4 ms·

They provide market liquidity. The chances that a seller and buyer come together at the exact same time across the 7.5 hours of open market operations is fairl

by zie 2y ago

They provide market liquidity. The chances that a seller and buyer come together at the exact same time across the 7.5 hours of open market operations is fairly low, so they buy from sellers and sell to buyers and hold in between to keep the markets liquid. This liquidity costs(often advertised as the bid/ask spread). We could essentially close them down if we moved all trading to say 1 hour a day. Though most retail traders are upset they can only trade 7.5hrs a day, they want to trade 24/7 instead. They seem to WANT the liquidity and are apparently willing to pay for it. Me, I'm fine with trading for only an hour a day, but I get not everyone is as lackadaisical as me. Unless you have a better mouse trap to solve the liquidity problem, this is the best we have for now.

EMM_386 2y ago
> They provide market liquidity. I actually know a little about this space. You know what the easiest response is that is always the answer? "We provide liquidity". Sounds important, most people don't get it, it works. But it's not like the market is going to grind to a halt if Jane Street disappears overnight. Of course, people will say that. Not people telling you the truth. I actually considered "but, but, THE LIQUIDITY!" in my answer but I felt there was sufficient snark.
- zie 2y ago
  Agreed, orders maybe wouldn't fill quite as fast, but it's not like markets would fall over and die.
  - alchemist1e9 2y ago
    Yes they would. It would be a significant and catastrophic mistake to restrict trading based on feelings of envy. It would be technically negative in every measurement possible. So many poor policies originate from Envy and poor reasoning not grounded in logic and understanding of free markets and economics. This would be yet another classic example of that.
    - zie 2y ago
      As we have talked about in the other part of this thread, envy has absolutely nothing to do with it. Stop thinking it does. You are starting to sound like a broken record. > It would be technically negative in every measurement possible. Since you believe this so strongly, can you provide academic sources for this perspective?
      - alchemist1e9 2y ago
        > envy has absolutely nothing to do with it Please do tell me then, what exactly motivates all the proposals for restricting trading periods or changing to auctions? All I have seen is that Jane Street and other make “too much money”. The reality is actually different they provide a service in 20 countries across all asset classes and do it for only $12B/year, that’s actually very cheap once the scope of their reach and operations are understood. Please explain what is the motivation other than envy behind the numerous comments proposing some restrictions or claiming they aren’t worse or even better. There are definitely academic sources that will backup my assertions however the irony is that my position somehow needs to be defended when it’s actually obvious to anyone who has spent a lifetime on the inside of the very system we are discussing and that somehow absurdist proposals about restricting market hours are accepted on face value without any rational or academic evidence whatsoever.
BobaFloutist 2y ago
> They provide market liquidity. That's funny, people say the same thing about ticket scalpers.
- zie 2y ago
  Event tickets are not usually subject to market forces, for good reason.
- therealdrag0 2y ago
  Don’t they? Artists set too low of prices because they don’t want to be thought of as greedy. Scalpers expose the true market rate of the goods.
alchemist1e9 2y ago
[flagged]
- zie 2y ago
  First, I never said it was a great idea, or that we should. It's not about envy or not. Liquidity provides a great service, if we need long market hours. If we don't need long market hours, it arguably provides little to no value. Yes it would massively reduce liquidity, that's the point :) Yes volatility would go up during that hour(especially at the beginning), because everyone would have to figure out the new pricing, but it would remove the need for liquidity as well. It would bring all the sellers and buyers together at the same time, eliminating the need for market makers to provide liquidity. I'm not suggesting we actually do this, in fact, the markets are trending the other way to 24/7 market trading. I'm sure Jane Street and the other liquidity providers are 100% on board with this plan of 24/7 trading. Personally, I'm very happy with the status quo, 7.5hr trading days M-F. Though personally I'd prefer they shift a little later so it's easier for west coasters to trade at market open. I.e. shift from EST to CST. I know that won't happen, but that would be my only real complaint. > Jane Street’s 2613 employees are replacing at least 10x that many needed to perform the same critical and necessary service to the markets from 30+ years ago. Agreed, they are doing a bang up job providing liquidity to the markets. I'm happy for them. I use their service, it's great. If we as a society want long liquid trading markets, then we need people like Jane Street to provide that liquidity. If we don't want long liquid trading markets, we can eliminate them and force buyers and sellers to meet all at a given point in time. One is not necessarily better than the other, it's a trade-off.
  - alchemist1e9 2y ago
    > If we as a society want long liquid trading markets, then we need people like Jane Street to provide that liquidity. If we don't want long liquid trading markets, we can eliminate them and force buyers and sellers to meet all at a given point in time. One is not necessarily better than the other, it's a trade-off. This is categorically false. Long electronic trading hours are simply a better solution, a more fair solution, a more competitive solution, a more efficient solution, and what the market is demanding. There is no trade off, especially as most liquidity is supplied by automated systems that can operated 24/7/365 if needed. When you compress transactions into specific time frames it isn't about forcing buyers and sellers to meet, you actually will reduce the numbers of buyers and sellers overall, you will lower the value of the asset, because assets are given liquidity premiums. The more you restrict transactions and reduce liquidity the less utility an asset has. This is one of the often overlooked reasons Bitcoin has more intrinsic value than is assumed at first by observers. When a primary issuer creates new securities this is very different situation and why an auction is needed, for example for new treasury bonds or any other initial offering. In that situation there is only 1 seller, the issuer, and the question is what is the starting fair price at which buyers appear. In a secondary market there are many current owners of the asset and many potential sellers. They don't decide to sell or buy independently and then meet. That is simply not what occurs. Instead think that every current owner is a potential seller and every participant who follows that market is a potential buyer. Sellers attract buyers, buyers attract sellers, both when they push the prices around via the market makers. By extending the time period for this dynamic to occur to continuous central limit order books (CLOBs) it make the most efficient process, periodic auctions have been proven to be very poor ideas and results in choice paralysis of participants, CLOBs incentivize higher rates of decision making and healthier dynamics. All properly operated CLOBs will also have a circuit breaker to auctions should time be need to digest rapidly changing information and the continuous book can't be created within some limits. By having extended market hours you widen the pool of buyers and sellers who can participate. You also allow markets to instantly digest new information as quickly as possible, this is most fair to all participants equally. Extended trading hours are strictly better than restricted trading hours.

by zie 2y ago

EMM_386 2y ago

> They provide market liquidity. I actually know a little about this space. You know what the easiest response is that is always the answer? "We provide liquidity". Sounds important, most people don't get it, it works. But it's not like the market is going to grind to a halt if Jane Street disappears overnight. Of course, people will say that. Not people telling you the truth. I actually considered "but, but, THE LIQUIDITY!" in my answer but I felt there was sufficient snark.

zie 2y ago
Agreed, orders maybe wouldn't fill quite as fast, but it's not like markets would fall over and die.
- alchemist1e9 2y ago
  Yes they would. It would be a significant and catastrophic mistake to restrict trading based on feelings of envy. It would be technically negative in every measurement possible. So many poor policies originate from Envy and poor reasoning not grounded in logic and understanding of free markets and economics. This would be yet another classic example of that.
  - zie 2y ago
    As we have talked about in the other part of this thread, envy has absolutely nothing to do with it. Stop thinking it does. You are starting to sound like a broken record. > It would be technically negative in every measurement possible. Since you believe this so strongly, can you provide academic sources for this perspective?
    - alchemist1e9 2y ago
      > envy has absolutely nothing to do with it Please do tell me then, what exactly motivates all the proposals for restricting trading periods or changing to auctions? All I have seen is that Jane Street and other make “too much money”. The reality is actually different they provide a service in 20 countries across all asset classes and do it for only $12B/year, that’s actually very cheap once the scope of their reach and operations are understood. Please explain what is the motivation other than envy behind the numerous comments proposing some restrictions or claiming they aren’t worse or even better. There are definitely academic sources that will backup my assertions however the irony is that my position somehow needs to be defended when it’s actually obvious to anyone who has spent a lifetime on the inside of the very system we are discussing and that somehow absurdist proposals about restricting market hours are accepted on face value without any rational or academic evidence whatsoever.

BobaFloutist 2y ago

> They provide market liquidity. That's funny, people say the same thing about ticket scalpers.

zie 2y ago
Event tickets are not usually subject to market forces, for good reason.
therealdrag0 2y ago
Don’t they? Artists set too low of prices because they don’t want to be thought of as greedy. Scalpers expose the true market rate of the goods.

alchemist1e9 2y ago

[flagged]

zie 2y ago
First, I never said it was a great idea, or that we should. It's not about envy or not. Liquidity provides a great service, if we need long market hours. If we don't need long market hours, it arguably provides little to no value. Yes it would massively reduce liquidity, that's the point :) Yes volatility would go up during that hour(especially at the beginning), because everyone would have to figure out the new pricing, but it would remove the need for liquidity as well. It would bring all the sellers and buyers together at the same time, eliminating the need for market makers to provide liquidity. I'm not suggesting we actually do this, in fact, the markets are trending the other way to 24/7 market trading. I'm sure Jane Street and the other liquidity providers are 100% on board with this plan of 24/7 trading. Personally, I'm very happy with the status quo, 7.5hr trading days M-F. Though personally I'd prefer they shift a little later so it's easier for west coasters to trade at market open. I.e. shift from EST to CST. I know that won't happen, but that would be my only real complaint. > Jane Street’s 2613 employees are replacing at least 10x that many needed to perform the same critical and necessary service to the markets from 30+ years ago. Agreed, they are doing a bang up job providing liquidity to the markets. I'm happy for them. I use their service, it's great. If we as a society want long liquid trading markets, then we need people like Jane Street to provide that liquidity. If we don't want long liquid trading markets, we can eliminate them and force buyers and sellers to meet all at a given point in time. One is not necessarily better than the other, it's a trade-off.
- alchemist1e9 2y ago
  > If we as a society want long liquid trading markets, then we need people like Jane Street to provide that liquidity. If we don't want long liquid trading markets, we can eliminate them and force buyers and sellers to meet all at a given point in time. One is not necessarily better than the other, it's a trade-off. This is categorically false. Long electronic trading hours are simply a better solution, a more fair solution, a more competitive solution, a more efficient solution, and what the market is demanding. There is no trade off, especially as most liquidity is supplied by automated systems that can operated 24/7/365 if needed. When you compress transactions into specific time frames it isn't about forcing buyers and sellers to meet, you actually will reduce the numbers of buyers and sellers overall, you will lower the value of the asset, because assets are given liquidity premiums. The more you restrict transactions and reduce liquidity the less utility an asset has. This is one of the often overlooked reasons Bitcoin has more intrinsic value than is assumed at first by observers. When a primary issuer creates new securities this is very different situation and why an auction is needed, for example for new treasury bonds or any other initial offering. In that situation there is only 1 seller, the issuer, and the question is what is the starting fair price at which buyers appear. In a secondary market there are many current owners of the asset and many potential sellers. They don't decide to sell or buy independently and then meet. That is simply not what occurs. Instead think that every current owner is a potential seller and every participant who follows that market is a potential buyer. Sellers attract buyers, buyers attract sellers, both when they push the prices around via the market makers. By extending the time period for this dynamic to occur to continuous central limit order books (CLOBs) it make the most efficient process, periodic auctions have been proven to be very poor ideas and results in choice paralysis of participants, CLOBs incentivize higher rates of decision making and healthier dynamics. All properly operated CLOBs will also have a circuit breaker to auctions should time be need to digest rapidly changing information and the continuous book can't be created within some limits. By having extended market hours you widen the pool of buyers and sellers who can participate. You also allow markets to instantly digest new information as quickly as possible, this is most fair to all participants equally. Extended trading hours are strictly better than restricted trading hours.