT hit retail traiders too. > * Y

by toth 3y ago

> You said > * HTF provide liquidity. > * HTF beeing invited into markets formerly excluding them. > * Regulation attempts on HFT hit retail traiders too. > * You disagree, that HTF is rent seeking? > Imho, all those statements are weak. > Providing liquidity in markets is essential but markets worked long before HFT was a thing. Correct, but the previous incarnation of liquid providers (mostly humans on stock exchange floors) was far more expensive and less efficient than HFT. This is why HFT was able to compete on price of liquidity provision (i.e., the spreads came down) and win. These legacy firms did lose out from HFT (and are actually behind some of the anti HFT rhetoric out there) but I assume people in HFT see technological disruption as a good thing, even if bad for some incumbents. The idea that retail traders or institutional investors are the ones that lost out from HFT lacks any evidence, AFAIK. > FTH is just another way of going "meta" (for VC?) simply beeing faster. Until they are the market. Your wording is a bit unclear, but if you are hinting that HFTs are operating at a loss until they capture sufficient market share, this is demonstrably false. HFTs make a lot of money (you can look up Virtu's financial statements for proof since it is a public company). > The big question, as you too said is. > > It is still possible that changing market structure or regulation [...] could be somehow beneficial for markets or society as a whole, but this is far from obvious. > To me, it is rent seeking. It would be if it was true. I admit it's a theoretical possibility, but I am yet to see a convincing argument of it.

throwawayqqq11 3y ago
> It would be [rent seeking] if it was true. I admit it's a theoretical possibility, but I am yet to see a convincing argument of it. As i see it, you already provided all aspects to label HFT as such. Except one: the physical foundation of running such a business. They provide faster and more cost efficient liquidity, thus "bringing down the spread" which will push out maybe not all but certainly the lesser privileged conventional traders. This is foremost negative for the effected traders and not per se for the public but as the pessimist that i am, i cannot help it but see it as just another way of market consolidation, of monopolization in the worst case. The only way to seriously compete with such HFTs, is to do it as they do, which requires the same physical accesses to the markets. Previously, the access to valuable (insider) information was a privilege for slow traders and a way to get an edge. Speed and algorithms are imo just a new privilege, enabled by technology. The simple reason why insider trading is illegal, because it puts other marketeers at a disadvantage, they have no means to compensate. The same is true for HFT. You cannot rent the rack next to the markets machines when its already occupied. What would you reply to such a statement: HFT is just front running but from the client side. But to be fair, i have to see convincing evidence for my pessimistic worst cases too.
- toth 3y ago
  > They provide faster and more cost efficient liquidity, thus "bringing down the spread" which will push out maybe not all but certainly the lesser privileged conventional traders. This is foremost negative for the effected traders and not per se for the public but as the pessimist that i am, i cannot help it but see it as just another way of market consolidation, of monopolization in the worst case. They are only "pushing out" other liquidity providers. If you are a medium/long term investor you are not competing with HFTs. Yes, if you want to be day trader HFTs might make your life harder, but I think from society's point of view that's fine. > The only way to seriously compete with such HFTs, is to do it as they do, which requires the same physical accesses to the markets. Previously, the access to valuable (insider) information was a privilege for slow traders and a way to get an edge. Speed and algorithms are imo just a new privilege, enabled by technology. > The simple reason why insider trading is illegal, because it puts other marketeers at a disadvantage, they have no means to compensate. The same is true for HFT. You cannot rent the rack next to the markets machines when its already occupied. There is no principle that all market participants must been on equal footing. That would be impossible to enforce, and counterproductive to boot. If you are a slow (non HFT) trader at a big fund or bank you also have a lot of advantages over a guy doing it from home: better financing rates, more market access, a whole infrastructure to provide you with information and analysis, etc. Should that be made illegal as well? What about if you are just a better trader? Should you be somehow given a handicap so others can compete with you? As I said in another reply, in every field of human activity, professionals are advantaged over hobbyists, and that's fine.
  - throwawayqqq11 3y ago
    > What about if you are just a better trader? If it was _only_ human ability / trade craft, that makes good traders (hft or conventional), imo those traders would have earned their cut. Honoring such a market making service and economic foresight with profits is reasonable for the public. Unfortunately, the difference between a good trader and a successfull one is not ability alone but privilege! Be it insider information or better latency, its the same thing here! > There is no principle that all market participants must been on equal footing. This statement is objectively false, when you take "equal footing" as "equal access". > in every field of human activity, professionals are advantaged over hobbyists, and that's fine. The gap between professionals and hobbyists is the same between professionals and customers, its the main reason of trustee obligations / market regulations. So something about this issue is not fine. My point is, privileged market access leads to growing power asymmetries, which a newcomer can never compensate with genius abilities alone. This kind of market capture is similar to institutionalized corruption btw. Once a vital service provider gets too dominant or the power gap gets too wide, regulators must step in. See health care (medical complexity), legal systems (cost of equal representation) or basically all infrastructure (obligation of contracting). ... I replied to your stronghold statements, didnt i? Now, is HFT just a client side approach of front running? Which is an insider privilege and illegal. https://en.m.wikipedia.org/wiki/Frontrunning https://en.m.wikipedia.org/wiki/Frontrunning

by toth 3y ago

throwawayqqq11 3y ago

> It would be [rent seeking] if it was true. I admit it's a theoretical possibility, but I am yet to see a convincing argument of it. As i see it, you already provided all aspects to label HFT as such. Except one: the physical foundation of running such a business. They provide faster and more cost efficient liquidity, thus "bringing down the spread" which will push out maybe not all but certainly the lesser privileged conventional traders. This is foremost negative for the effected traders and not per se for the public but as the pessimist that i am, i cannot help it but see it as just another way of market consolidation, of monopolization in the worst case. The only way to seriously compete with such HFTs, is to do it as they do, which requires the same physical accesses to the markets. Previously, the access to valuable (insider) information was a privilege for slow traders and a way to get an edge. Speed and algorithms are imo just a new privilege, enabled by technology. The simple reason why insider trading is illegal, because it puts other marketeers at a disadvantage, they have no means to compensate. The same is true for HFT. You cannot rent the rack next to the markets machines when its already occupied. What would you reply to such a statement: HFT is just front running but from the client side. But to be fair, i have to see convincing evidence for my pessimistic worst cases too.

toth 3y ago
> They provide faster and more cost efficient liquidity, thus "bringing down the spread" which will push out maybe not all but certainly the lesser privileged conventional traders. This is foremost negative for the effected traders and not per se for the public but as the pessimist that i am, i cannot help it but see it as just another way of market consolidation, of monopolization in the worst case. They are only "pushing out" other liquidity providers. If you are a medium/long term investor you are not competing with HFTs. Yes, if you want to be day trader HFTs might make your life harder, but I think from society's point of view that's fine. > The only way to seriously compete with such HFTs, is to do it as they do, which requires the same physical accesses to the markets. Previously, the access to valuable (insider) information was a privilege for slow traders and a way to get an edge. Speed and algorithms are imo just a new privilege, enabled by technology. > The simple reason why insider trading is illegal, because it puts other marketeers at a disadvantage, they have no means to compensate. The same is true for HFT. You cannot rent the rack next to the markets machines when its already occupied. There is no principle that all market participants must been on equal footing. That would be impossible to enforce, and counterproductive to boot. If you are a slow (non HFT) trader at a big fund or bank you also have a lot of advantages over a guy doing it from home: better financing rates, more market access, a whole infrastructure to provide you with information and analysis, etc. Should that be made illegal as well? What about if you are just a better trader? Should you be somehow given a handicap so others can compete with you? As I said in another reply, in every field of human activity, professionals are advantaged over hobbyists, and that's fine.
- throwawayqqq11 3y ago
  > What about if you are just a better trader? If it was _only_ human ability / trade craft, that makes good traders (hft or conventional), imo those traders would have earned their cut. Honoring such a market making service and economic foresight with profits is reasonable for the public. Unfortunately, the difference between a good trader and a successfull one is not ability alone but privilege! Be it insider information or better latency, its the same thing here! > There is no principle that all market participants must been on equal footing. This statement is objectively false, when you take "equal footing" as "equal access". > in every field of human activity, professionals are advantaged over hobbyists, and that's fine. The gap between professionals and hobbyists is the same between professionals and customers, its the main reason of trustee obligations / market regulations. So something about this issue is not fine. My point is, privileged market access leads to growing power asymmetries, which a newcomer can never compensate with genius abilities alone. This kind of market capture is similar to institutionalized corruption btw. Once a vital service provider gets too dominant or the power gap gets too wide, regulators must step in. See health care (medical complexity), legal systems (cost of equal representation) or basically all infrastructure (obligation of contracting). ... I replied to your stronghold statements, didnt i? Now, is HFT just a client side approach of front running? Which is an insider privilege and illegal. https://en.m.wikipedia.org/wiki/Frontrunning https://en.m.wikipedia.org/wiki/Frontrunning