5 ms·

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

by 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.)
- yxhuvud 13y ago
  A transaction tax will increase spreads. That is a really big argument against that such an exchange would be popular.
  - crdoconnor 13y ago
    HFT did not reduce spreads. electronic trading did. actually sometimes hft can be a liquidity taker and thus increase spreads.
    - hft_throwaway 13y ago
      I don't know where this meme started, but it's clearly untrue. Nanex likes to make this claim, but they claim "HFT" only started with Reg NMS in 2007. Tell me this doesn't sound like the most stereotypical HFT-style trading in 2005: http://www.bizjournals.com/kansascity/stories/2005/01/17/smallb1.html?page=all http://www.bizjournals.com/kansascity/stories/2005/01/17/sma... And it wasn't just Tradebot doing it. There were many firms already active with similar styles in the early 2000s like GETCO, ATD, Madison Tyler (now Virtu) and a bunch of smaller guys. HFT does not depend on Reg NMS, fragmentation, or rebates. HFT firms are super successful in futures markets with a consolidated limit order book and fees for both sides of the transaction.

by jzwinck 13y ago

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.)
yxhuvud 13y ago
A transaction tax will increase spreads. That is a really big argument against that such an exchange would be popular.
- crdoconnor 13y ago
  HFT did not reduce spreads. electronic trading did. actually sometimes hft can be a liquidity taker and thus increase spreads.
  - hft_throwaway 13y ago
    I don't know where this meme started, but it's clearly untrue. Nanex likes to make this claim, but they claim "HFT" only started with Reg NMS in 2007. Tell me this doesn't sound like the most stereotypical HFT-style trading in 2005: http://www.bizjournals.com/kansascity/stories/2005/01/17/smallb1.html?page=all http://www.bizjournals.com/kansascity/stories/2005/01/17/sma... And it wasn't just Tradebot doing it. There were many firms already active with similar styles in the early 2000s like GETCO, ATD, Madison Tyler (now Virtu) and a bunch of smaller guys. HFT does not depend on Reg NMS, fragmentation, or rebates. HFT firms are super successful in futures markets with a consolidated limit order book and fees for both sides of the transaction.