7 ms·

It disgusts me how much talent is wasted on nonsense like this. Like Haim is alluding to in the documentary, imagine if all these smart people focused on real p

It disgusts me how much talent is wasted on nonsense like this. Like Haim is alluding to in the documentary, imagine if all these smart people focused on real problems instead. If this isn't a good argument for a transaction tax, I don't know what is. Say all you want about increasing efficiencies etc, but it's pretty clear to me that what the world needs is investors, not day traders.

aet 13y ago
Algorithmic and HFT lowers costs for retail traders. Transaction taxes increase costs for retail traders.
- ajays 13y ago
  I hear that often. If HFT is indeed lowering the cost, how come they are making the money and not the retail traders? This last quarter I may have bought/sold on the order of 10K shares max. If there's a $0.0001 tax per share traded, it would've cost me $1. That's ambient noise level.
  - mdkess 13y ago
    That would only be true if you had to pay the tax and nobody else did. Assuming the result of the tax is less liquidity, higher volatility and bigger spreads, it could cost you quite a bit more.
  - kasey_junk 13y ago
    Not all of them are making money. Most of the money is just being shuffled around between various firms. At any given time you can find an HFT firm making money and another one blowing up.
  - twoodfin 13y ago
    If HFT is indeed lowering the cost, how come they are making the money and not the retail traders? This sounds like an odd question if you transpose it to any other market where automated systems have lowered costs: "If Amazon is indeed lowering the cost of buying books, how come they are making the money and not the consumer?" "If Expedia is indeed lowering the cost of booking a plane ticket, how come they are making money and not the traveler?" "If Toyota is indeed lowering the cost of manufacturing a car, how come they are making the money and not the auto buyer?" Retail traders benefit from the cheaper trades facilitated by high liquidity in automated trading. There wouldn't be anywhere near as high liquidity in many of these stocks if there weren't automated systems trying to make money on penny price shifts.
    - tedunangst 13y ago
      That's a great point about Amazon. In fact, Amazon is playing the role of both exchange and market maker. Can you imagine the shitstorm of comments if a stock exchange tried that?
  - radikalus 13y ago
    It's not only about bid-ask spreads; I find this a gross oversimplification of what HFTs bring the market. Other things: - Prices around the world across all exchanges are kept in line. If you need to hedge your Yen exposure and can only trade in Europe, you will get the closest possible price as someone in Asia or the US. This is true across all asset classes. This lack of massive arbitrage may get a lot of investors/hedgers/speculators significantly better prices. - Derivatives on almost any asset are similarly tight as their underlying assets. No longer are you crossing wide/illiquid markets to hedge back month products or options. In a lot of markets, you can trade tight/liquid markets at almost any tenure; this is potentially a LARGE cost savings particularly compared to what some of the markets looked like a decade ago. - Stat Arb + Relative value spreads are kept in line with their variance structures. Stocks move in line with their eigen components, options move smoothly with their volatility structures, futures at various tenures are priced in line with their synthetic interest rate exposure. Without being able to accurately price something, most participants are able to get a 'good' price on almost anything. While a lot of the HFT is indeed zero sum between firms, the net economic effect of their activity is certainly not. The amount of $ that most firms make from the HFT business is really not that large; most of the big trading firms have made their fortunes from large speculative/fortunate events, not from being the best at constantly collecting a 1/10th of a tick of edge over and over.
qubitsam 13y ago
raganwald shared a similar sentiment a while back [1] and was discussed here on HN [2]. [1] http://neighborhoodhacker.com/why-the-fuck-raganwalds-posterous/ http://neighborhoodhacker.com/why-the-fuck-raganwalds-poster... [2] https://news.ycombinator.com/item?id=5088815 https://news.ycombinator.com/item?id=5088815
theorique 13y ago
And who's going to give those investors their shares and exits when they want to trade? The question that needs to be answered is where trading stocks crosses over between moral to neutral to immoral. If we assume: nanoseconds = worse than Hitler decades = saintly Warren Buffett then there must be some timescale at which trading becomes good or evil. The challenge is that the faster traders operate as counterparties for the slower ones (and for each other). They absorb risk, provide liquidity, and establish definitive prices. One way to enforce a speed limit would be to have a crossing auction every second (similar to what they do prior to the open, or when a stock is halted, or for an IPO). If you wanted to be an active trader, you would participate in many such crossing auctions during the day.
grandalf 13y ago
Who should decide what is a "real problem" and what is "nonsense"? Simply being indignant about it does little to further the discussion.
- AkimChristine 13y ago
  Human beings with a brain, in discussion with other humans, creating the kind of world they want to live in. Just like everything else in the world is decided. It makes no sense at all to pretend that humans are too stupid to understand what is and is not good for our planet. The whole point of having language and intelligence is that it should be used, not just discarded with some discredited hand wave that "if we just do nothing, everything will work out for the best!"
  - lmm 13y ago
    > It makes no sense at all to pretend that humans are too stupid to understand what is and is not good for our planet. The whole point of having language and intelligence is that it should be used, not just discarded with some discredited hand wave that "if we just do nothing, everything will work out for the best!" Centrally planned economies have been tried. The Soviet Union discouraged a lot of research into areas like psychology that they saw as pointless; artists had to conform to traditional styles. It didn't turn out very well. Letting the market allocate resources has a lot of inefficiencies, but it works better than any alternative that has been tried.
    - flumbaps 13y ago
      > Letting the market allocate resources has a lot of inefficiencies, but it works better than any alternative that has been tried. I don't think we've ever tried having the market solely allocate resources. I think pretty much every government has regulated trade, collected taxes, that sort of thing. What seems to have worked best would be letting the market allocate resources to some extent, but collecting taxes and investing in long term goals (such as research and infrastructure). But maybe this isn't necessary, maybe in a truly free market there would always be genius entrepreneurs like Elon Musk appearing every now and again to progress humanity. Still, there's a massive difference between the kinds of long term planning that modern western democracies already do and a communist dictatorship.
stygiansonic 13y ago
It's really a balance - you say the world needs "investors" and not "day traders". By this, I am assuming you mean those who purchase shares using a buy-and-hold strategy as opposed to those who seek to profit off of short term swings. It's difficult to have one without the other. Day traders and speculators supply the liquidity that enables long-term investors to buy in when they choose to do so. This does improve the efficiency of the markets, as there has to be another side to every trade. To take it to the extreme: If everyone was a buy-and-hold investor, what would happen? IPOs and infrequent sells from buy-and-holds existing would be the only supply of stock. Would this be efficient? (Note: I'm not asking this as rhetorical question as I actually don't know the answer) I am not arguing for or against HFT, as I've read both sides (from "they provide liquidity and lower spreads" to "they are akin to parasitic front-runners") and am not sure of where the truth lies. Instead, I'm just arguing against this concept that "day trading" provides no value.
diydsp 13y ago
> investors, not day traders. Yes, did you see the angst when that one trader got stuck with a stock "overnight" ? He acted like having a stock overnight was the stupidest possible thing. Imagine holding a stock for 12 months! Goodness!
dragontamer 13y ago
Day traders help stabilize the prices and ensure liquidity. Sure, they screw over other day-traders to get that position, but long-term investors overall benefit from this sort of squabbling. These HFT guys are complaining about fractions of a penny. Meanwhile, illiquid markets such as the Bond Market have real issues going on, where bid/ask spreads are completely opaque, and pricing on the same bonds are vastly different from broker to broker. (with differences measured in hundreds of dollars... not fractions of a penny)
deleted 13y ago
[deleted]

aet 13y ago

Algorithmic and HFT lowers costs for retail traders. Transaction taxes increase costs for retail traders.

ajays 13y ago
I hear that often. If HFT is indeed lowering the cost, how come they are making the money and not the retail traders? This last quarter I may have bought/sold on the order of 10K shares max. If there's a $0.0001 tax per share traded, it would've cost me $1. That's ambient noise level.
- mdkess 13y ago
  That would only be true if you had to pay the tax and nobody else did. Assuming the result of the tax is less liquidity, higher volatility and bigger spreads, it could cost you quite a bit more.
- kasey_junk 13y ago
  Not all of them are making money. Most of the money is just being shuffled around between various firms. At any given time you can find an HFT firm making money and another one blowing up.
- twoodfin 13y ago
  If HFT is indeed lowering the cost, how come they are making the money and not the retail traders? This sounds like an odd question if you transpose it to any other market where automated systems have lowered costs: "If Amazon is indeed lowering the cost of buying books, how come they are making the money and not the consumer?" "If Expedia is indeed lowering the cost of booking a plane ticket, how come they are making money and not the traveler?" "If Toyota is indeed lowering the cost of manufacturing a car, how come they are making the money and not the auto buyer?" Retail traders benefit from the cheaper trades facilitated by high liquidity in automated trading. There wouldn't be anywhere near as high liquidity in many of these stocks if there weren't automated systems trying to make money on penny price shifts.
  - tedunangst 13y ago
    That's a great point about Amazon. In fact, Amazon is playing the role of both exchange and market maker. Can you imagine the shitstorm of comments if a stock exchange tried that?
- radikalus 13y ago
  It's not only about bid-ask spreads; I find this a gross oversimplification of what HFTs bring the market. Other things: - Prices around the world across all exchanges are kept in line. If you need to hedge your Yen exposure and can only trade in Europe, you will get the closest possible price as someone in Asia or the US. This is true across all asset classes. This lack of massive arbitrage may get a lot of investors/hedgers/speculators significantly better prices. - Derivatives on almost any asset are similarly tight as their underlying assets. No longer are you crossing wide/illiquid markets to hedge back month products or options. In a lot of markets, you can trade tight/liquid markets at almost any tenure; this is potentially a LARGE cost savings particularly compared to what some of the markets looked like a decade ago. - Stat Arb + Relative value spreads are kept in line with their variance structures. Stocks move in line with their eigen components, options move smoothly with their volatility structures, futures at various tenures are priced in line with their synthetic interest rate exposure. Without being able to accurately price something, most participants are able to get a 'good' price on almost anything. While a lot of the HFT is indeed zero sum between firms, the net economic effect of their activity is certainly not. The amount of $ that most firms make from the HFT business is really not that large; most of the big trading firms have made their fortunes from large speculative/fortunate events, not from being the best at constantly collecting a 1/10th of a tick of edge over and over.

qubitsam 13y ago

raganwald shared a similar sentiment a while back [1] and was discussed here on HN [2]. [1] http://neighborhoodhacker.com/why-the-fuck-raganwalds-posterous/ http://neighborhoodhacker.com/why-the-fuck-raganwalds-poster... [2] https://news.ycombinator.com/item?id=5088815 https://news.ycombinator.com/item?id=5088815

theorique 13y ago

And who's going to give those investors their shares and exits when they want to trade? The question that needs to be answered is where trading stocks crosses over between moral to neutral to immoral. If we assume: nanoseconds = worse than Hitler decades = saintly Warren Buffett then there must be some timescale at which trading becomes good or evil. The challenge is that the faster traders operate as counterparties for the slower ones (and for each other). They absorb risk, provide liquidity, and establish definitive prices. One way to enforce a speed limit would be to have a crossing auction every second (similar to what they do prior to the open, or when a stock is halted, or for an IPO). If you wanted to be an active trader, you would participate in many such crossing auctions during the day.

grandalf 13y ago

Who should decide what is a "real problem" and what is "nonsense"? Simply being indignant about it does little to further the discussion.

AkimChristine 13y ago
Human beings with a brain, in discussion with other humans, creating the kind of world they want to live in. Just like everything else in the world is decided. It makes no sense at all to pretend that humans are too stupid to understand what is and is not good for our planet. The whole point of having language and intelligence is that it should be used, not just discarded with some discredited hand wave that "if we just do nothing, everything will work out for the best!"
- lmm 13y ago
  > It makes no sense at all to pretend that humans are too stupid to understand what is and is not good for our planet. The whole point of having language and intelligence is that it should be used, not just discarded with some discredited hand wave that "if we just do nothing, everything will work out for the best!" Centrally planned economies have been tried. The Soviet Union discouraged a lot of research into areas like psychology that they saw as pointless; artists had to conform to traditional styles. It didn't turn out very well. Letting the market allocate resources has a lot of inefficiencies, but it works better than any alternative that has been tried.
  - flumbaps 13y ago
    > Letting the market allocate resources has a lot of inefficiencies, but it works better than any alternative that has been tried. I don't think we've ever tried having the market solely allocate resources. I think pretty much every government has regulated trade, collected taxes, that sort of thing. What seems to have worked best would be letting the market allocate resources to some extent, but collecting taxes and investing in long term goals (such as research and infrastructure). But maybe this isn't necessary, maybe in a truly free market there would always be genius entrepreneurs like Elon Musk appearing every now and again to progress humanity. Still, there's a massive difference between the kinds of long term planning that modern western democracies already do and a communist dictatorship.

stygiansonic 13y ago

It's really a balance - you say the world needs "investors" and not "day traders". By this, I am assuming you mean those who purchase shares using a buy-and-hold strategy as opposed to those who seek to profit off of short term swings. It's difficult to have one without the other. Day traders and speculators supply the liquidity that enables long-term investors to buy in when they choose to do so. This does improve the efficiency of the markets, as there has to be another side to every trade. To take it to the extreme: If everyone was a buy-and-hold investor, what would happen? IPOs and infrequent sells from buy-and-holds existing would be the only supply of stock. Would this be efficient? (Note: I'm not asking this as rhetorical question as I actually don't know the answer) I am not arguing for or against HFT, as I've read both sides (from "they provide liquidity and lower spreads" to "they are akin to parasitic front-runners") and am not sure of where the truth lies. Instead, I'm just arguing against this concept that "day trading" provides no value.

diydsp 13y ago

> investors, not day traders. Yes, did you see the angst when that one trader got stuck with a stock "overnight" ? He acted like having a stock overnight was the stupidest possible thing. Imagine holding a stock for 12 months! Goodness!

dragontamer 13y ago

Day traders help stabilize the prices and ensure liquidity. Sure, they screw over other day-traders to get that position, but long-term investors overall benefit from this sort of squabbling. These HFT guys are complaining about fractions of a penny. Meanwhile, illiquid markets such as the Bond Market have real issues going on, where bid/ask spreads are completely opaque, and pricing on the same bonds are vastly different from broker to broker. (with differences measured in hundreds of dollars... not fractions of a penny)

deleted 13y ago

[deleted]