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" seller of the house has every right to reject my +500 bid in order to wait for a better deal if they think one is coming along" You know that someone else ju
by rondon 13y ago
" seller of the house has every right to reject my +500 bid in order to wait for a better deal if they think one is coming along"
You know that someone else just said they were going to offer 1000 over asking. The seller doesn't know that. You have an advantage.
" you are assuming that there is a fixed price for the things you are buying when there aren't."
When Bob offers stock X for 5.00 that is fixed until he cancels that order. Just like the milk, it is 5.00 until the store changes the price.
Your analogy implies that I need all the properties on a block. That would be similar to a hostile takeover where someone needs to buy 50+% of a company to take control.
Are you aware that HFT are not making their money by detecting hostile takeovers?
- tptacek 13y agoCan I hazard a guess that he is aware of how HFTs make their money, and further point out that one of the reasons he has an unusually specific amount of detail to offer about how electronic trading works is that he is in fact an electronic trading software engineer? Further, your attempt to poke a hole in his analogy is itself flawed, because you have a poor working notion of the scarcity involved. "There aren't just 10 shares of MSFT in the market" is what you're thinking, while ignoring that there is a finite amount of MSFT offered a price compatible with your investment goal. You can't think of the total amount of MSFT that exists. To reason about the market, you have to have a notion of what you're willing to pay for it. Many people who hold MSFT are unwilling to unload it at anything near the current spot price. This stands to reason, because if they were willing to unload at that price, they wouldn't be long MSFT.
- rondon 13y agoI guess you don't quite understand how HFT works? The simplest example is like this: 1. Bob sees that 10,000 share of MSFT are for sell on exchange X at $50.00 and also 30,000 share are for sell on exchange Y at $50.00 and 60,000 shares are for sell on exchange Z at $50.00 2. Bob attempts to buy 100,000 shares of MSFT at $50.00. 3. The HF trader sees the 60,000 order get filled at 50.00 and reasonably assumes that someone is trying to buy more than 60,000 shares right now. 4. He buys the remaining 40,000 shares at $50.00 before Bob's trade is executed. 5. The HF trader immediately lists the 40,000 shares at 50.01 Do you understand how the HF trader is injecting himself into the transaction?
- tptacek 13y agoIt looks like you just gave an example of a trader buying all the liquidity of MSFT on every market with a single market order.
- rondon 13y agoGood point. You should ignore the previous comment based on a technicality. Since I didn't specify that the 100,000 share purchase was not actually 3 different orders
- tptacek 13y agoAside from the strange example you provided, what's funny is that you focused on a 1 cent price movement. The average bid-ask spread before high-volume electronic trading drove it down was 12 cents --- that was money in the pockets of middlemen. Before electronic trading, the spread could have been measured in dollars.
- rondon 13y agoThat is crazy logic. Because international telephone calls used to cost over 12 cents a minute I should let my ISP charge me 1 cent a minute whenever I use Skype internationally?
- harryh 13y agoYou should realize that market makers are actually providing a service that they get paid for and be happy that due to automation & competition the price for that service has dropped by an enormous amount.
- rondon 13y agoI don't want that service, I want to buy something without someone else inserting themselves as a middleman.