3 ms·

That example, however, it not solely germane to ultra-HFT. More traditional market makers have provided that level of liquidity for a long time. Do you have an

by sakai 14y ago

That example, however, it not solely germane to ultra-HFT. More traditional market makers have provided that level of liquidity for a long time. Do you have an example of where sub-100 ms execution truly adds significant liquidity? I'm open to listening, but have never heard a convincing case for why HFT below such a time threshold adds net value (i.e., enough to make up for the volatility it can cause). Edit: Changed to "solely germane"

yummyfajitas 14y ago
That example, however, it not solely germane to ultra-HFT. More traditional market makers have provided that level of liquidity for a long time. The studies I link to provide compelling evidence that traditional market makers provided much lower levels of liquidity. Do you have an example of where sub-100 ms execution truly adds significant liquidity? Please reread my post starting from the words "The Latency Arms Race".
- nhaehnle 14y ago
  Actually, out of the three links the first one does not talk about HFT at all, but about algorithmic trading. I don't think anybody seriously thinks algorithmic trading is bad per se. The third link talks about reducing the bid/ask spread. Fair enough. However, what people seem to forget in these discussions is that if you are genuinely trading in the long run, then the bid/ask spread is mostly irrelevant anyway, because it is totally dominated by intraday fluctuations. Whether I buy at the offered price at 12am vs 1pm makes a much bigger difference than whether a HFT reduced the spread by some small amount. I have yet to see an argument that the sum of intraday fluctuations + bid/ask spread is helped at all by HFT. So one study remains (this one: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1624329 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1624329). This one might genuinely apply - I haven't had the time to go through it - but the abstract isn't exactly enthusiastic, and probably disregards the social costs that come from people being sucked into the field. So I am still skeptical. Confirmation bias applies as well, I guess ;)
  - ChristianMarks 14y ago
    That's a familiar pattern: disingenuously link to studies that don't validate an assertion.
scott_s 14y ago
I thought he answered your question well in the section Automated market makers - like humans, but faster and smarter.

by sakai 14y ago

yummyfajitas 14y ago

That example, however, it not solely germane to ultra-HFT. More traditional market makers have provided that level of liquidity for a long time. The studies I link to provide compelling evidence that traditional market makers provided much lower levels of liquidity. Do you have an example of where sub-100 ms execution truly adds significant liquidity? Please reread my post starting from the words "The Latency Arms Race".

nhaehnle 14y ago
Actually, out of the three links the first one does not talk about HFT at all, but about algorithmic trading. I don't think anybody seriously thinks algorithmic trading is bad per se. The third link talks about reducing the bid/ask spread. Fair enough. However, what people seem to forget in these discussions is that if you are genuinely trading in the long run, then the bid/ask spread is mostly irrelevant anyway, because it is totally dominated by intraday fluctuations. Whether I buy at the offered price at 12am vs 1pm makes a much bigger difference than whether a HFT reduced the spread by some small amount. I have yet to see an argument that the sum of intraday fluctuations + bid/ask spread is helped at all by HFT. So one study remains (this one: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1624329 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1624329). This one might genuinely apply - I haven't had the time to go through it - but the abstract isn't exactly enthusiastic, and probably disregards the social costs that come from people being sucked into the field. So I am still skeptical. Confirmation bias applies as well, I guess ;)
- ChristianMarks 14y ago
  That's a familiar pattern: disingenuously link to studies that don't validate an assertion.

scott_s 14y ago

I thought he answered your question well in the section Automated market makers - like humans, but faster and smarter.