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> Healthy markets are markets where everyone has access to the same information. I don't want to sound condescending, but did you read the article? One of the

by runeks 13y ago

> Healthy markets are markets where everyone has access to the same information. I don't want to sound condescending, but did you read the article? One of the points is that this is exactly what HFT accomplishes: Bob wants to buy a lot of Apple shares. At this point he has more information than all other market participants. He knows that in a few moments, the price of Apple shares will rise. Is the market for Apple shares -- at this point -- an unhealthy market, because Bob has access to more information about it? If Bob's large order is larger than the current number of open orders, then an HFT algorithm might see Bob's trade -- where he buys some of the stock he wants to buy -- and assume he wants to buy more, so it adjusts its orders accordingly. This very act disseminates information into the market about Bob's large order (if the HFT algo is right, if it isn't it loses money). Information about Bob's future order is now more evenly spread between market participants, though a higher ask price, reflecting Bob's large future order. The information that each participant has is now more equal than it was if no orders were adjusted, because the buying price has risen as a result.

wavesounds 13y ago
My point is these traders get to know things before other traders, thats not fair, everyone should see Bob's purchase order at the same time and arguing that Bob has an unfair advantage because he knows what he's going to do before the HFT's know what Bob's going to do is just silly.
- runeks 13y ago
  > My point is these traders get to know things before other traders, thats not fair, everyone should see Bob's purchase order at the same time How is that physically possible? How can an exchange make sure that I, living in Europe, get to see Bob's order at the same time as an HFT set up in a building adjacent to the exchange? > and arguing that Bob has an unfair advantage because he knows what he's going to do before the HFTs know what Bob's going to do is just silly. I'm not arguing it's an "unfair advantage". I'm arguing that your definition of a healthy market as being one where each actor has the same knowledge is not helpful, because this is evidently the case all the time in markets -- even those that seem to work very well. At the same time I'm arguing that HFTs actually improve this situation (of market participants sharing the same information), instead of hinder it.
  - asfapifb 13y ago
    > How is that physically possible? How can an exchange make sure that I, living in Europe, get to see Bob's order at the same time as an HFT set up in a building adjacent to the exchange? Easy, trading cycles occur in (e.g.) ten second intervals synced to UTC atomic time. For instance results of trades propagated for five seconds, orders are accepted for five seconds and then are executed. This should allow enough time for reasonable latency and ensure that everyone has the most recent price on the exchange. > At the same time I'm arguing that HFTs actually improve this situation (of market participants sharing the same information), instead of hinder it. I decline to respond as I'm still undecided as to whether this is a good thing or not.
    - runeks 13y ago
      > Easy, trading cycles occur in (e.g.) ten second intervals synced to UTC atomic time. For instance results of trades propagated for five seconds, orders are accepted for five seconds and then are executed. This should allow enough time for reasonable latency and ensure that everyone has the most recent price on the exchange. Right. But that would constitute a new type of trading -- similar to opening and closing auctions -- so it wouldn't be compatible with the current system. But yes, it's definitely possible. The question is what the market prefers.

by runeks 13y ago

wavesounds 13y ago

My point is these traders get to know things before other traders, thats not fair, everyone should see Bob's purchase order at the same time and arguing that Bob has an unfair advantage because he knows what he's going to do before the HFT's know what Bob's going to do is just silly.

runeks 13y ago
> My point is these traders get to know things before other traders, thats not fair, everyone should see Bob's purchase order at the same time How is that physically possible? How can an exchange make sure that I, living in Europe, get to see Bob's order at the same time as an HFT set up in a building adjacent to the exchange? > and arguing that Bob has an unfair advantage because he knows what he's going to do before the HFTs know what Bob's going to do is just silly. I'm not arguing it's an "unfair advantage". I'm arguing that your definition of a healthy market as being one where each actor has the same knowledge is not helpful, because this is evidently the case all the time in markets -- even those that seem to work very well. At the same time I'm arguing that HFTs actually improve this situation (of market participants sharing the same information), instead of hinder it.
- asfapifb 13y ago
  > How is that physically possible? How can an exchange make sure that I, living in Europe, get to see Bob's order at the same time as an HFT set up in a building adjacent to the exchange? Easy, trading cycles occur in (e.g.) ten second intervals synced to UTC atomic time. For instance results of trades propagated for five seconds, orders are accepted for five seconds and then are executed. This should allow enough time for reasonable latency and ensure that everyone has the most recent price on the exchange. > At the same time I'm arguing that HFTs actually improve this situation (of market participants sharing the same information), instead of hinder it. I decline to respond as I'm still undecided as to whether this is a good thing or not.
  - runeks 13y ago
    > Easy, trading cycles occur in (e.g.) ten second intervals synced to UTC atomic time. For instance results of trades propagated for five seconds, orders are accepted for five seconds and then are executed. This should allow enough time for reasonable latency and ensure that everyone has the most recent price on the exchange. Right. But that would constitute a new type of trading -- similar to opening and closing auctions -- so it wouldn't be compatible with the current system. But yes, it's definitely possible. The question is what the market prefers.