4 ms·

Cue the argument: there are many flavors of HTF trading. Some funds exploit the latency of different trading platforms - I agree they don't add anything to the

by tomp 12y ago

Cue the argument: there are many flavors of HTF trading. Some funds exploit the latency of different trading platforms - I agree they don't add anything to the society. Others offer liquidity - if the bid-offer spread is $1, they will insert bids above the other bids and offers below the rest of offers, making trading less expensive for investors. Yet others specialize in execution - your "dumb" pension fund manager wants to sell $100M of a particular stock, he'll route the order through a HTF broker who knows the "best strategy" to execute the order without affecting the market price too much, so that the fund gets a better price.

kasey_junk 12y ago
"Some funds exploit the latency of different trading platforms - I agree they don't add anything to the society." Even those are pretty easy to make an argument for. Very specialized firms spend vast sums of money, to make very thin margins, to provide me with a very valuable service. That is, I don't have to venue shop based on pricing oddities, they will arbitrage those away. I can shop purely on fees and features, the things that actually will impact me in the long term.
- tomp 12y ago
  Not really - that's ordinary arbitrage, not HFT arbitrage. No "actual" investor will profit from the fact that prices converge in 0.1s instead of 1.1s. They just wast hume sums of money building fiber optics on the direct line from Chicago to NY.
  - mlrtime 12y ago
    There are 1000's of trades that occur in that second and not only HFT. Someone will benefit if they just happen to cross the spread in that .1s. If you are unloading 10,0000 shares the speed arbitrage could save you real money.
  - ycombobreaker 12y ago
    > that's ordinary arbitrage, not HFT arbitrage. As it turns out, the "HFT" version of any trading strategy is _just like_ the "ordinary" version, but faster. You could say that they "disrupted" the older arbitrageurs due to their collective technology R&D.

by tomp 12y ago

kasey_junk 12y ago

"Some funds exploit the latency of different trading platforms - I agree they don't add anything to the society." Even those are pretty easy to make an argument for. Very specialized firms spend vast sums of money, to make very thin margins, to provide me with a very valuable service. That is, I don't have to venue shop based on pricing oddities, they will arbitrage those away. I can shop purely on fees and features, the things that actually will impact me in the long term.

tomp 12y ago
Not really - that's ordinary arbitrage, not HFT arbitrage. No "actual" investor will profit from the fact that prices converge in 0.1s instead of 1.1s. They just wast hume sums of money building fiber optics on the direct line from Chicago to NY.
- mlrtime 12y ago
  There are 1000's of trades that occur in that second and not only HFT. Someone will benefit if they just happen to cross the spread in that .1s. If you are unloading 10,0000 shares the speed arbitrage could save you real money.
- ycombobreaker 12y ago
  > that's ordinary arbitrage, not HFT arbitrage. As it turns out, the "HFT" version of any trading strategy is _just like_ the "ordinary" version, but faster. You could say that they "disrupted" the older arbitrageurs due to their collective technology R&D.