Post: #101

While I do think that HFT presents a problem, it's important to separate that from more general problems that aren't necessarily related:

(04-02-2014 05:34 PM)scorpion Wrote:  Who gives a fuck if you cripple the markets? The purpose of a stock exchange is not to facilitate gambling and speculation, it's to allow investors to purchase shares of companies. If you aren't willing to hold onto your shares for at least a year then you aren't investing, you're gambling. We need to get back to an idea of actually owning shares of a company instead of just trading them like fucking baseball cards. If you own a share, you OWN it. You are a partial owner of that company entitled to a fractional share of its profits. If you don't want to become a fractional owner of the company over a long term time horizon, don't buy the stock. There is absolutely no productive reason for stocks to be changing hands as much as they do now, especially with HFT where positions can be held for fractions of a second. It's completely ridiculous and has nothing to do with actually creating wealth.

To be frank, we would be a lot better off if the modern day stock market was crippled. It has long since lost sight of its original purpose and has become nothing more than a gigantic casino and money skimming operation.

The fact that there is a lot of 'gambling' in the modern stock market is not to do with the existence of the market itself, but the existence of torrents of cheap money flowing across the economy. At any given time, there is going to be a discrepancy between the amount of stock investors want to buy and the amount of stock available. The role of the speculator is to come in and alleviate this discrepancy by holding stocks for shorter periods of time. Essentially, they take on some of the risk that would have been borne by investors and issuers of stock, and they get paid for it if they do their jobs well. This happens not only in the stock market, but all markets, and has happened since man invented markets. There's nothing inherently wrong with it.

Your real beef should be with the fact that conventional economic wisdom favours artificially cheap debt and money printing as its method to drive economic growth. Even if you got your way and administered the punitive taxes you called for upthread, you wouldn't end the casino. It would just move to a different venue, because the cheap money would still be flowing.

(04-04-2014 12:08 PM)Samseau Wrote:  The people defending HFT are acting stupid. If I just called you stupid, sorry. But you are.

Something can only be considered fair if everyone has equal access to it. Can anyone setup an HFT algo on wall st? No, you cannot. Only people with access to HFT are the super rich who can buy the licenses and rights to use it. And the fact that HFT never loses means HFT isn't a gamble or risk, like most businesses or stock trading are.

On eTrade or Scottstrade, the amount of times you can buy and sell a position within a day is 3 or 4 times. Yet HFT can buy or sell a position 4000 times per second, yet us "common folk" can only buy or sell a position 3 or 4 times per day. If this doesn't offend your moral sensibilities, then you are probably a maniac who doesn't have any moral sensibilities.

There is nothing wrong with being faster and more equipped, the appeal to fairness is misplaced in my opinion. You can go back to the famous example of Rothschild getting information about how the Battle of Waterloo was going before everyone else and profiting from that. Ever since the advancement of telecommunications, there have always been market participants who get information, and even prices before the rest. Seemingly HFT is just the latest example of it, and it would be if all it was doing is just 'trading faster.'

The real issue with HFT is the quote stuffing. For example if you want to buy a stock at $25 and you put an order in the market, HFT can 'see' your order, and get in front of it by placing huge orders at 25.01. This is going to lift the price, but before the order gets completed the HFT cancels its huge buy order. It can push the price up to say 25.02 in this manner, at which point it actually sells it to you at 25.02. But because there were no real orders (just fake orders that the HFT kept cancelling right before they were filled), the price of the stock drops back to $25 and the HFT makes a quick 2 cents. It's bullshit, unproductive behavior that doesn't add anything to the market. The idea that it adds liquidity is nonsense, because there is nothing behind all of those quick orders the HFTs put in. At least in the past, speculators with deep pockets actually had to put their money on the line as part of their 'manipulations,' meaning you could argue that it was a real market at least. Today, with HFT supposedly doing 70% of trading, and the volume in stock trading dropping like a stone, it's potentially just a bunch of algos trading with each other in the modern stock market.

Post: #102

(04-10-2014 06:39 AM)Nemencine Wrote:  ElBorrachoInfamoso,

+1 rep point from me.

These threads are amusing. There was one about TWITTER and another one about facebook purchase of whatsapp. It is quite interesting to read the level of misinformation in those threads.....

People that have no qualifications or experience with something... lecturing others about that same subject... the blind leading the blind.

I am willing to bet that most of these commentators do not have the requisite background in quantitative science, and (b), do not trade the financial markets....but they are apparently qualified to lecture on these subjects!

I have background in quantitative science and i also trade the financial market.

I am willing to bet that some of these commentators talking about HFT have no fracking clue about order flow characteristics at the level of market microstructure...... that when you go to that granular level inside market ecology, that market orders exhibits herding behaviour that sometime follows power laws series...What does this say about the claims being made about HFT? i will bet they cannot answer that. That market orders follows a concave function...again, what does this say about the claims being made about HFT?..... i am also willing to bet they dont know how trading friction and Volatility clustering relates to HFT.... what are the causes and roles of order cascades? .... or do you think they understand liquidity disequilibrium in the market place? or the relevance of latent and pending interest in generating episodic volatility?

or what the ARCH-GARCH model even means? BY that i am referring to autoregressive conditional heteroskedasticity.

You think they have any fracking idea how market digest changes in supply and demand... and what effects, if any, HFT have on that? And yet, they are lecturing about how HFT affects supply and demand.

You honestly think they can grasp or understand the mathematics and models behind it?

I am not an expert, of course. But i dont go around lecturing others because i read some zero hedge nonsense or watch some youtube clips. I certainly wont debate thomas the rhymer about medicine or prophylactic about chiropractic medicine or MikeCf about the law.

ElBorrachoInfamoso, please stop wasting your time..... let them circle-jerk and engage in their doomsday sayings.

That is all i have to say. And with that, i am abandoning thread

adios, amigos.




regards,

Nemencine

"I'm just going to use a bunch of quant jargon to make me sound like an expert, insult the people I disagree with without actually refuting them, then post a gif. Shit's going to be awesome."

Post: #103

(04-10-2014 09:04 AM)scorpion Wrote:  

(04-10-2014 06:39 AM)Nemencine Wrote:  ElBorrachoInfamoso,

+1 rep point from me.

These threads are amusing. There was one about TWITTER and another one about facebook purchase of whatsapp. It is quite interesting to read the level of misinformation in those threads.....

People that have no qualifications or experience with something... lecturing others about that same subject... the blind leading the blind.

I am willing to bet that most of these commentators do not have the requisite background in quantitative science, and (b), do not trade the financial markets....but they are apparently qualified to lecture on these subjects!

I have background in quantitative science and i also trade the financial market.

I am willing to bet that some of these commentators talking about HFT have no fracking clue about order flow characteristics at the level of market microstructure...... that when you go to that granular level inside market ecology, that market orders exhibits herding behaviour that sometime follows power laws series...What does this say about the claims being made about HFT? i will bet they cannot answer that. That market orders follows a concave function...again, what does this say about the claims being made about HFT?..... i am also willing to bet they dont know how trading friction and Volatility clustering relates to HFT.... what are the causes and roles of order cascades? .... or do you think they understand liquidity disequilibrium in the market place? or the relevance of latent and pending interest in generating episodic volatility?

or what the ARCH-GARCH model even means? BY that i am referring to autoregressive conditional heteroskedasticity.

You think they have any fracking idea how market digest changes in supply and demand... and what effects, if any, HFT have on that? And yet, they are lecturing about how HFT affects supply and demand.

You honestly think they can grasp or understand the mathematics and models behind it?

I am not an expert, of course. But i dont go around lecturing others because i read some zero hedge nonsense or watch some youtube clips. I certainly wont debate thomas the rhymer about medicine or prophylactic about chiropractic medicine or MikeCf about the law.

ElBorrachoInfamoso, please stop wasting your time..... let them circle-jerk and engage in their doomsday sayings.

That is all i have to say. And with that, i am abandoning thread

adios, amigos.




regards,

Nemencine

"I'm just going to use a bunch of quant jargon to make me sound like an expert, insult the people I disagree with without actually refuting them, then post a gif. Shit's going to be awesome."

Why are you putting quotes around your post? Are you trying to belittle the previous poster (which is why you copied his post), whose analysis was spot on? If so, again, it seems strange as to why you need to quotes to mock him.

I've worked in finance and still actively trade stocks/options. HFT is ridiculously complicated, and there are so many parts that confuse me. But that doesn't stop some people, who have neither worked in finance nor trade stocks, to pronounce judgements or call people stupid who might think HFT actually might be a net plus for small investors.

Post: #104

(04-10-2014 10:00 AM)Ardbeg Wrote:  Why are you putting quotes around your post? Are you trying to belittle the previous poster (which is why you copied his post), whose analysis was spot on? If so, again, it seems strange as to why you need to quotes to mock him.

I've worked in finance and still actively trade stocks/options. HFT is ridiculously complicated, and there are so many parts that confuse me. But that doesn't stop some people, who have neither worked in finance nor trade stocks, to pronounce judgements or call people stupid who might think HFT actually might be a net plus for small investors.

The only pro-HFT argument presented in this thread is basically, "HFT is very complicated and you have to be a very smart Wall Street quant to understand the details of how it works, therefore we are not qualified to judge whether or not it is good or bad."

Of course this is complete nonsense. It's like saying you need to be a cardiac surgeon to tell if someone is having a heart attack. Appealing to authority and saying that an issue is too complicated to hold an educated opinion on (without being an expert) is simply a form of shutting down discussion.

As Dismal Operator pointed out above, the real problem with HFT is quote stuffing. It's not even real trading as we understand the term. HFT is not providing liquidity or making markets. It's parasitic money scalping.

Somehow (amazingly!) the markets managed to function perfectly fine until the ancient days of 2005 without HFT. The idea that it is an important financial innovation is a complete fucking farce. It's a skimming operation enabled by new technology and changes to market rules, it's as simple as that.

Post: #105

(04-10-2014 10:20 AM)scorpion Wrote:  

(04-10-2014 10:00 AM)Ardbeg Wrote:  Why are you putting quotes around your post? Are you trying to belittle the previous poster (which is why you copied his post), whose analysis was spot on? If so, again, it seems strange as to why you need to quotes to mock him.

I've worked in finance and still actively trade stocks/options. HFT is ridiculously complicated, and there are so many parts that confuse me. But that doesn't stop some people, who have neither worked in finance nor trade stocks, to pronounce judgements or call people stupid who might think HFT actually might be a net plus for small investors.

The only pro-HFT argument presented in this thread is basically, "HFT is very complicated and you have to be a very smart Wall Street quant to understand the details of how it works, therefore we are not qualified to judge whether or not it is good or bad."

Of course this is complete nonsense. It's like saying you need to be a cardiac surgeon to tell if someone is having a heart attack. Appealing to authority and saying that an issue is too complicated to hold an educated opinion on (without being an expert) is simply a form of shutting down discussion.

As Dismal Operator pointed out above, the real problem with HFT is quote stuffing. It's not even real trading as we understand the term. HFT is not providing liquidity or making markets. It's parasitic money scalping.

Somehow (amazingly!) the markets managed to function perfectly fine until the ancient days of 2005 without HFT. The idea that it is an important financial innovation is a complete fucking farce. It's a skimming operation enabled by new technology and changes to market rules, it's as simple as that.

I wasn’t trying to appeal to authority to shut down a debate; my last post was simply to mock you with your misuse of quotes and your poor use of sarcasm.

But if you want to get back to HFT, while I can’t comment on this thread, the internet is abuzz with thoughtful refutations about how HFT results in “rigged” financial markets. [Note: In this sentence, I use rigged in quotations to allude to recent headlines about Michael Lewis’s accusation that Wall Street is "rigged."]

Two persuasive commentaries on how HFT might positively affect retail investors can be found here:

http://www.morningstar.com/cover/videoce...id=hpvideo

http://qed.econ.queensu.ca/pub/faculty/m...KM_AP3.pdf

HFT is a complicated subject. There are parts of it that baffle me, and there are parts that might adversely impact retail investors. But discussing the complexities of these arguments seem to elude this thread. When you write, “markets managed to function perfectly fine until the ancient days of 2005” I know that your experience in finance and trading is limited. Markets have never functioned perfectly fine. There is a certain amount of friction in every market. But compared to the dark ages of the 1990s, when many brokers charged $30+ per trade, wider bid/ask prices than today, and absence of some super efficient ETFs with costs of 0.05%, the market seems to function better than in the past. Maybe, just maybe, HFT is part of the reason.

Post: #106

What the fuck are you babbling about? You were mocking me for my misuse of quotes and sarcasm? They were intentional, I used the quotes to signify his thought process as he wrote that pointless, drive-by post.

If you're going to mock someone you should at least make sure you understand what he was saying.

And yes, markets functioned perfectly fine until 2005. Insistence otherwise shows me that you're some kind of Aspergers guy who is incapable of understanding that the expression "perfectly fine" does not mean "literally perfect". This may come as a shock to you, but markets were not designed so that Ardbeg can sit around in his underwear and trade all day. They were designed to facilitate the buying and selling of ownerships shares in companies. Trading shares back and forth adds zero real value to the economy. Trading does at least provides liquidity into the market, however. But HFT doesn't even do that. You're trying to say that the market had insufficient liquidity pre-HFT, which is obviously absurd.

Maybe you should try looking at the issue from the macro scale, instead of the fact that, "Hey, I can trade with dirt cheap commissions now. This is fucking awesome!" Talk about missing the forest for the trees. The funniest part is that electronic trading fee reductions and increase accessibility have nothing to do with HFT, so I'm not sure why you're conflating them. Maybe HFT is part of the reason? No. HFT has nothing to do with it. Maybe if you understood finance and trading as well as you think you did, you would know that.

But I don't want to keep you any further. Better get back to that E*trade, champ.

Post: #107

It's been a major theme of this thread to be critical of posters who don't understand HFT, and I understand that.

But there are people in the business and business media who certainly do understand it, and many of those folks are very critical of HFT.

For the most part, I trust the objectivity of these people more than I trust the objectivity of the people defending it.

Post: #108

"For the most part, I trust the objectivity of these people more than I trust the objectivity of the people defending it."

Why, most of the people complaining about HFT are human traders because they are no longer making as much money as they use. Also another individual built a competing exchange and one is trying to sell a book.

HFT does lowers trading costs, increases price discovery, and provides liquidity to the markets. The major benefit of HFT is its ability to stabilize the market and limit arbitrage opportunities. As the market has become increasingly global it has created multiple exchanges increasing price discrepancies. HFT with its speed brings these prices back in line. Also HFT limits price distortions around major new situations.

Also everyone is talking about quote stuffing and HFT engages in manipulate tactics but so do the majority of human traders as well. As HFT trading has caused spreads to come down more products have started to trade on the screens. This is a huge benefit to investors.

Scorpion, saying the market was fine before HFT trading is like saying the world existed without the internet so there is no need for it.

Post: #109

(04-10-2014 04:26 PM)Lou pai Wrote:  Scorpion, saying the market was fine before HFT trading is like saying the world existed without the internet so there is no need for it.

Comparing HFT to the internet is utterly laughable. The internet is an invention that has created dozens, if not hundreds of new industries, and tens of thousands of companies. It has revolutionized the entire world, making the sum of human knowledge available at our fingertips. As an invention, it is on par with written language, the printing press and electricity in terms of its impact on humanity.

In contrast, HFT is simply a sophisticated money skimming operation. It's a 21st century method of picking pennies out of the pockets of people on the way to the bank.

As I pointed out, the market does not exist for the benefit of traders and speculators, it exists to connect buyers and sellers. The fact that parasites are able to make money trading should only be tolerated to the extent that they serve a useful function by making markets and providing liquidity. The market does not owe traders a living, and certainly not HFT people who aren't even engaging in real trading, but who are merely abusing recently created rules and technology to skim money.

Post: #110

Do you understand HFT trading because I believe you don't. The idea HFT is not real trading is a ridiculous argument. I understand that there is firms that do engage in quote stuffing and front running but the majority of HFT trading firms actually do play within the rules and provide value. You are arguing that HFT trading provides no value but it does. The major issue with HFT trading is when participant don't play by the rules.

Previously I posted how HFT provides increase price discovery this is a huge benefit to buyers and sellers.

I have an advanced degree in financial engineering. In my arguments I never said that HFT trading is perfect but it does provide value.

Post: #111

(04-10-2014 04:57 PM)Lou pai Wrote:  I have an advanced degree in financial engineering.

So basically you make a living doing this stuff, or electronic trading similar to HFT. Maybe you're even angling to land an HFT job yourself?

That was all you had to say.

To quote myself from earlier:

(04-07-2014 11:05 AM)scorpion Wrote:  The only people defending HFT are: 1) People who don't understand it, and 2) People who are making money from it.

Thread adjourned.

Post: #112

I actually work on a sales desk for an investment bank and have no desire to ever become a trader. However I was fascinated by algo trading and decided I wanted to learn more.

The only people criticizing HFT are those who do not understand or would make money from criticizing it.

Post: #113

(04-10-2014 04:26 PM)Lou pai Wrote:  The major benefit of HFT is its ability to stabilize the market and limit arbitrage opportunities.

It's hilarious when proponents of HFT use this argument which has no ground whatsoever. Whenever a major dump happens on the market, HFTs all pull their bids and crowd on the offer thus decreasing liquidity and increasing volatility, instead of this supposed market stabilization. The flash crash in 2010, the NITE disaster a couple of years ago were caused by HFTs as well. The market making aspect and generally keeping the spreads lower - at times of stable markets is about the only useful feature they provide, and it is a side benefit.

However, I think HFTs get the majority of the blame here while truly they are just playing within the framework of what's allowed. It's the exchanges such as BATS, DirectEdge and many others, as well as many banks that sell their order flow to HFTs and rake huge fees for access and pipes, and allow them to jump the order queue and use a variety of special order types that all are designed to fuck over the non-HFT orders - those guys enable this predatory behaviour and should be assigned most of the blame. When a bank gets a buy order for 10,000 shares of Facebook when the NBBO (best bid/offer) is for example 60.01/60.05, and they stuff the order into their dark pool allowing HFTs to take a peek and and when a sell order for 10K shares at 60.02 hits a public exchange, the HFT quickly buys 10K shares at 60.02 at exchange and sells the same 10K shares at dark pool for 60.05. If there was no HFT in the middle it would have been 1 transaction at for instance 60.02, now there are 2 individual transactions at 60.02 and 60.05, pocketing the HFT and the bank a quick $300 and fucking over the 2 investors for the same amount. No risk to HFT, no risk to the bank, no benefit to anyone else, - if this isn't pure theft, then I don't know what is. There are dozens of similar ways HFTs and banks steal investors money nowadays.

Post: #114

Here is a good High Frequency Trading resources website that i stumbled upon.

It is a web-community of people who are High Frequency Traders themselves or keenly interested in the subject. The website isn't just about interviews and videos about new breakthroughs and development in HFT around the world... The website also have resources for networking with other HFT people in the industry... the range and number of experts contributing on that website is staggering... heavyweights in the HFT industry From U.S.A to U.K. to Poland to Russia to Tokyo etcetera contribute and interview on the website...

The website also gives you place and time of upcoming HFT events around the world to attend, etc. which is important to job prospects and networking purposes. Best of all, it has a section dedicated to Academic studies/White paper on HFT. This is the website:

http://www.thetradingmesh.com/pg/main/white-papers

It is formerly known as "HFT review".

Enjoy,

Nemencine