3 ms·
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
by 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 agoWhat 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 agoObviously 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 agoIf 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 agoFairness 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 agoBut 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 agoBut 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.
- harryh 13y agoRegular folks aren't buying into firms with proprietary knowledge that deeply care about trading speed. They're buying into index funds or dumb mutual funds. These sorts of funds are the ones that benefit from more accurate and faster updating prices at the expense of the Bill Ackmans & David Einhorns of the world.
- hackinthebochs 13y agoI don't know enough to question your point, so I'll take your word for it. But the smell test is still strong here, even if HFT is neutral or beneficial to regular folk. You'll have a hard time convincing people with a complicated argument in the face of this obvious signal for unfairness.
- harryh 13y agoI agree with you about having a hard time. This is exactly what's so frustrating about the Michael Lewis book that kicked off the present round of controversy. See this comment: https://news.ycombinator.com/item?id=7548124 https://news.ycombinator.com/item?id=7548124