4 ms·

Liquidity is the reason you can click a button on E-Trade and get your trades almost instantly, for between zero and a few more pennies than what traders would

Liquidity is the reason you can click a button on E-Trade and get your trades almost instantly, for between zero and a few more pennies than what traders would pay, plus a $9.99 commission. This was absolutely not the case before computer trading and electronic markets. The "good old days" of human traders where when you'd pay fifty bucks plus one percent to a broker who would almost certainly front-run your trades, and the best spreads were at least 1/8. Nowdays the worst that could happen is an HFT might, perfectly legally, place an order a split second faster and extract fractions of a penny as they narrow the spread for everyone. Please forgive me if I don't consider this a disaster for investors, hedgers, mutual funds, and other consumers of markets that they can quickly execute orders close to the market price.

arturadib 14y ago
> Liquidity is the reason you can click a button on E-Trade and get your trades almost instantly I personally don't care that my trade happens in a second or a minute because I'm a long-term investor - someone who wants to become a company owner, as I explained above, and not yet another hacker who couldn't care less about the long-term health of the company I'm buying. My point is that if folks care about liquidity on the order of seconds/sub-seconds, they are themselves falling into the short-term trading BS (and consequently continuously distorting company prices). Please stop perpetuating this insanity. Here's a timely article by Mark Cuban fresh out of the oven to help clarify my point: http://blogmaverick.com/2012/09/21/what-business-is-wall-street-in-3/ http://blogmaverick.com/2012/09/21/what-business-is-wall-str...
- cynicalkane 14y ago
  Look, I'm talking about $50 and 1/8 spreads in 70s and 80s dollars. A low income investor from that time period might only have 3 or 4 digits to sock away in the market per year, Wall Street taking a huge bite every time. Then there are index funds and ETFs which need to get their costs as low as possible to benefit lay investors. If you think big commissions and spreads are inconsequential, you are factually incorrect. If you think trading doesn't narrow spreads or lower costs, you are also incorrect. Finally, if you think trading qua trading distorts prices, there's almost no data that supports this and huge bodies of economic literature to the contrary. This isn't a matter of opinion.
- tatsuke95 14y ago
  >"I personally don't care that my trade happens in a second or a minute because I'm a long-term investor" Long-term investor or not, you want liquidity to ensure you are getting in and getting out at the price you want. That's the big difference between investing in a liquid stock versus, say, your house. The reason you can get in and out as a long-term investor is because of the liquidity provided by traders.
- Permit 14y ago
  Mark Cuban bemoans the good old days like any technical trader before they were beaten out by computers. He doesn't advocate trading on fundamentals. The battle cry against high frequency tradings seems to come primarily from individuals who were previously successful in specialist trading. Here he talks about how he bought a stock, watched it climb then shorted it and celebrated its bankruptcy: http://blogmaverick.com/2008/09/08/talking-stocks-and-money/ http://blogmaverick.com/2008/09/08/talking-stocks-and-money/ But yes, speak to us from the moral high ground. Cuban simply rode what essentially amounted to a pump-n-dump. He wasn't doing the promotion, but he sure as hell wasn't in it for the long term growth of the underlying company. Here's a fantastic quote from Mr. Cuban: "What about fundamentals? Fundamentals is a word invented by sellers to find buyers. Price-earnings ratios, price-sales, the present value of future cash flows, pick one. Fundamentals are merely metrics created to help stockbrokers sell stocks, and to give buyers reassurance when buying stocks. Even how profits are calculated is manipulated to give confidence to buyers."
- genwin 14y ago
  > I personally don't care that my trade happens in a second or a minute because I'm a long-term investor The difference between a second and a minute could cost even the small investor many $thousands in the long term. I prefer milliseconds. If you're a buyer at $30 and a second is allowed, you're likely paying $30.30 or more due to front-running. Immediately after you buy it will be $30 again, so you lost 1+% in the delay.

arturadib 14y ago

> Liquidity is the reason you can click a button on E-Trade and get your trades almost instantly I personally don't care that my trade happens in a second or a minute because I'm a long-term investor - someone who wants to become a company owner, as I explained above, and not yet another hacker who couldn't care less about the long-term health of the company I'm buying. My point is that if folks care about liquidity on the order of seconds/sub-seconds, they are themselves falling into the short-term trading BS (and consequently continuously distorting company prices). Please stop perpetuating this insanity. Here's a timely article by Mark Cuban fresh out of the oven to help clarify my point: http://blogmaverick.com/2012/09/21/what-business-is-wall-street-in-3/ http://blogmaverick.com/2012/09/21/what-business-is-wall-str...

cynicalkane 14y ago
Look, I'm talking about $50 and 1/8 spreads in 70s and 80s dollars. A low income investor from that time period might only have 3 or 4 digits to sock away in the market per year, Wall Street taking a huge bite every time. Then there are index funds and ETFs which need to get their costs as low as possible to benefit lay investors. If you think big commissions and spreads are inconsequential, you are factually incorrect. If you think trading doesn't narrow spreads or lower costs, you are also incorrect. Finally, if you think trading qua trading distorts prices, there's almost no data that supports this and huge bodies of economic literature to the contrary. This isn't a matter of opinion.
tatsuke95 14y ago
>"I personally don't care that my trade happens in a second or a minute because I'm a long-term investor" Long-term investor or not, you want liquidity to ensure you are getting in and getting out at the price you want. That's the big difference between investing in a liquid stock versus, say, your house. The reason you can get in and out as a long-term investor is because of the liquidity provided by traders.
Permit 14y ago
Mark Cuban bemoans the good old days like any technical trader before they were beaten out by computers. He doesn't advocate trading on fundamentals. The battle cry against high frequency tradings seems to come primarily from individuals who were previously successful in specialist trading. Here he talks about how he bought a stock, watched it climb then shorted it and celebrated its bankruptcy: http://blogmaverick.com/2008/09/08/talking-stocks-and-money/ http://blogmaverick.com/2008/09/08/talking-stocks-and-money/ But yes, speak to us from the moral high ground. Cuban simply rode what essentially amounted to a pump-n-dump. He wasn't doing the promotion, but he sure as hell wasn't in it for the long term growth of the underlying company. Here's a fantastic quote from Mr. Cuban: "What about fundamentals? Fundamentals is a word invented by sellers to find buyers. Price-earnings ratios, price-sales, the present value of future cash flows, pick one. Fundamentals are merely metrics created to help stockbrokers sell stocks, and to give buyers reassurance when buying stocks. Even how profits are calculated is manipulated to give confidence to buyers."
genwin 14y ago
> I personally don't care that my trade happens in a second or a minute because I'm a long-term investor The difference between a second and a minute could cost even the small investor many $thousands in the long term. I prefer milliseconds. If you're a buyer at $30 and a second is allowed, you're likely paying $30.30 or more due to front-running. Immediately after you buy it will be $30 again, so you lost 1+% in the delay.