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Ummm...so the only example where an HFT has helped someone out is the one where the HFT screwed up and lost money? In other words, the better an HFT gets, the

Ummm...so the only example where an HFT has helped someone out is the one where the HFT screwed up and lost money? In other words, the better an HFT gets, the less benefit they're providing. This isn't doing much to convince me. Yes, in that case, it would suck to be Fry. But the problem at that point is that the price dropped before Fry got his order in, and that's a price of doing business in the stock market. Considering that an HFT would do all in their power NOT to be helping Fry in that case, it doesn't really support your position. You're not in this to try to help people like Fry; you're in this to AVOID helping people like Fry as much as possible. >If you want to take that risk, place an ALO order at the bid or ask price. ALO? How does that differ from a limit order? I only ever use limit orders when buying or selling stock -- and pretty much every bit of investment advice I've read recommends that you only ever use limit orders, though advice on where to place your limit varies. If "most people" use market orders, well, most people also lose money in the stock market.

yummyfajitas 14y ago
Ummm...so the only example where an HFT has helped someone out is the one where the HFT screwed up and lost money? Yes. This isn't all that uncommon - see insurance companies, for example. Without Leela, the problem is not that the market moved before Fry got his order in. The problem is the market moved before his order was filled. ALO? How does that differ from a limit order? It's a limit order which Adds Liquidity Only. But it's not even necessary in this case - if Fry is willing to accept execution risk, he can place a sell order at $10.05 instead of $10.00: Sell(Fry, $10.05, 100) Sell(Leela, $10.05, 100) ---------------- Buy(Leela, $10.00, 100) Buy(Bender, $10.00, 100) If Zoidberg and Amy each buy 100 shares, Fry's order gets filled. If not, Fry loses money. Fry could also have placed his sell order at $10.04 and jumped the queue: Sell(Leela, $10.05, 100) Sell(Fry, $10.04, 100) ---------------- Buy(Leela, $10.00, 100) Buy(Bender, $10.00, 100) In this case Fry gets filled before Leela, so he doesn't need Amy to show up.
- SomeCallMeTim 14y ago
  Insurance companies don't have to screw up for people to benefit from having insurance. >the market moved before his order was filled. In what tangible way is this different from "the market moved before Fry got his order in"? The market for a particular stock depends on there being people who are willing to buy it. Saying "the market moved" blurs the fact that there simply weren't any buyers at that price any more by the time he got his order in. If we're talking about a stock with a lot of volume, and Fry "jumps the queue" by setting a limit order in the current spread (something I almost always do myself, FWIW, based on that same investing advice I mentioned), then he'll sell his stock with or without HFTs. What value does the HFT add in this case? The argument is that HFTs add liquidity. Don't HFTs only work with stocks that have high volume? How is adding liquidity when there's already high volume a value?
  - yummyfajitas 14y ago
    Insurance companies don't have to screw up for people to benefit from having insurance. How does insurance benefit someone who's car doesn't crash? It's a couple of hundred bucks a month for nothing. What value does the HFT add in this case? None. If Fry doesn't want to cross the spread and pay for liquidity, he doesn't have to. Similarly, Arthur's Steakhouse doesn't benefit me because I'm a vegetarian and don't want to buy what they are selling. Don't HFTs only work with stocks that have high volume? How is adding liquidity when there's already high volume a value? First of all, many HFTs do work with the long tail of US securities. Second, adding liquidity via price improvement (i.e., narrowing the spread) is useful even if volume is high.
haberman 14y ago
> Ummm...so the only example where an HFT has helped someone out is the one where the HFT screwed up and lost money? They haven't lost money until they sell at a lower price. The price could still go back up and the HFT would make money overall. But Fry is still better off in this case because he got to sell right away at a better price than he could have gotten if Leela wasn't around. In this case, everyone benefited: Fry got to sell when he wanted at a better price than the non-HFT's were offering and Leela made money. Leela made money by taking on risk. Leela makes money overall only if she is smart enough to win more often than she loses.

yummyfajitas 14y ago

Ummm...so the only example where an HFT has helped someone out is the one where the HFT screwed up and lost money? Yes. This isn't all that uncommon - see insurance companies, for example. Without Leela, the problem is not that the market moved before Fry got his order in. The problem is the market moved before his order was filled. ALO? How does that differ from a limit order? It's a limit order which Adds Liquidity Only. But it's not even necessary in this case - if Fry is willing to accept execution risk, he can place a sell order at $10.05 instead of $10.00: Sell(Fry, $10.05, 100) Sell(Leela, $10.05, 100) ---------------- Buy(Leela, $10.00, 100) Buy(Bender, $10.00, 100) If Zoidberg and Amy each buy 100 shares, Fry's order gets filled. If not, Fry loses money. Fry could also have placed his sell order at $10.04 and jumped the queue: Sell(Leela, $10.05, 100) Sell(Fry, $10.04, 100) ---------------- Buy(Leela, $10.00, 100) Buy(Bender, $10.00, 100) In this case Fry gets filled before Leela, so he doesn't need Amy to show up.

SomeCallMeTim 14y ago
Insurance companies don't have to screw up for people to benefit from having insurance. >the market moved before his order was filled. In what tangible way is this different from "the market moved before Fry got his order in"? The market for a particular stock depends on there being people who are willing to buy it. Saying "the market moved" blurs the fact that there simply weren't any buyers at that price any more by the time he got his order in. If we're talking about a stock with a lot of volume, and Fry "jumps the queue" by setting a limit order in the current spread (something I almost always do myself, FWIW, based on that same investing advice I mentioned), then he'll sell his stock with or without HFTs. What value does the HFT add in this case? The argument is that HFTs add liquidity. Don't HFTs only work with stocks that have high volume? How is adding liquidity when there's already high volume a value?
- yummyfajitas 14y ago
  Insurance companies don't have to screw up for people to benefit from having insurance. How does insurance benefit someone who's car doesn't crash? It's a couple of hundred bucks a month for nothing. What value does the HFT add in this case? None. If Fry doesn't want to cross the spread and pay for liquidity, he doesn't have to. Similarly, Arthur's Steakhouse doesn't benefit me because I'm a vegetarian and don't want to buy what they are selling. Don't HFTs only work with stocks that have high volume? How is adding liquidity when there's already high volume a value? First of all, many HFTs do work with the long tail of US securities. Second, adding liquidity via price improvement (i.e., narrowing the spread) is useful even if volume is high.

haberman 14y ago

> Ummm...so the only example where an HFT has helped someone out is the one where the HFT screwed up and lost money? They haven't lost money until they sell at a lower price. The price could still go back up and the HFT would make money overall. But Fry is still better off in this case because he got to sell right away at a better price than he could have gotten if Leela wasn't around. In this case, everyone benefited: Fry got to sell when he wanted at a better price than the non-HFT's were offering and Leela made money. Leela made money by taking on risk. Leela makes money overall only if she is smart enough to win more often than she loses.