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To avoid payment for access, presumably access would need to be free. Who would pay for it, then? Should we have state-sponsored exchanges? The networks and

by jzwinck 13y ago

To avoid payment for access, presumably access would need to be free. Who would pay for it, then? Should we have state-sponsored exchanges? The networks and rack space required to let people trade in near-time are not cheap (and using the internet doesn't really work because people would go right back to paying for lower latency, higher throughput, and/or better reliability). We could make the markets go super-slowly, but you know what will happen then? Correlated securities in other countries will trade at high frequency and dominate the price discovery process for "our" listings. That won't help our economy, it won't help reliability, and it won't help us assess taxes.

crdoconnor 13y ago
>To avoid payment for access, presumably access would need to be free. There is absolutely no reason to presume that. It could be one flat rate. >We could make the markets go super-slowly, but you know what will happen then? Correlated securities in other countries will trade at high frequency and dominate the price discovery process for "our" listings. That won't help our economy, it won't help reliability, and it won't help us assess taxes. If our intention is to kill HFT (and it probably should be), we could simply levy a very tiny transaction tax on trades. It would instantly render the practice unprofitable. Retail and institutional investors wouldn't even notice the tax (although they would probably notice the fact that HFT isn't skimming money from their trades).
- jzwinck 13y ago
  Thanks for pointing out the tax idea (a fairly popular one these days). It has some of the same issues as slowing the market down. For example, a transaction tax on one market will push transaction volume to other markets, like squeezing a water balloon. A lot of securities have correlated or even 1:1 equivalents in other jurisdictions (e.g. Europe vs. US), which results in a tricky situation. Basically, whatever market pushes their costs up first risks suffocating itself. I'm not sure what you mean by "one flat rate." Exchanges already charge a flat rate for connectivity (the rate is per month, usually a couple thousand bucks or so).
  - crdoconnor 13y ago
    >For example, a transaction tax on one market will push transaction volume to other markets, like squeezing a water balloon. Actually the exact opposite will happen. Only the HFTs will want to move away, the rest will want to move to such a market. For the rest of them, operating in a market that allows HFT is pretty much the same thing as operating in a market for lemons: https://en.wikipedia.org/wiki/The_Market_for_Lemons https://en.wikipedia.org/wiki/The_Market_for_Lemons Asymmetric information in markets means 'the bad drives out the good'. Just as running an honest used car market will attract buyers and sellers, running an honest stock exchange will attract traders.
    - icebraining 13y ago
      Then why hasn't a stock exchange that imposes a transaction fee appeared and pulled in all traders, leaving the HFTs behind? This is what I can't understand about this stories, and makes me doubt the claims against the HFTs.
      - crdoconnor 13y ago
        network effects work heavily against new exchanges. it's not like starting a SaaS to deliver email.
        cpwright 13y ago
        But there are already 13 of them that are regulated. At this point BATS owns 4 of them, the only reason to have 4 different exchanges is to have slightly different rule sets and fee structures. Any one of the existing exchanges (especially the small ones) could change their rule set or fee structure if they thought it would bring volume.
        yummyfajitas 13y ago
        This is nonsense. There is a lot of competition in exchanges, a new one is sprouting up every few months. Not all of them are able to get Michael Lewis to shill for them, but a new ATS/Dark Pool/etc sprouting up is hardly uncommon. You should consider asking yourself why most such trading networks actually go to great effort to encourage HFTs to trade on them. (Hint: no liquidity no customers.)
- yummyfajitas 13y ago
  Canada tried a transaction tax (technically a regulatory fee increase) in 2012. The net result is that retail lost, institutional investors won, and spreads increased by 9%. http://qed.econ.queensu.ca/pub/faculty/milne/322/IIROC_FeeChange_submission_KM_AP3.pdf http://qed.econ.queensu.ca/pub/faculty/milne/322/IIROC_FeeCh... Everyone would notice a 9% increase in spreads. If you believe HFT is "skimming money from their trades", can you explain the specific mechanics (i.e., what orders are placed when)?
  - ThomPete 13y ago
    Didn't Canada loose out because people went to other markets instead? I.e. not because of the tax/regulation per-se but rather because other markets didn't have that tax/regulation. From what I learned from a guy who did HFT back in 2007 HFT skimming money from their trades, thats why they make more money when markets are volatile. In some ways it's just a more sophisticated version of the traders who in the nineties made their money from each trade they made happen whether it went good or bad. The more customers they go to investe, re-invest etc the more money they made. Don't think thats a big secret.
    - tptacek 13y ago
      "Canada" didn't lose out. Individual investors in Canada did, because the bid-ask spread widened. If that happened because HFT market markets decided not to use the TSX anymore and instead haunt exchanges that were amenable to HFT, that's evidence that HFT was helping individual investors.
      - ThomPete 13y ago
        Thats like saying tax havens are evidence that paying less taxes is helping individual tax payers. Sure but that is not really the point is it?
        deleted 13y ago
        [deleted]
- theorique 13y ago
  > If our intention is to kill HFT (and it probably should be), we could simply levy a very tiny transaction tax on trades. It would instantly render the practice unprofitable. That would also kill a lot of mutual funds, exchange-traded funds, asset managers, and others. These depend on the availability of frequent rebalancing of portfolios at low transaction cost. Add in a tax to this and you penalize it significantly.
rschmitty 13y ago
I forget if it was on The Daily Show or 60 minutes, but the "solution" the new exchange came up with was to actually slow down his trades by fractions of a second such they all arrived at the same time. Once he did that his order fill rate went up and the HFT got cut out. He did this while a 60km fiber optic spool So "super slowly" isnt exactly what he was doing
- mhurron 13y ago
  It was the Daily Show http://thedailyshow.cc.com/extended-interviews/o7grtj/exclusive-michael-lewis-extended-interview http://thedailyshow.cc.com/extended-interviews/o7grtj/exclus... As I understand it, that link is only good in the US. So for everyone else, that is the extended interview of the April 1 episode. I'm sure it can be found somewhere.
  - runeks 13y ago
    Thanks for the link. It works fine from Denmark. I've never had problems watching it from a non-US country. Also, pro tip if you want to avoid ads between segments: right before the video gets to a horizontal line (ad break) on the seek bar, skip to the part right after the horizontal line. You'll skip the ad. Also: if you work as a web developer at Comedy Central, you never saw this comment.
BugBrother 13y ago
GP: >>You cannot pay to gain privileged access. [my emphasis] >>To avoid payment for access, presumably access would need to be free (Also, high frequency trading can't have much to do with finding the price points of stuff.) I don't have a horse in this race (I don't know the subject area), but most of that comment was a straw man argument. I realise that was probably a mistake in reading, but even I can see the implementation ought to be somewhere between simple and possible: Publicise the algorithm for a random delay between a tenth of a second and (more seldom) ten seconds for all buys/sells. Or something similar. Make certain to have good random number generators. Edit: If it is a good thing (or possible) to do this I don't know.

by jzwinck 13y ago

crdoconnor 13y ago

>To avoid payment for access, presumably access would need to be free. There is absolutely no reason to presume that. It could be one flat rate. >We could make the markets go super-slowly, but you know what will happen then? Correlated securities in other countries will trade at high frequency and dominate the price discovery process for "our" listings. That won't help our economy, it won't help reliability, and it won't help us assess taxes. If our intention is to kill HFT (and it probably should be), we could simply levy a very tiny transaction tax on trades. It would instantly render the practice unprofitable. Retail and institutional investors wouldn't even notice the tax (although they would probably notice the fact that HFT isn't skimming money from their trades).

jzwinck 13y ago
Thanks for pointing out the tax idea (a fairly popular one these days). It has some of the same issues as slowing the market down. For example, a transaction tax on one market will push transaction volume to other markets, like squeezing a water balloon. A lot of securities have correlated or even 1:1 equivalents in other jurisdictions (e.g. Europe vs. US), which results in a tricky situation. Basically, whatever market pushes their costs up first risks suffocating itself. I'm not sure what you mean by "one flat rate." Exchanges already charge a flat rate for connectivity (the rate is per month, usually a couple thousand bucks or so).
- crdoconnor 13y ago
  >For example, a transaction tax on one market will push transaction volume to other markets, like squeezing a water balloon. Actually the exact opposite will happen. Only the HFTs will want to move away, the rest will want to move to such a market. For the rest of them, operating in a market that allows HFT is pretty much the same thing as operating in a market for lemons: https://en.wikipedia.org/wiki/The_Market_for_Lemons https://en.wikipedia.org/wiki/The_Market_for_Lemons Asymmetric information in markets means 'the bad drives out the good'. Just as running an honest used car market will attract buyers and sellers, running an honest stock exchange will attract traders.
  - icebraining 13y ago
    Then why hasn't a stock exchange that imposes a transaction fee appeared and pulled in all traders, leaving the HFTs behind? This is what I can't understand about this stories, and makes me doubt the claims against the HFTs.
    - crdoconnor 13y ago
      network effects work heavily against new exchanges. it's not like starting a SaaS to deliver email.
      - cpwright 13y ago
        But there are already 13 of them that are regulated. At this point BATS owns 4 of them, the only reason to have 4 different exchanges is to have slightly different rule sets and fee structures. Any one of the existing exchanges (especially the small ones) could change their rule set or fee structure if they thought it would bring volume.
      - yummyfajitas 13y ago
        This is nonsense. There is a lot of competition in exchanges, a new one is sprouting up every few months. Not all of them are able to get Michael Lewis to shill for them, but a new ATS/Dark Pool/etc sprouting up is hardly uncommon. You should consider asking yourself why most such trading networks actually go to great effort to encourage HFTs to trade on them. (Hint: no liquidity no customers.)
yummyfajitas 13y ago
Canada tried a transaction tax (technically a regulatory fee increase) in 2012. The net result is that retail lost, institutional investors won, and spreads increased by 9%. http://qed.econ.queensu.ca/pub/faculty/milne/322/IIROC_FeeChange_submission_KM_AP3.pdf http://qed.econ.queensu.ca/pub/faculty/milne/322/IIROC_FeeCh... Everyone would notice a 9% increase in spreads. If you believe HFT is "skimming money from their trades", can you explain the specific mechanics (i.e., what orders are placed when)?
- ThomPete 13y ago
  Didn't Canada loose out because people went to other markets instead? I.e. not because of the tax/regulation per-se but rather because other markets didn't have that tax/regulation. From what I learned from a guy who did HFT back in 2007 HFT skimming money from their trades, thats why they make more money when markets are volatile. In some ways it's just a more sophisticated version of the traders who in the nineties made their money from each trade they made happen whether it went good or bad. The more customers they go to investe, re-invest etc the more money they made. Don't think thats a big secret.
  - tptacek 13y ago
    "Canada" didn't lose out. Individual investors in Canada did, because the bid-ask spread widened. If that happened because HFT market markets decided not to use the TSX anymore and instead haunt exchanges that were amenable to HFT, that's evidence that HFT was helping individual investors.
    - ThomPete 13y ago
      Thats like saying tax havens are evidence that paying less taxes is helping individual tax payers. Sure but that is not really the point is it?
      - deleted 13y ago
        [deleted]
theorique 13y ago
> If our intention is to kill HFT (and it probably should be), we could simply levy a very tiny transaction tax on trades. It would instantly render the practice unprofitable. That would also kill a lot of mutual funds, exchange-traded funds, asset managers, and others. These depend on the availability of frequent rebalancing of portfolios at low transaction cost. Add in a tax to this and you penalize it significantly.

rschmitty 13y ago

I forget if it was on The Daily Show or 60 minutes, but the "solution" the new exchange came up with was to actually slow down his trades by fractions of a second such they all arrived at the same time. Once he did that his order fill rate went up and the HFT got cut out. He did this while a 60km fiber optic spool So "super slowly" isnt exactly what he was doing

mhurron 13y ago
It was the Daily Show http://thedailyshow.cc.com/extended-interviews/o7grtj/exclusive-michael-lewis-extended-interview http://thedailyshow.cc.com/extended-interviews/o7grtj/exclus... As I understand it, that link is only good in the US. So for everyone else, that is the extended interview of the April 1 episode. I'm sure it can be found somewhere.
- runeks 13y ago
  Thanks for the link. It works fine from Denmark. I've never had problems watching it from a non-US country. Also, pro tip if you want to avoid ads between segments: right before the video gets to a horizontal line (ad break) on the seek bar, skip to the part right after the horizontal line. You'll skip the ad. Also: if you work as a web developer at Comedy Central, you never saw this comment.

BugBrother 13y ago

GP: >>You cannot pay to gain privileged access. [my emphasis] >>To avoid payment for access, presumably access would need to be free (Also, high frequency trading can't have much to do with finding the price points of stuff.) I don't have a horse in this race (I don't know the subject area), but most of that comment was a straw man argument. I realise that was probably a mistake in reading, but even I can see the implementation ought to be somewhere between simple and possible: Publicise the algorithm for a random delay between a tenth of a second and (more seldom) ten seconds for all buys/sells. Or something similar. Make certain to have good random number generators. Edit: If it is a good thing (or possible) to do this I don't know.