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That's private information. It is an important distinction. You're saying the market should have a right to know whether I plan on selling my shares next year

That's private information. It is an important distinction. You're saying the market should have a right to know whether I plan on selling my shares next year.

harryh 13y ago
It's private information right up until the millisecond that your trade hits the exchanges. Then it's public information.
- hackinthebochs 13y ago
  Which the HFT firms have earlier access to and greater ability to respond to. Can this legitimately be called fair?
  - harryh 13y ago
    They get early access because they pay to be colocated on the exchange. Literally anyone can do this. Can you think of a more fair system than this?
    - hackinthebochs 13y ago
      A system where no one can do this or that eliminates the ability to profit off of such a position. Some have suggested a minimum limit on how long one can hold a stock. Seems reasonable to me.
      - harryh 13y ago
        What do you think would happen to spreads if there was a non-trivial minimum limit on how long one could hold a stock?
        hackinthebochs 13y ago
        Obviously they would increase. There seems to be an assumption that reduced spreads at any scale benefits the economy as a whole. On the scale of cents, I don't see how this is necessarily so. On the other hand, I can imagine there being a trivial limit as far as the wider economy is concerned, but still eliminating the benefit that colocation gives HFT firms. Do you disagree?
        harryh 13y ago
        If you don't think that increasing spreads by a few cents would hurt the economy than why are you worried about the penny a share the HFT firms are making?
        hackinthebochs 13y ago
        Fairness is a fundamental bedrock of systems like this. Even if the amount of money HFT firms extract does not have a measurable effect on the economy, it harms trust which can have serious consequences.
        harryh 13y ago
        But people only think it's unfair because people like Michael Lewis have done such a bad job explaining it to them! They think that HFT makes them materially worse off when it, in fact, does the exact opposite. We should just cave to that misconception?
        hackinthebochs 13y ago
        But if a firm is making a big sell of a stock, as a representative of institutional investors, then it is making regular folks worse off. Misconceptions should certainly be eliminated, but the fact that HFT firms require colocation does not pass the smell test of fairness. No amount of explanations can eliminate that.
    - nhaehnle 13y ago
      It may be fair in some sense, but it also leads to an arms race that is inherently wasteful.
  - stephencanon 13y ago
    They're paying market rate for that information; you can too if you want to. In the previous version of wall street, it couldn’t be bought—you needed to be part of the old boys club. Are you going to argue that was more “fair”?
  - logn 13y ago
    These aren't bribes to get the information quickly; there are actual costs involved that must be covered to transmit and process the info with high frequency. The alternative would be saying they'll only publish the information slowly (SIP, or say the morning newspaper), in which case there's an imbalance of knowledge between people placing huge orders and everyone else. Suppose we had no weather forecasts and meteorologists hoarded the information. And suppose store owners could only adjust prices each morning. Before a hurricane, meteorologists could buy up every last emergency supply within an afternoon from the stores and then sell them the next day after the hurricane at 10 times the original price. Is that fair?
    - hackinthebochs 13y ago
      I don't think I understand the point you're making in your first paragraph. For your meteorology example, if such information didn't have life or death consequences, I might call it fair. But the contexts of the two scenarios are different. The stock market is inherently a bet on future prices, and so using information obtained by yourself through your own efforts cannot be seen as unfair--it is an expected property of the system. Using HFT techniques to profit off of frontrunning your demand is unfair. The "market" for items needed for survival isn't analogous.
patio11 13y ago
I'm saying that if anybody can successfully predict your intentions for next year based on your observable actions to date then they have a right to the fruit of those labors, and that you don't have a cognizable interest in "Prevent that person from telling the rest of the world about my intentions for next year", even though that might lead to you making less money than you would but for our friend who reads actions well.
- hackinthebochs 13y ago
  >I'm saying that if anybody can successfully predict your intentions for next year based on your observable actions to date then they have a right to the fruit of those labors I don't see why this is so. If I have decided through some analysis that I am going to sell X shares at some date, why shouldn't that information be private? Front-running my behavior is essentially front-running my analysis. It would be unethical to hack my computer and read my analysis for yourself, so how is analyzing my behavior to get at that same information any different?
  - logn 13y ago
    If you're buying a million dollars of Yelp (as posed in this hypothetical), then it's going to take some time (microseconds, minutes, months, etc) for people to realize that. For as long as no one catches on, the person making this large order has a tremendous advantage because supply-demand is misunderstood by everyone else. The market can't fairly price the stock as a result. The HFTs are saying they'll pay the money to get order info in nano-seconds so they can design algorithms to recognize these large orders and react appropriately. They make money being a middleman but the benefit for the rest of the market would be seeing a price change and also for small orders to be filled at a fairer price to supply-demand.
    - hackinthebochs 13y ago
      >For as long as no one catches on, the person making this large order has a tremendous advantage because supply-demand is misunderstood by everyone else Why is the market entitled to knowledge that I'm currently in the process of making a big order? This knowledge being disseminated clearly doesn't benefit me. Should I not be entitled to the sole benefit of my reasoning in deciding to make a big order? Furthermore, how does this knowledge being disseminated mid-order rather than after the full order has completed benefit the market as a whole?

That's private information. It is an important distinction. You're saying the market should have a right to know whether I plan on selling my shares next year.

harryh 13y ago

It's private information right up until the millisecond that your trade hits the exchanges. Then it's public information.

hackinthebochs 13y ago
Which the HFT firms have earlier access to and greater ability to respond to. Can this legitimately be called fair?
- harryh 13y ago
  They get early access because they pay to be colocated on the exchange. Literally anyone can do this. Can you think of a more fair system than this?
  - hackinthebochs 13y ago
    A system where no one can do this or that eliminates the ability to profit off of such a position. Some have suggested a minimum limit on how long one can hold a stock. Seems reasonable to me.
    - harryh 13y ago
      What do you think would happen to spreads if there was a non-trivial minimum limit on how long one could hold a stock?
      - hackinthebochs 13y ago
        Obviously they would increase. There seems to be an assumption that reduced spreads at any scale benefits the economy as a whole. On the scale of cents, I don't see how this is necessarily so. On the other hand, I can imagine there being a trivial limit as far as the wider economy is concerned, but still eliminating the benefit that colocation gives HFT firms. Do you disagree?
        harryh 13y ago
        If you don't think that increasing spreads by a few cents would hurt the economy than why are you worried about the penny a share the HFT firms are making?
        hackinthebochs 13y ago
        Fairness is a fundamental bedrock of systems like this. Even if the amount of money HFT firms extract does not have a measurable effect on the economy, it harms trust which can have serious consequences.
        harryh 13y ago
        But people only think it's unfair because people like Michael Lewis have done such a bad job explaining it to them! They think that HFT makes them materially worse off when it, in fact, does the exact opposite. We should just cave to that misconception?
        hackinthebochs 13y ago
        But if a firm is making a big sell of a stock, as a representative of institutional investors, then it is making regular folks worse off. Misconceptions should certainly be eliminated, but the fact that HFT firms require colocation does not pass the smell test of fairness. No amount of explanations can eliminate that.
  - nhaehnle 13y ago
    It may be fair in some sense, but it also leads to an arms race that is inherently wasteful.
- stephencanon 13y ago
  They're paying market rate for that information; you can too if you want to. In the previous version of wall street, it couldn’t be bought—you needed to be part of the old boys club. Are you going to argue that was more “fair”?
- logn 13y ago
  These aren't bribes to get the information quickly; there are actual costs involved that must be covered to transmit and process the info with high frequency. The alternative would be saying they'll only publish the information slowly (SIP, or say the morning newspaper), in which case there's an imbalance of knowledge between people placing huge orders and everyone else. Suppose we had no weather forecasts and meteorologists hoarded the information. And suppose store owners could only adjust prices each morning. Before a hurricane, meteorologists could buy up every last emergency supply within an afternoon from the stores and then sell them the next day after the hurricane at 10 times the original price. Is that fair?
  - hackinthebochs 13y ago
    I don't think I understand the point you're making in your first paragraph. For your meteorology example, if such information didn't have life or death consequences, I might call it fair. But the contexts of the two scenarios are different. The stock market is inherently a bet on future prices, and so using information obtained by yourself through your own efforts cannot be seen as unfair--it is an expected property of the system. Using HFT techniques to profit off of frontrunning your demand is unfair. The "market" for items needed for survival isn't analogous.

patio11 13y ago

I'm saying that if anybody can successfully predict your intentions for next year based on your observable actions to date then they have a right to the fruit of those labors, and that you don't have a cognizable interest in "Prevent that person from telling the rest of the world about my intentions for next year", even though that might lead to you making less money than you would but for our friend who reads actions well.

hackinthebochs 13y ago
>I'm saying that if anybody can successfully predict your intentions for next year based on your observable actions to date then they have a right to the fruit of those labors I don't see why this is so. If I have decided through some analysis that I am going to sell X shares at some date, why shouldn't that information be private? Front-running my behavior is essentially front-running my analysis. It would be unethical to hack my computer and read my analysis for yourself, so how is analyzing my behavior to get at that same information any different?
- logn 13y ago
  If you're buying a million dollars of Yelp (as posed in this hypothetical), then it's going to take some time (microseconds, minutes, months, etc) for people to realize that. For as long as no one catches on, the person making this large order has a tremendous advantage because supply-demand is misunderstood by everyone else. The market can't fairly price the stock as a result. The HFTs are saying they'll pay the money to get order info in nano-seconds so they can design algorithms to recognize these large orders and react appropriately. They make money being a middleman but the benefit for the rest of the market would be seeing a price change and also for small orders to be filled at a fairer price to supply-demand.
  - hackinthebochs 13y ago
    >For as long as no one catches on, the person making this large order has a tremendous advantage because supply-demand is misunderstood by everyone else Why is the market entitled to knowledge that I'm currently in the process of making a big order? This knowledge being disseminated clearly doesn't benefit me. Should I not be entitled to the sole benefit of my reasoning in deciding to make a big order? Furthermore, how does this knowledge being disseminated mid-order rather than after the full order has completed benefit the market as a whole?