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Manoj Narang of Tradeworx has stated their average holding time is up to 10 minutes. Is he taking risk? http://washpost.bloomberg.com/Story?docId=1376-N2CB0F6T

• mayukh 13y ago
  'Average' holding times don't help understand the issue. You could have one position that was a long-term bet edit: I did not imply that none of the hft strategies were taking market risk. The ones that scalp certainly seem to.
  • tptacek 13y ago
    This is the second time you've used the word "scalp", as if all liquidity on the public markets for the last century weren't funded by "scalping". In the absence of "scalping", trading in stocks works like trading in houses. There are lots of buyers. There are lots of sellers. In the majority of cases, they disagree materially on the correct price. Therefore, it (a) takes forever to enter or exit a position, and (b) often forces people to accept terribly unfavorable pricing. The "scalp" market makers take is the market price for always having a counterparty willing to trade with you at a price near the true market value of the trading instrument. If you want the markets to work more like the real estate market, you can do that: place limit orders. The fact that market orders carry a premium price isn't a subtle detail of the market; it's trading 101. All things being equal, you want the "scalp" to be as thin as possible. The wider the spread, the closer the scalping blade comes to the skull. Liquidity has a price, and investors want that price to be as low as possible. So now, an exercise for you: at the height of HFT profit-taking, was the price of liquidity (a) lower or (b) higher than it was during the 1990s?
    • dllthomas 13y ago
      Though houses also have the additional complication that they're not (at all) fungible.
    • aet 13y ago
      I'm going to go with (a) lower. http://www.nytimes.com/2005/04/13/business/13nyse.html?pagewanted=print&position=&_r=0 http://www.nytimes.com/2005/04/13/business/13nyse.html?pagew...
• wglb 13y ago
  I know of one HFT firm whose hold times, averaged out over a year, came to Zero. This firm accounted for a significant fraction of all stocks traded.
  • lrm242 13y ago
    Did Knight take risk?
    • wglb 13y ago
      I am not referring to Knight. [Edit] I am referring to another firm; it seems if you are in the trading business, you are taking risk. This certainly has multiple meanings. You can measure risk against a position you hold relative to holding nothing. If you are a Market Maker HFT, then you risk the market collapsing out from under you when you are legally obligated to stay in.