5 ms·

Hahaha. Yes. When big brokers can peek at trade data before the public and do HFT before you can even look at a chart and click "buy," it's pretty damn rigged.

wdewind 13y ago
Ok, but this shouldn't really affect anyone but other HFTs, right? Maybe you get a very slightly different price but that shouldn't matter if you are holding investments long enough. If you are trying to outtrade HFTs and losing, I'm not sure that shows the stock market is rigged.
- rosser 13y ago
  Are you saying you're okay with the price at which you're purchasing a security being driven up (if infinitesimally), at your expense, so that someone else can pocket the delta?
  - lotsofpulp 13y ago
    Regardless of what's fair or not, wouldn't a buy limit at the maximum you're willing to spend solve this problem?
    - 001sky 13y ago
      no
  - wdewind 13y ago
    I guess specifically I didn't like the way he phrased it, as if they are stealing data somehow. In fact they bought the access. Other than a clock rate (or 60km limiting box, as shown in the video) I'm not sure how you would create rules against HFT. I'm also not convinced if HFT is a net win or loss for economy, I'm not even sure how to consider it.
    - deleted 13y ago
      [deleted]
    - brianbarker 13y ago
      How does buying access matter? It's like giving access to see other player's cards in poker (because you're a high roller) and then making bets based on it. The rest of the players only see their cards and the river. That's not a fair game.
- colechristensen 13y ago
  Effectively it's a tax on you and on the whole economy. Fractions of a penny which end up turning into billions of dollars siphoned out of the economy with little benefit to the rest of society. There are quite a few really smart people earning bundles doing something which is fundamentally mostly useless. If you plug that hole, those really smart people might just drive their attention somewhere else and accomplish something valuable.
  - wdewind 13y ago
    What causes you to conclude that there is no benefit to the economy?
    - colechristensen 13y ago
      HF trading provides liquidity and there is some debatable value to that purpose, but using the speed of light to profit from traders who didn't pay the toll to be closer to the marked pretty clearly doesn't benefit anyone but those in on the scam.
      - sseveran 13y ago
        So should we get rid of trading pits as well? Thats another form of colocation.
      - wdewind 13y ago
        Literally how do you compare the debatable liquidity value to the debatable cost to those who didn't pay the toll? Why are those who didn't pay the toll more deserving and necessarily more benefitting to the economy? If there is increased liquidity aren't the non-HFTs starting at a lower price than they would've, even if part of their order is more expensive? I'm asking honestly, I don't know either way.
        colechristensen 13y ago
        High frequency trading does lots of things and only a few of them are being highlighted as bad. There are a specific set of legal advantages which can be had by being physically close to an exchange which give unfair advantage. If the speed of light was infinite, these advantages would be clearly and unbeatably illegal: in essence the high frequency traders are paying huge sums of money to impose a delay on every other trader resulting in foreknowledge of events. As a hypothetical high frequency trader, I could see that you have placed an order for a million shares of Apple, because of my positioning I can execute my own order _before_ yours goes through raising the price a tick and then selling those stocks to you. If exchanges allowed this and profited by it by erecting artificial delays it would be extraordinarily immoral, but because it's a natural delay it is still illegal. The problem is that laws didn't catch up with technology, and as stated before the whole thing is complicated and not so easily understood and there are a _lot_ of money in it. This has nothing at all to do with the separate issue of high frequency traders providing liquidity... they can do that without a time delay advantage over everyone else.
- chrisbennet 13y ago
  True, if you hold the investments long enough, a small difference in price would even out. Investor are only trying to "out trade" HFT in same sense that are trying to make a fair trade without the secret tax that front runners extract.
- dredmorbius 13y ago
  Nope. Read the Mark Lewis article also highlighted on HN right now: http://www.reuters.com/article/2014/03/31/us-markets-hft-flashboys-idUSBREA2U03D20140331 http://www.reuters.com/article/2014/03/31/us-markets-hft-fla... With the help of new hire Ronan Ryan, [Brad] Katsuyama[, former head trader in New York for the Royal Bank of Canada], realized that his orders traveled along fiber optic lines and hit the closest exchange first, where high frequency traders would get a glimpse, and then use their speed advantage to beat him to the other 12 U.S. public exchanges and 45 private trading venues. HFT algorithms could then buy the shares Katsuyama wanted, and then sell them to him at a slightly higher price. That's the definition of front-running, and it was hitting large institutional traders, of whom investment and retirement funds are a significant portion -- that's stealing from you and me, friend.

wdewind 13y ago

Ok, but this shouldn't really affect anyone but other HFTs, right? Maybe you get a very slightly different price but that shouldn't matter if you are holding investments long enough. If you are trying to outtrade HFTs and losing, I'm not sure that shows the stock market is rigged.

rosser 13y ago
Are you saying you're okay with the price at which you're purchasing a security being driven up (if infinitesimally), at your expense, so that someone else can pocket the delta?
- lotsofpulp 13y ago
  Regardless of what's fair or not, wouldn't a buy limit at the maximum you're willing to spend solve this problem?
  - 001sky 13y ago
    no
- wdewind 13y ago
  I guess specifically I didn't like the way he phrased it, as if they are stealing data somehow. In fact they bought the access. Other than a clock rate (or 60km limiting box, as shown in the video) I'm not sure how you would create rules against HFT. I'm also not convinced if HFT is a net win or loss for economy, I'm not even sure how to consider it.
  - deleted 13y ago
    [deleted]
  - brianbarker 13y ago
    How does buying access matter? It's like giving access to see other player's cards in poker (because you're a high roller) and then making bets based on it. The rest of the players only see their cards and the river. That's not a fair game.
colechristensen 13y ago
Effectively it's a tax on you and on the whole economy. Fractions of a penny which end up turning into billions of dollars siphoned out of the economy with little benefit to the rest of society. There are quite a few really smart people earning bundles doing something which is fundamentally mostly useless. If you plug that hole, those really smart people might just drive their attention somewhere else and accomplish something valuable.
- wdewind 13y ago
  What causes you to conclude that there is no benefit to the economy?
  - colechristensen 13y ago
    HF trading provides liquidity and there is some debatable value to that purpose, but using the speed of light to profit from traders who didn't pay the toll to be closer to the marked pretty clearly doesn't benefit anyone but those in on the scam.
    - sseveran 13y ago
      So should we get rid of trading pits as well? Thats another form of colocation.
    - wdewind 13y ago
      Literally how do you compare the debatable liquidity value to the debatable cost to those who didn't pay the toll? Why are those who didn't pay the toll more deserving and necessarily more benefitting to the economy? If there is increased liquidity aren't the non-HFTs starting at a lower price than they would've, even if part of their order is more expensive? I'm asking honestly, I don't know either way.
      - colechristensen 13y ago
        High frequency trading does lots of things and only a few of them are being highlighted as bad. There are a specific set of legal advantages which can be had by being physically close to an exchange which give unfair advantage. If the speed of light was infinite, these advantages would be clearly and unbeatably illegal: in essence the high frequency traders are paying huge sums of money to impose a delay on every other trader resulting in foreknowledge of events. As a hypothetical high frequency trader, I could see that you have placed an order for a million shares of Apple, because of my positioning I can execute my own order _before_ yours goes through raising the price a tick and then selling those stocks to you. If exchanges allowed this and profited by it by erecting artificial delays it would be extraordinarily immoral, but because it's a natural delay it is still illegal. The problem is that laws didn't catch up with technology, and as stated before the whole thing is complicated and not so easily understood and there are a _lot_ of money in it. This has nothing at all to do with the separate issue of high frequency traders providing liquidity... they can do that without a time delay advantage over everyone else.
chrisbennet 13y ago
True, if you hold the investments long enough, a small difference in price would even out. Investor are only trying to "out trade" HFT in same sense that are trying to make a fair trade without the secret tax that front runners extract.
dredmorbius 13y ago
Nope. Read the Mark Lewis article also highlighted on HN right now: http://www.reuters.com/article/2014/03/31/us-markets-hft-flashboys-idUSBREA2U03D20140331 http://www.reuters.com/article/2014/03/31/us-markets-hft-fla... With the help of new hire Ronan Ryan, [Brad] Katsuyama[, former head trader in New York for the Royal Bank of Canada], realized that his orders traveled along fiber optic lines and hit the closest exchange first, where high frequency traders would get a glimpse, and then use their speed advantage to beat him to the other 12 U.S. public exchanges and 45 private trading venues. HFT algorithms could then buy the shares Katsuyama wanted, and then sell them to him at a slightly higher price. That's the definition of front-running, and it was hitting large institutional traders, of whom investment and retirement funds are a significant portion -- that's stealing from you and me, friend.