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It's interesting what happened that day. At the opening of FB stock, Nasdaq tried to match about 75 million shares' worth of buys and asks--the 'opening cross'.
by cynicalkane 14y ago
It's interesting what happened that day. At the opening of FB stock, Nasdaq tried to match about 75 million shares' worth of buys and asks--the 'opening cross'. However, if any one of those trades were updated, Nasdaq's engine was programmed to partially or completely throw out the cross and try again, resulting in an infinite loop since they couldn't calculate the cross fast enough every time there was an update. This is a pretty basic mistake in a system designed to process lots of events in real-time.
Nanex always likes to cast HFT as the villain of everything that goes wrong with the market--this is silly. HFT makes nothing but money for Nasdaq, and narrows spreads for investors. It was pretty clearly Nasdaq's job to handle the volume of information and not falter due to such a dumb mistake as other networks kept chugging along.
The same bug also affected trading in Zynga later that day on lower volume when trading closed and re-opened on that stock. This to my mind makes Nasdaq look guiltier. It's like they didn't even test what would happen handling a big cross under load.
- nanex 14y ago"HFT makes nothing but money for Nasdaq, and narrows spreads for investors." HFT makes a pile of money for Nasdaq. But narrows the spread? Prove it. Here's one of thousands of examples that shows otherwise. http://www.youtube.com/watch?v=sDriNz8oAlc http://www.youtube.com/watch?v=sDriNz8oAlc
- cma 14y agoEven if it does narrow spreads, it doesn't matter at the margin. If the spread is 5 pennies on average without HFT, and 1 penny with it, investors are losing out. HFT is charging them a penny to remove a penny of randomness. If someone offered you a a game where you could either: A) flip nickles: heads you keep get the nickle, tails your opponent gets it B) flip pennies: heads you keep the penny 98% of the time, 2% of the time some other third party gets to keep it (an HFT outfit), your opponent gets it Would you take A or B?
- Drbble 14y agoWhy do non-HFT buyers or sellers deserve the spread any more than HFT buyers and sellers? They pay the same fees you do.
- cynicalkane 14y agoI guess you're a guy from Nanex. I'm curious why you think I should have to "prove it" if willing buyers are trading with willing sellers on an exchange they chose to trade on. Seems pretty anti-market for a finance company.
- nanex 14y agoYou made a false statement. Simple as that.
- tedunangst 14y agoIs there a video that shows us what the spread looks like without HFT?