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> creating liquidity I'd like to point out that is not a fact, but a debatable point. [0] [0] http://www.economist.com/debate/days/view/817/showCommentModule

by diydsp 12y ago

> creating liquidity I'd like to point out that is not a fact, but a debatable point. [0] [0] http://www.economist.com/debate/days/view/817/showCommentModule:1 http://www.economist.com/debate/days/view/817/showCommentMod...

gnaritas 12y ago
Actually it's a fact that they're doing that since they're playing the spread and by definition that means offering liquidity. The debatable point of course is whether it counts since they might yank all liquidity in response to unexpected movements and thus weren't offering usable liquidity.
- harry8 12y ago
  Liquidity is that which isn't there when you need it by definition. Unexpected movement always reduces liquidity. The only interesting question is is the spread tighter when I want to trade in the presence of HFT or in its absence. Then you look at all the times that non-liquidity providers may want to buy and sell and determine that. As far as I know it's almost always a tighter spread in the presence of HFT. So when you buy you buy cheaper and when you sell you sell for more money. The profit from market making shifts from know nothing sons of friends of the brokerage's CEO to those who can compete at something real. Everyone except those whose Daddies can get them high paying jobs wins. Financial market function more efficiently making it easer for smart people to get funding to do promising ventures. Incumbents, eh, annoying when the gravy train loses steam, really annoying.
  - gnaritas 12y ago
    While I agree with some of your points, I don't see how they relate to the conversation you stepped into. > The only interesting question is is the spread tighter when I want to trade in the presence of HFT or in its absence. There's never only one interesting question, so that's not correct. If you're seeing liquidity that disappears the second you try and touch it, it's an arguable point that's it's not real liquidity.
    - harry8 12y ago
      If you genuinely can't hit a price being shown, ever; I'd call that market a fraud. A spread you literally can't ever trade is not a spread it's a lie. I've never seen any evidence of it. And it should be really easy to spot. Spread width n millis before execution. Spread at execution. IF the latter is consistently wider it's not a market it's a con, take your business elsewhere. Of course with two players vying to be at the front of the queue showing the tightest possible price, well spying on your ioc order and backing off just means you make no money. Competition is good like that. Only one market maker in a market? Yeah that's always been a problem and likely a worse one when it's some rich, fat bastard who knows it, knows you and can rip your face off. And they do. Michael Lewis made a career out of documenting it. In the Big Short, in Liars Poker etc. etc. But it doesn't seem to happen when there's HFT does it because if you quote a market like that you make no trades and someone else gets the pennies on offer. The actual spread that you can actually trade when you want to trade is the only thing that is interesting when discussing liquidity. No really. If that spread that you actually can trade is wider it's more expensive, if it's tighter it's less expensive to transact in the market. The rest is a load of BS. And smelly BS. That spread that you can actually trade has been shown to be consistently tighter in the presence of HFT. Evidence showing otherwise is something, we all will be very interested in.
      - gnaritas 12y ago
        > If you genuinely can't hit a price being shown, ever; I'd call that market a fraud. Which is exactly what many are complaining about; welcome to the conversation. > Spread width n millis before execution. Spread at execution. IF the latter is consistently wider it's not a market it's a con, take your business elsewhere. Again, that's the complaint they have, see, you do understand the debate.
        harry8 12y ago
        But still no data to back this garbage claim. Still data that does support a narrower spread in the presence of HFT. Leave the condescension out, huh?

by diydsp 12y ago

gnaritas 12y ago

Actually it's a fact that they're doing that since they're playing the spread and by definition that means offering liquidity. The debatable point of course is whether it counts since they might yank all liquidity in response to unexpected movements and thus weren't offering usable liquidity.

harry8 12y ago
Liquidity is that which isn't there when you need it by definition. Unexpected movement always reduces liquidity. The only interesting question is is the spread tighter when I want to trade in the presence of HFT or in its absence. Then you look at all the times that non-liquidity providers may want to buy and sell and determine that. As far as I know it's almost always a tighter spread in the presence of HFT. So when you buy you buy cheaper and when you sell you sell for more money. The profit from market making shifts from know nothing sons of friends of the brokerage's CEO to those who can compete at something real. Everyone except those whose Daddies can get them high paying jobs wins. Financial market function more efficiently making it easer for smart people to get funding to do promising ventures. Incumbents, eh, annoying when the gravy train loses steam, really annoying.
- gnaritas 12y ago
  While I agree with some of your points, I don't see how they relate to the conversation you stepped into. > The only interesting question is is the spread tighter when I want to trade in the presence of HFT or in its absence. There's never only one interesting question, so that's not correct. If you're seeing liquidity that disappears the second you try and touch it, it's an arguable point that's it's not real liquidity.
  - harry8 12y ago
    If you genuinely can't hit a price being shown, ever; I'd call that market a fraud. A spread you literally can't ever trade is not a spread it's a lie. I've never seen any evidence of it. And it should be really easy to spot. Spread width n millis before execution. Spread at execution. IF the latter is consistently wider it's not a market it's a con, take your business elsewhere. Of course with two players vying to be at the front of the queue showing the tightest possible price, well spying on your ioc order and backing off just means you make no money. Competition is good like that. Only one market maker in a market? Yeah that's always been a problem and likely a worse one when it's some rich, fat bastard who knows it, knows you and can rip your face off. And they do. Michael Lewis made a career out of documenting it. In the Big Short, in Liars Poker etc. etc. But it doesn't seem to happen when there's HFT does it because if you quote a market like that you make no trades and someone else gets the pennies on offer. The actual spread that you can actually trade when you want to trade is the only thing that is interesting when discussing liquidity. No really. If that spread that you actually can trade is wider it's more expensive, if it's tighter it's less expensive to transact in the market. The rest is a load of BS. And smelly BS. That spread that you can actually trade has been shown to be consistently tighter in the presence of HFT. Evidence showing otherwise is something, we all will be very interested in.
    - gnaritas 12y ago
      > If you genuinely can't hit a price being shown, ever; I'd call that market a fraud. Which is exactly what many are complaining about; welcome to the conversation. > Spread width n millis before execution. Spread at execution. IF the latter is consistently wider it's not a market it's a con, take your business elsewhere. Again, that's the complaint they have, see, you do understand the debate.
      - harry8 12y ago
        But still no data to back this garbage claim. Still data that does support a narrower spread in the presence of HFT. Leave the condescension out, huh?