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> What Lewis’s book demonstrated to me isn’t just how “bad” HFTs are per se, but rather, what happens when finance keeps walking down the path it seems to be se

> What Lewis’s book demonstrated to me isn’t just how “bad” HFTs are per se, but rather, what happens when finance keeps walking down the path it seems to be set on — a path that involves abstracting itself from the creation of real-world value. The final destination? It will enter a world entirely of its own — a world in which it is fighting to capture value that is completely independent of whether any is created in the first place. I'd say the financial markets have been there for 6-8 years already.

cube13 12y ago
They're been at that point for the last century, at least.
Vektorweg 12y ago
Isn't it the goal of an artist to create an imaginary world? ;)
rsync 12y ago
Nothing will change, since it's turtles all the way down. The first person to discount a bill at the very first bank was "abstracting itself from the creation of real-world value". Later, I'm sure someone said the exact same sentence that you just did when the first exchange traded fund (ETF) was created. I know for a fact it was said throughout the 90s in relation to derivatives, etc. In the future, HFT as it exists today will be a quaint feature of a bygone era that will be referenced to illustrate the problems with whatever new practice has superseded it. What does matter is where you are on the spectrum and how fragile that makes you, but there is no natural law limiting how abstracted you can be and how fragile you can be. By some relative measures we're impossibly abstracted and fragile, but by other relative measures (as yet unknown) we're adorably simple.
- jeremyjh 12y ago
  I thought EFTs were only possible due to HFT, which seemed like one of the greatest benefits to retail investors. A little bit of arbitrage tax is no where near as bad as sales loads and management fees.
  - dragontamer 12y ago
    The only problem is that arbitrage tax is hard to measure, while sales loads and management fees are predictable values. But I agree with your point overall. Getting pennies skimmed off of my trades is not nearly as big a deal as a 0.1% yearly recurring fee on say... a $100,000 retirement account. (ie: $100 / year). Those tiny percentages add up to a huge amount of money in the long run. I've heard of reports of 1.5% or even higher management fees (or ~$1,500+ / year in this example)

cube13 12y ago

They're been at that point for the last century, at least.

Vektorweg 12y ago

Isn't it the goal of an artist to create an imaginary world? ;)

rsync 12y ago

Nothing will change, since it's turtles all the way down. The first person to discount a bill at the very first bank was "abstracting itself from the creation of real-world value". Later, I'm sure someone said the exact same sentence that you just did when the first exchange traded fund (ETF) was created. I know for a fact it was said throughout the 90s in relation to derivatives, etc. In the future, HFT as it exists today will be a quaint feature of a bygone era that will be referenced to illustrate the problems with whatever new practice has superseded it. What does matter is where you are on the spectrum and how fragile that makes you, but there is no natural law limiting how abstracted you can be and how fragile you can be. By some relative measures we're impossibly abstracted and fragile, but by other relative measures (as yet unknown) we're adorably simple.

jeremyjh 12y ago
I thought EFTs were only possible due to HFT, which seemed like one of the greatest benefits to retail investors. A little bit of arbitrage tax is no where near as bad as sales loads and management fees.
- dragontamer 12y ago
  The only problem is that arbitrage tax is hard to measure, while sales loads and management fees are predictable values. But I agree with your point overall. Getting pennies skimmed off of my trades is not nearly as big a deal as a 0.1% yearly recurring fee on say... a $100,000 retirement account. (ie: $100 / year). Those tiny percentages add up to a huge amount of money in the long run. I've heard of reports of 1.5% or even higher management fees (or ~$1,500+ / year in this example)