4 ms·

SPX is the index. SPY is the ETF. Also the idea that you can rest an order with an expectation that if the news is good you profit but at worst you lose nothing

by minimax 12y ago

SPX is the index. SPY is the ETF. Also the idea that you can rest an order with an expectation that if the news is good you profit but at worst you lose nothing is ridiculous. That would be a free option. If you want that kind of optionality you have to pay for it. If you rest an order, especially before a big news event, you are taking a risk that you'll get hit and the market will move against you. That's how markets work and there isn't anything wrong with that.

leverage 12y ago
I think you missed my point: if people are reacting to info at the same time (e.g. clicking at the same time) the exchange should receive the message at the same time. Similarly, market data should be transmitted at the same speed, and exchanges should not offer co-location to give one participant faster data than another - This is how they front-run.
- minimax 12y ago
  I didn't miss your point and you don't have any idea what front running is. Front running is when your broker, your agent who has a legal responsibility to seek the best execution for your order, trades in front of your order. If someone who you have no relationship with manages to react to a news event faster than you do, that's not front running. If you took away exchange colocation, you'd just have a boom in property values around the exchange as automated traders would still try to get on the shortest network path to the exchange. Exchange colocation is actually a way to level that playing field. Everyone who is colocated has exactly the same network delay to the matching engine as everyone else who is colocated.
  - rondon2 12y ago
    Lewis is not saying that all investors should be given the exact same access to the exchanges. He is saying that some traders are extracting money from the market simply because they have a faster route to the exchange and they are buying/selling ahead of other investors. They are not buying/selling based on market fundamentals, speculation, research. Millions of Americans invest a large percentage of their retirement money in 401ks because they believe that the US Stock Market is a relatively good place to make long term investments. When we see examples of people skimming money off of the market it makes us lose faith in the market. That is why this practice should be banned.
    - doktrin 12y ago
      > That is why this practice should be banned. Which practice, exactly? You described one party having a faster connection than another. That's not exactly something you can "ban". Lewis even acknowledged that relative inequality of this nature will always exist.
      - rondon2 12y ago
        The same way insider trading is banned. It is impossible to prevent 100% of insider information being involved in some trades but you can prosecute people who can be proven to have made trades on insider information.
        doktrin 12y ago
        I don't think you answered my question. How do you "ban" a fast connection? How do you even define a fast(er) connection?
        rondon2 12y ago
        You don't ban faster connections the same way you don't ban insider information. Faster connections and insider information will always exist. What you ban is trading on specific information that puts you at a substantially unfair advantage. If I'm the CFO of company X I have an unfair advantage when it comes to making trades minutes before the quarterly results are release for my company.
        doktrin 12y ago
        You're still talking about insider trading, and not HFT. What, in the context of this discussion, would you ban?
        rondon2 12y ago
        You ban trades that are made in an attempt to purchase shares that you believe someone else is also attempting to purchase based on knowledge that you have received because of your proximity to an exchange. This would be very similar to insider trading in that there is going to be a grey area where it would be hard to prove that the intent was to undercut someone else but having the regulation there would at least curtail this practice somewhat.

by minimax 12y ago

leverage 12y ago

I think you missed my point: if people are reacting to info at the same time (e.g. clicking at the same time) the exchange should receive the message at the same time. Similarly, market data should be transmitted at the same speed, and exchanges should not offer co-location to give one participant faster data than another - This is how they front-run.

minimax 12y ago
I didn't miss your point and you don't have any idea what front running is. Front running is when your broker, your agent who has a legal responsibility to seek the best execution for your order, trades in front of your order. If someone who you have no relationship with manages to react to a news event faster than you do, that's not front running. If you took away exchange colocation, you'd just have a boom in property values around the exchange as automated traders would still try to get on the shortest network path to the exchange. Exchange colocation is actually a way to level that playing field. Everyone who is colocated has exactly the same network delay to the matching engine as everyone else who is colocated.
- rondon2 12y ago
  Lewis is not saying that all investors should be given the exact same access to the exchanges. He is saying that some traders are extracting money from the market simply because they have a faster route to the exchange and they are buying/selling ahead of other investors. They are not buying/selling based on market fundamentals, speculation, research. Millions of Americans invest a large percentage of their retirement money in 401ks because they believe that the US Stock Market is a relatively good place to make long term investments. When we see examples of people skimming money off of the market it makes us lose faith in the market. That is why this practice should be banned.
  - doktrin 12y ago
    > That is why this practice should be banned. Which practice, exactly? You described one party having a faster connection than another. That's not exactly something you can "ban". Lewis even acknowledged that relative inequality of this nature will always exist.
    - rondon2 12y ago
      The same way insider trading is banned. It is impossible to prevent 100% of insider information being involved in some trades but you can prosecute people who can be proven to have made trades on insider information.
      - doktrin 12y ago
        I don't think you answered my question. How do you "ban" a fast connection? How do you even define a fast(er) connection?
        rondon2 12y ago
        You don't ban faster connections the same way you don't ban insider information. Faster connections and insider information will always exist. What you ban is trading on specific information that puts you at a substantially unfair advantage. If I'm the CFO of company X I have an unfair advantage when it comes to making trades minutes before the quarterly results are release for my company.
        doktrin 12y ago
        You're still talking about insider trading, and not HFT. What, in the context of this discussion, would you ban?
        rondon2 12y ago
        You ban trades that are made in an attempt to purchase shares that you believe someone else is also attempting to purchase based on knowledge that you have received because of your proximity to an exchange. This would be very similar to insider trading in that there is going to be a grey area where it would be hard to prove that the intent was to undercut someone else but having the regulation there would at least curtail this practice somewhat.