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this strategy is ineffective with the transaction tax. it should be obvious why. the whale is normally a pension fund or some other institutional investor that

this strategy is ineffective with the transaction tax. it should be obvious why. the whale is normally a pension fund or some other institutional investor that doesn't have the resources of an hft. that means they get burned. I find it somewhat amusing that you're assuming that the rest of the market needs to be protected from the pensioners by Goldman Sachs.

yummyfajitas 13y ago
this strategy is ineffective with the transaction tax. it should be obvious why. Explain like I'm a 5 year old child how a 6bps tax will prevent HFTs from running a strategy generating 20-100bps of alpha. It'll certainly prevent them from running a market making strategy generating 1-2bps. You also still haven't explained why it's better for the whale (i.e., someone large enough to move markets) to be able to make others suffer the price impact of their trades.
- jules 13y ago
  How is the whale making others suffer? If an investment fund is forced to sell because of its terms, then it's making itself suffer. It's just that now HFT traders get to serve as the useless middle man.
  - yummyfajitas 13y ago
    Concrete example. The whale wants to dump 1MM shares which will result in a price drop from $105 to $100. Currently the bid/ask is $104.9/105.1. If the whale sells at 104.9, the market will figure it out, and the counterparties who just bought will find the price of their shares drops to $100. A predator forces the whale to suffer more of the price impact while making price improvements for the counterparties. I don't see a reason to prioritize the whale over the counterparties.
    - jules 13y ago
      First, the "benefit" to the counterparties is infinitesimal. The predator is going to scape up the market at as lost cost as possible. Second, shares don't magically lose underlying value just because an investment fund is forced to sell. Longer term the price will go to whatever it would go anyway. Investors who bought did not lose that $5. Besides, even with HFT involved the short term price will still drop to $100 so everyone holding those shares still "suffers". Suffice it to say that this is a ridiculous argument which I'm sure you are not actually making but I'm just pointing this out. Third, because of shady HTF practices like flooding the exchange with orders, it's most likely actually hurting the counterparties, impeding their ability to adjust their price. Now tell me, what social good did the HFT middle man bring?
      - yummyfajitas 13y ago
        Supply goes up - price goes down. If whales weren't worried about price impact they wouldn't be hiding their offers (typically by running HFT systems of their own, or renting them) to begin with. Third, because of shady HTF practices like flooding the exchange with orders, it's most likely actually hurting the counterparties, impeding their ability to adjust their price. I don't understand. Counterparties want to buy and a predator is improving prices. How does this hinder them? I'm not asserting that predation is socially good or bad. It marginally increases market efficiency and causes small players to lose less money to the big boys - that's the extent of my claims. I just don't understand why everyone seems to think helping the big players is somehow socially beneficial. What's good for Goldman is good for America?
        jules 13y ago
        I see you ignored the fact that counterparties are actually only "benefiting" infinitesimally. Convenient. > I don't understand. Counterparties want to buy and a predator is improving prices. How does this hinder them? That's not what I said. It's not the offers themselves that are hurting, it's the intentional clogging up of the exchange by the HFT traders which in effect locks out everybody else. > marginally increases market efficiency and causes small players to lose less money to the big boys As in trades get executed a femtosecond earlier and for a infinitesimally different price, if you conveniently ignore shady practices like clogging up exchanges? Yea, that is most definitely worth the big bucks the HFT traders are making on the other side of the transaction. /s > I just don't understand why everyone seems to think helping the big players is somehow socially beneficial. What's good for Goldman is good for America? You pick Goldman Sachs as an example because you know people will have an emotional reaction, and ignore pension funds etc. This is an argument designed to run on people's emotions. Besides, Goldman Sachs, unlike pension funds, is perfectly capable and in fact does do HFT of its own. Eradicating HFT is socially beneficial because it will (A) remove a bunch of wasted effort to be just a tiny bit faster than everybody else (B) remove the HFT middle man tax for investors who just want to trade with other investors.

yummyfajitas 13y ago

this strategy is ineffective with the transaction tax. it should be obvious why. Explain like I'm a 5 year old child how a 6bps tax will prevent HFTs from running a strategy generating 20-100bps of alpha. It'll certainly prevent them from running a market making strategy generating 1-2bps. You also still haven't explained why it's better for the whale (i.e., someone large enough to move markets) to be able to make others suffer the price impact of their trades.

jules 13y ago
How is the whale making others suffer? If an investment fund is forced to sell because of its terms, then it's making itself suffer. It's just that now HFT traders get to serve as the useless middle man.
- yummyfajitas 13y ago
  Concrete example. The whale wants to dump 1MM shares which will result in a price drop from $105 to $100. Currently the bid/ask is $104.9/105.1. If the whale sells at 104.9, the market will figure it out, and the counterparties who just bought will find the price of their shares drops to $100. A predator forces the whale to suffer more of the price impact while making price improvements for the counterparties. I don't see a reason to prioritize the whale over the counterparties.
  - jules 13y ago
    First, the "benefit" to the counterparties is infinitesimal. The predator is going to scape up the market at as lost cost as possible. Second, shares don't magically lose underlying value just because an investment fund is forced to sell. Longer term the price will go to whatever it would go anyway. Investors who bought did not lose that $5. Besides, even with HFT involved the short term price will still drop to $100 so everyone holding those shares still "suffers". Suffice it to say that this is a ridiculous argument which I'm sure you are not actually making but I'm just pointing this out. Third, because of shady HTF practices like flooding the exchange with orders, it's most likely actually hurting the counterparties, impeding their ability to adjust their price. Now tell me, what social good did the HFT middle man bring?
    - yummyfajitas 13y ago
      Supply goes up - price goes down. If whales weren't worried about price impact they wouldn't be hiding their offers (typically by running HFT systems of their own, or renting them) to begin with. Third, because of shady HTF practices like flooding the exchange with orders, it's most likely actually hurting the counterparties, impeding their ability to adjust their price. I don't understand. Counterparties want to buy and a predator is improving prices. How does this hinder them? I'm not asserting that predation is socially good or bad. It marginally increases market efficiency and causes small players to lose less money to the big boys - that's the extent of my claims. I just don't understand why everyone seems to think helping the big players is somehow socially beneficial. What's good for Goldman is good for America?
      - jules 13y ago
        I see you ignored the fact that counterparties are actually only "benefiting" infinitesimally. Convenient. > I don't understand. Counterparties want to buy and a predator is improving prices. How does this hinder them? That's not what I said. It's not the offers themselves that are hurting, it's the intentional clogging up of the exchange by the HFT traders which in effect locks out everybody else. > marginally increases market efficiency and causes small players to lose less money to the big boys As in trades get executed a femtosecond earlier and for a infinitesimally different price, if you conveniently ignore shady practices like clogging up exchanges? Yea, that is most definitely worth the big bucks the HFT traders are making on the other side of the transaction. /s > I just don't understand why everyone seems to think helping the big players is somehow socially beneficial. What's good for Goldman is good for America? You pick Goldman Sachs as an example because you know people will have an emotional reaction, and ignore pension funds etc. This is an argument designed to run on people's emotions. Besides, Goldman Sachs, unlike pension funds, is perfectly capable and in fact does do HFT of its own. Eradicating HFT is socially beneficial because it will (A) remove a bunch of wasted effort to be just a tiny bit faster than everybody else (B) remove the HFT middle man tax for investors who just want to trade with other investors.