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>E.g. no HFT firm should be able to make a profit from such a stock market. Selling stocks earlier and often should result in a penalty or percentage being take
by gruez 2y ago
>E.g. no HFT firm should be able to make a profit from such a stock market. Selling stocks earlier and often should result in a penalty or percentage being taken away as a fee.
Maybe by "HFT" you only mean "those evil hedge funds that are pushing companies to chase next quarters' earnings", but there's nothing fundamentally wrong with high frequency trading. Market making[1] is high frequency trading, and basically involves offering to both buy and sell and given stock, and pocketing the spread. That increases liquidity, making it easier for other traders to buy/sell stock without taking a huge loss. It's unclear why you'd want to ban this, or how you'd distinguish this from whatever evil HFT you actually want to ban.
[1] https://en.wikipedia.org/wiki/Market_maker https://en.wikipedia.org/wiki/Market_maker
- nthingtohide 2y agoI am not saying HFTs can't sell but there should be penalty for higher frequency. It means they have to craft algorithms which will take longer term view of stocks (and their fundamentals) rather than ignorance of other participants
- gruez 2y agoMarket makers make fractions of a percent per trade. How will your "penalty for higher frequency" deter traders that prey on "ignorance of other participants" or whatever, but don't put market makers out of business?
- mistercheph 2y agoEasy, bye market makers! It's like a layoff, some good will end up getting culled with the bad.
- deleted 2y ago[deleted]
- disgruntledphd2 2y agoUnfortunately, if you don't have people to make a market, it's not going to be a very good market for a bunch of important values of good.
- nthingtohide 2y agoAll these HFT stuff reminds me of chinese event where people send each other gift money as a good will gesture. Revenue is high but no meaningful transaction has happened. The money is just being exchanged between the same top HFT firms. And the best of our minds are fighting it out in the arena of algorithms rather than creating real world value.
- gruez 2y ago>Revenue is high but no meaningful transaction has happened. The money is just being exchanged between the same top HFT firms. And the best of our minds are fighting it out in the arena of algorithms rather than creating real world value. Liquidity is "real world value". Being able to buy/sell a stock instantly without a massive premium/discount makes stock ownership for the average person possible. Contrast this to an liquid market, like buying houses, where you need to spend months house hunting, and pay a 6% commission on top.
- nthingtohide 2y agohttps://www.ecb.europa.eu/press/research-publications/resbull/2020/html/ecb.rb201215~210477c6b0.en.html https://www.ecb.europa.eu/press/research-publications/resbul... Conclusions and policy implications To return to our initial question: does stock market liquidity deteriorate when HFTs compete? The results suggest that competition among HFTs increases speculative high-frequency trades, which could lead to a deterioration in market liquidity.
- gruez 2y agoTaking the study at face value, it only says that competition among HFT is bad. It also specifically admits that "As market-makers, they can update their price quotes fast when news arrives and provide liquidity to the market. In this case, the low-frequency traders in the market – the investors – benefit from lower transaction costs". In other words, at best it's advocating for some sort of monopoly for HFT, rather than getting rid of HFTs entirely.