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(The New York Times)   As a further indication of a struggling economy, profits from get rich quick schemes are down by 35%   (nytimes.com) divider line 20
    More: Interesting, account of profits, high-frequency trading, Harvard Ph.D., automated trading, stock trading, reversal  
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1158 clicks; posted to Business » on 15 Oct 2012 at 9:55 AM (1 year ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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ZAZ [TotalFark]
2012-10-15 09:49:17 AM
At only $4 per capita per year the leeches may not be sucking enough blood to make it worth our time to kill them. Unless we do it for retaliation and to send a message. Or just for fun. I know I would get more than $4 of entertainment value from a 1 second delayed ticker introduced without warning.
 
2012-10-15 10:07:41 AM
i got hit with 5 advertisement banners trying to read the link.... no thank you.
 
2012-10-15 10:44:15 AM
Won't someone think of the ponzi schemers?
 
2012-10-15 10:45:45 AM
Good. HFT should be illegal.
 
2012-10-15 10:46:43 AM
You need to forget about getting rich with get-rich-quick schemes. I've got a a new scheme to sell tickets to seminars telling you how you won't get rich quick with get-rich-quick schemes. Ooh, mama! This is finally, really happening. After years of disappointment with get-rich-quick schemes, I know I'm gonna get rich with this scheme...and quick!
 
2012-10-15 12:45:48 PM

FishyFred: Good. HFT should be illegal.


Why?
 
2012-10-15 01:02:05 PM

RumsfeldsReplacement: FishyFred: Good. HFT should be illegal.

Why?


Because it has gone from taking advantage of small changes in stock prices to make fast money... to using what amounts to financial DoS attacks to create its own opportunities, or sometimes even jumping the line when the HFTs know what orders are coming up so they can beat the market there.
 
2012-10-15 01:04:32 PM

FishyFred: RumsfeldsReplacement: FishyFred: Good. HFT should be illegal.

Why?

Because it has gone from taking advantage of small changes in stock prices to make fast money... to using what amounts to financial DoS attacks to create its own opportunities, or sometimes even jumping the line when the HFTs know what orders are coming up so they can beat the market there.


How does that impact my ability to buy, hold onto, or sell a stock at a given price?
 
2012-10-15 01:34:27 PM

RumsfeldsReplacement: FishyFred: RumsfeldsReplacement: FishyFred: Good. HFT should be illegal.

Why?

Because it has gone from taking advantage of small changes in stock prices to make fast money... to using what amounts to financial DoS attacks to create its own opportunities, or sometimes even jumping the line when the HFTs know what orders are coming up so they can beat the market there.

How does that impact my ability to buy, hold onto, or sell a stock at a given price?


It puts the power to run prices up or down in the hands of a very few powerful people on Wall Street with the added bonus that sometimes they'll fark up and cause a flash crash. It adds very little financial utility and a hell of a lot of risk.

At the very least, it should be regulated with extremely harsh judgement.
 
2012-10-15 01:49:41 PM
The reason their algorithms aren't making as much money as they did in 2009 is that there's too farking many of them. It's over fishing and now the trawling boats of the big players have crowded in on the niche player.

If there was one man doing this he'd be set for billions. But two players will occasionally work to each other's foil. Multiply the players and unless you arrange collusion the numbers are gonna suffer. And what's really beautiful is that the profit per player is shrinking faster than new players come into the game.

Imagine if you were the only guy who knew you could gather up aluminum cans from these 20 locations on a regular basis and make a decent living. Someone else comes along and says "I want a slice of that action." Well, you're going to need more locations or more frequent visits, and each location will become less profitable. Then another person sees you and says "I'll do what that guy is doing" and suddenly no one can make any money because there's a third of a living doing the business per person. The only solution is to change games because you can't kill enough of the other farkers to make it profitable again. This also applies to flipping houses, storage auctions, picking for eBay goodies, Foodie food trucks, placer gold mining. Essentially anything that doesn't require an investment in the millions or hundreds of hours of learning.
 
2012-10-15 01:57:44 PM
But the speed at which those profits are realized is up by 40%, so we're actually ahead of the game.
 
ZAZ [TotalFark]
2012-10-15 02:52:00 PM
How does that impact my ability to buy, hold onto, or sell a stock at a given price?

If you buy, you get a higher price. If you sell, you get a lower price. If you hold, your paper valuation fluctuates more than it should and with a lesser connection to the true health of the company.

For commentary on the harm of a gambling market rather than an investment market, see Fixing the Game by Roger Martin. (Amazon)
 
2012-10-15 03:23:14 PM

ZAZ: How does that impact my ability to buy, hold onto, or sell a stock at a given price?

If you buy, you get a higher price. If you sell, you get a lower price. If you hold, your paper valuation fluctuates more than it should and with a lesser connection to the true health of the company.



Sure, but by much less than the 12.5 cents that specialists used to charge on every share in the pre-HFT era (and usually they would get that on both ends, making it 25 cents per share). HFT has driven the liquidity premium down into the penny range, if not lower on many highly liquid stocks.
 
2012-10-15 04:47:30 PM

OptionC: ZAZ: How does that impact my ability to buy, hold onto, or sell a stock at a given price?

If you buy, you get a higher price. If you sell, you get a lower price. If you hold, your paper valuation fluctuates more than it should and with a lesser connection to the true health of the company.



Sure, but by much less than the 12.5 cents that specialists used to charge on every share in the pre-HFT era (and usually they would get that on both ends, making it 25 cents per share). HFT has driven the liquidity premium down into the penny range, if not lower on many highly liquid stocks.


Pretty much this. There are, maybe, conceivably, some wishy washy negative effects for amorphous things like "confidence in the system" or "fair play" or whatever. Good luck quantifying that, or even finding some qualitative data. But then there are easily observable, documented benefits like much tighter bid/ask spreads and shrinking or disappearing commissions for small fish like you and me.

Who am I going to believe, my own lying eyes, or a bunch of butt-hurt day traders on zerohedge who are mad that their dumb limit orders get adversely selected by a robot?

Here's something I could be convinced of: This is inefficient behavior because we have a rule that says the minimum size for a tick is one penny. Therefore, once the bid/ask spread is down to 1 penny, the whole thing turns into a "who can get their orders in line first" competition. So thanks to that rule all these guys are racing to be first because they can't do any better on price. If we got rid of that rule, and let companies post bids/offers in factions of pennies, it would be a race to see who made the best price first. That seems like a good way to get rid of the anti-social "queuing optimization" craziness that happens and seems really inefficient.

But yeah: no HFT
/definitely not a "regulations bad whargarrbl" type
//could make a smarter regulation that does away with the sub-penny rule
 
2012-10-15 04:49:45 PM

gtp123:
But yeah: no HFT


Oops, I accidentally some words.

no HFT is worse than HFT with this dumb rule is worse than HFT without this dumb rule.
 
2012-10-15 08:26:30 PM
If you know how to make $5000 dollar in just 45 minutes then you too watch videos at "illegal" sites.
 
2012-10-15 10:28:27 PM
even the crooks are having a tough time. they aren't in the club.

if Rmoney wins, they'll do better, though.
 
2012-10-16 02:33:50 AM
I like how the unregulated system complains about said system being unregulated.
 
2012-10-16 08:01:09 AM

gtp123: This is inefficient behavior because we have a rule that says the minimum size for a tick is one penny. Therefore, once the bid/ask spread is down to 1 penny, the whole thing turns into a "who can get their orders in line first" competition. So thanks to that rule all these guys are racing to be first because they can't do any better on price. If we got rid of that rule, and let companies post bids/offers in factions of pennies, it would be a race to see who made the best price first.


Fundamentally, though, what's the social utility in chopping up pennies for securities transactions? None. Because Wall Street gets bailouts the system is for all intents and purposes supported by the citizenry, and ANY program that relies on the citizenry to ANY extent is subject to assessment of its social benefits. Does trading benefit the public? Sure. Does high-frequency microtrading benefit the public? Absolutely not. If you're out to game the system it's neat, but in the real world, that level of precision is about as meaningful as a GPS accurate to the micrometer on a freight train. Hell, the lead time on most parts is 4-6 weeks from factory order and that's with just-in-time logistics.

I have a bit of perspective on this, as I've both worked for a mutual fund company and in industry. I know both worlds. The industry, the side of America that actually makes shiat, deals in scales of weeks and thousands of dollars, minimum. Wall Street is saying even pennies and microseconds aren't enough. They are completely insulated from the very social utility they claim to have in order to justify their existence.

HFT shouldn't be illegal because it's unethical or inherently destructive or whatever. There's no moral argument against it. It should be banned because Wall Street has made VERY clear, time and time again, in NUMEROUS staggering bailouts totaling trillions of dollars, that they do not, cannot and will not exist without the support of the citizenry. And any system that burdens the citizenry with its risks is subject to regulation by the citizenry for the latter's benefit. TL;DR version: If you get bailed out, you are a de facto government program subject to government regulation no matter how much John Galt rhetoric you spew out your face-hole.
 
2012-10-16 11:28:35 AM

ZAZ: For commentary on the harm of a gambling market rather than an investment market, see Fixing the Game by Roger Martin. (Amazon)


Seconded. Eye-opening read.
 
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