4 ms·
This is fixing the wrong problem. The issue is not the rate at which people are getting information; it is the rate at which people are using the information w
by SeanLuke 12y ago
This is fixing the wrong problem. The issue is not the rate at which people are getting information; it is the rate at which people are using the information which creates the volatility.
My solution is as follows. When someone places a market order, the order is not cancelable and his funds or security goes into escrow. Then he must wait for a amount of time, selected at random from some distribution by the market. For example, he might have to wait 5 minutes; or wait 2 hours. At that point, the transaction occurs. The market will clear all transactions before it closes. The idea is to significantly reduce the advantage people might gain from rapid transactions. To discourage breaking transactions into many microtransactions for purposes of gaming the distribution, we might also introduce a small per-transaction tax.
- jeffreyrogers 12y agoHFT does have some benefits that doing this eliminates: 1) It provides markets for securities that would otherwise by relatively illiquid. 2) It compresses the bid/ask spread so that the price better approximates what buyers and sellers are willing to pay. The people who HFT affects are the institutions that are competing directly with them. For the most part it doesn't affect what you or I should choose to invest in as long as we assume we're investing, rather than speculating. (And even if we're speculating, our time horizon is probably much longer than a HFT firm's.
- SeanLuke 12y agoI think these are microscopic advantages compared to the enormous, and well documented, problems that HFT, and its volatility, cause in the market.