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(Quartz)   High-speed traders will have to find another way to get themselves off early   (qz.com) divider line 44
    More: Amusing, Thomson Reuters, Qingdao, Eric Schneiderman, New York Statutes  
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6865 clicks; posted to Main » on 08 Jul 2013 at 12:50 PM (1 year ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



44 Comments   (+0 »)
   
View Voting Results: Smartest and Funniest
 
2013-07-08 11:37:48 AM  
Why would you give high speed traders a head start? If anything, shouldn't it be the other way around?
 
2013-07-08 11:55:53 AM  
How long will it take them to get off?
 
2013-07-08 12:28:31 PM  

impaler: Why would you give high speed traders a head start? If anything, shouldn't it be the other way around?


$
 
2013-07-08 12:31:58 PM  

blatz514: How long will it take them to get off?


2 seconds
 
2013-07-08 01:00:26 PM  

SurfaceTension: blatz514: How long will it take them to get off?

2 seconds


Only if they think about baseball stats
 
2013-07-08 01:02:08 PM  

impaler: Why would you give high speed traders a head start? If anything, shouldn't it be the other way around?


Let's see if I can remember this correctly:
Part of it is the natural evolution of demand/markets, part of it is the natural evolution of information systems, the last money.

High speed traders keep their servers located physically inside the markets whenever possible. This is so that when the markets' information is available, it is consumed at almost the speed of light. It really can take several seconds to get information across the world. Since their servers are available internally (without going out to a WAN or separate ISP), it would make plenty of sense to see if there was a market for selling extremely high demand data at extremely high prices. I'm sure each data seller makes a million or more a month on this sort of deal.
 
2013-07-08 01:04:41 PM  
I really don't like this ultra-high speed algorithmic trading.   I'm curious as to when this kind of practice became popular as I'm suspecting it was around 2005-2006 and has undoubtedly contributed to the unprecedented volatility we've seen in the market over the past few years.
 
2013-07-08 01:05:46 PM  
TAX TRANSACTIONS.
 
2013-07-08 01:07:47 PM  
Wow -- I guess the webdinks at QZ didn't try viewing their site on an Android browser, where the big floating images and footers leave EXACTLY ONE LINE OF STORY CONTENT visible. I was interested enough in the topic to wade all the way through, teleprompter-style, but it wasn't worth it.
 
2013-07-08 01:10:55 PM  

dj_spanmaster: It really can take several seconds to get information across the world.


No.

I can ping fark.com at 140ms, that's a roundtrip from Europe to USA + all the equipment in betweeen.

The highspeed traders are concerned about milliseconds, not seconds.
 
2013-07-08 01:12:59 PM  

DubtodaIll: I really don't like this ultra-high speed algorithmic trading.   I'm curious as to when this kind of practice became popular as I'm suspecting it was around 2005-2006 and has undoubtedly contributed to the unprecedented volatility we've seen in the market over the past few years.


The first stock market crash that is believed to be caused by computer controlled trading was in 1987. I'm constantly amazing by people who fail to understand how much control has been turned over to computers and just how long ago the trend began.
 
2013-07-08 01:14:57 PM  
Wow, it would be nice if it actually went to the article when you click on it. Piece of shiat site...
 
2013-07-08 01:14:58 PM  

Kuta: TAX TRANSACTIONS.


Would a penny tax do it or would we need a percentage?
 
2013-07-08 01:15:26 PM  

Kuta: TAX TRANSACTIONS.


And make that tax inversely proportional to the amount of time the asset was held. You want to buy and sell the same stock within a couple milliseconds to take advantage of some random fluctuation in price? Great. Enjoy your 100% capital gains tax. Hold your stock for a decade, maybe we'll give you a sweet 5% rate.
 
2013-07-08 01:15:42 PM  

DubtodaIll: I really don't like this ultra-high speed algorithmic trading.   I'm curious as to when this kind of practice became popular as I'm suspecting it was around 2005-2006 and has undoubtedly contributed to the unprecedented volatility we've seen in the market over the past few years.


They don't make any positive contributions at least.

And if they're making money, they have to be the cause of looses of money for someone else.
 
2013-07-08 01:16:16 PM  

Kuta: TAX TRANSACTIONS.


Or just create a random delay.  Make a trade take anywhere from 1-3 seconds to execute.  This entire problem would go away.
 
2013-07-08 01:18:44 PM  

DubtodaIll: I really don't like this ultra-high speed algorithmic trading.   I'm curious as to when this kind of practice became popular as I'm suspecting it was around 2005-2006 and has undoubtedly contributed to the unprecedented volatility we've seen in the market over the past few years.


Not a fan either.  As to why it's popular:  $
 
2013-07-08 01:19:51 PM  

Prank Call of Cthulhu: Kuta: TAX TRANSACTIONS.

And make that tax inversely proportional to the amount of time the asset was held. You want to buy and sell the same stock within a couple milliseconds to take advantage of some random fluctuation in price? Great. Enjoy your 100% capital gains tax. Hold your stock for a decade, maybe we'll give you a sweet 5% rate.


Approval, newsletter, etc.
 
2013-07-08 01:22:06 PM  

jfarkinB: I guess the webdinks at QZ didn't try viewing their site on an Android browser,


Same with firefox on ubuntu.  Didn't bother to read the article.

It did tell me to enable javascript, something I won't do for an unknown site.
 
2013-07-08 01:28:46 PM  

Kuta: TAX TRANSACTIONS.


If we make it like a .05% tax, such that a normal person might owe $100 by year's end but the big guys might owe a few million.
 
2013-07-08 01:31:05 PM  
but....but....but....2 seconds isn't much time.


                                  ALMOST AN ETERNITY
25.media.tumblr.com
 
2013-07-08 01:32:22 PM  

dj_spanmaster: impaler: Why would you give high speed traders a head start? If anything, shouldn't it be the other way around?

Let's see if I can remember this correctly:
Part of it is the natural evolution of demand/markets, part of it is the natural evolution of information systems, the last money.

High speed traders keep their servers located physically inside the markets whenever possible. This is so that when the markets' information is available, it is consumed at almost the speed of light. It really can take several seconds to get information across the world. Since their servers are available internally (without going out to a WAN or separate ISP), it would make plenty of sense to see if there was a market for selling extremely high demand data at extremely high prices. I'm sure each data seller makes a million or more a month on this sort of deal.


Apparently the physical location of the system warehouses matters considerably. I read a story last year that big firms are buying entire buildings in central Manhattan, gutting them, and fixing them up to put servers in. Those servers will get data at 2-5 milliseconds faster than servers in Hong Kong or London or Brazil and be able to take advantage of information faster. It's nuts.
 
2013-07-08 01:35:51 PM  

DubtodaIll: I really don't like this ultra-high speed algorithmic trading.   I'm curious as to when this kind of practice became popular as I'm suspecting it was around 2005-2006 and has undoubtedly contributed to the unprecedented volatility we've seen in the market over the past few years.


Wut?  Other than a brief period in 2008-2009, volatility is no higher than it was from 1997-2003...

chart.finance.yahoo.com
 
2013-07-08 01:36:15 PM  

Prank Call of Cthulhu: Kuta: TAX TRANSACTIONS.

And make that tax inversely proportional to the amount of time the asset was held. You want to buy and sell the same stock within a couple milliseconds to take advantage of some random fluctuation in price? Great. Enjoy your 100% capital gains tax. Hold your stock for a decade, maybe we'll give you a sweet 5% rate.


you dere boy, your newsletter, chop. chop.
 
2013-07-08 01:37:10 PM  

Kuta: TAX TRANSACTIONS.


^^^
 
2013-07-08 01:41:43 PM  
2 cents per every order placed/cancelled. Then dare them to make high speed profitable.
 
2013-07-08 01:53:42 PM  

OptionC: Wut? Other than a brief period in 2008-2009, volatility is no higher than it was from 1997-2003...


He might be referring to stuff like the Flash Crash from a few years ago. But yeah, overall volatility is pretty low. Here is a looooooong timescale chart.

graphics8.nytimes.com
 
2013-07-08 02:01:17 PM  

Snarcoleptic_Hoosier: 2 cents per every order placed/cancelled. Then dare them to make high speed profitable.


They'd just update their algorithms....and there might be fewer trading opportunities; but as soon as they found one that would cover the 2 cent tax - they'd have even more pressure to be the fastest.  It might squeeze out some companies that are sufficiently loaded to have all the competitive edges - but it wouldn't change anything.
 
2013-07-08 02:17:46 PM  

spawn73: dj_spanmaster: It really can take several seconds to get information across the world.

No.

I can ping fark.com at 140ms, that's a roundtrip from Europe to USA + all the equipment in betweeen.

The highspeed traders are concerned about milliseconds

microseconds, not seconds.

A millisecond is forever in the low latency / high frequency trading game.

I had an IT guy at a large HFT tell me that if they could gain a 1 microsecond speed advantage, it was worth well over $100,000,000 annually.
 
2013-07-08 02:21:39 PM  

spawn73: dj_spanmaster: It really can take several seconds to get information across the world.

No.

I can ping fark.com at 140ms, that's a roundtrip from Europe to USA + all the equipment in betweeen.

The highspeed traders are concerned about milliseconds, not seconds.


While what I said is not untrue, there's a mess of variables that both of our comments leave out, including but not limited to
- demand of said data
- freshness/staleness of said data ("can it be satisfactorily cached?")
- the number of hops in a request
- the quality of connection between the required hops

Will it take more than 2 seconds to get the Florida Senate homepage to load if the request is coming from rural Botswana? Definitely. Will it take more than 2 seconds to get the latest market stock market info from NYSE from rural Botswana? Probably. Still, your point is accurate, that HFT wants to care about milliseconds and not seconds. That's why they don't put their servers in rural Botswana.
 
2013-07-08 02:53:20 PM  

lewismarktwo: Kuta: TAX TRANSACTIONS.

Would a penny tax do it or would we need a percentage?


A penny per share would halt all high frequency transactions.  It would kill that investment approach instantly.  The second that tax took effect, all those systems would suddenly idle.
 
2013-07-08 04:11:17 PM  
Will algorithmic trading optimize the market and put investors out of work?

Or will it define humanity and encapsulate it?

Schrodinger's Market.
 
2013-07-08 04:18:18 PM  
Silly Farker figured out how to force them to fix high-frequency trading:

Stop contributing to your 401k, until they institute every half second batch trading.

Here is the info:   ByThePeo.pl

http://www.bythepeo.pl/pins/18

Still building the site, so give me a break on the formatting.

// Oh yea and before everyone else .... Your Blog sucks!
// or is that .... My Blog sucks!
/// Website to crowdsource solutions to problems outside of hands and knees bagging to government; that's unpossible
 
2013-07-08 04:58:36 PM  

BankExaminer: Silly Farker figured out how to force them to fix high-frequency trading:

Stop contributing to your 401k, until they institute every half second batch trading.

Here is the info:   ByThePeo.pl

http://www.bythepeo.pl/pins/18

Still building the site, so give me a break on the formatting.

// Oh yea and before everyone else .... Your Blog sucks!
// or is that .... My Blog sucks!
/// Website to crowdsource solutions to problems outside of hands and knees bagging to government; that's unpossible


You go right ahead and stop contributing. That'll show 'em.

// If HFT has any substantive effect on your investments, you are doing it horribly wrong.
 
2013-07-08 05:26:02 PM  

BMFPitt: BankExaminer: Silly Farker figured out how to force them to fix high-frequency trading:

Stop contributing to your 401k, until they institute every half second batch trading.

Here is the info:   ByThePeo.pl

http://www.bythepeo.pl/pins/18

Still building the site, so give me a break on the formatting.

// Oh yea and before everyone else .... Your Blog sucks!
// or is that .... My Blog sucks!
/// Website to crowdsource solutions to problems outside of hands and knees bagging to government; that's unpossible

You go right ahead and stop contributing. That'll show 'em.

// If HFT has any substantive effect on your investments, you are doing it horribly wrong.


Cool, can you post that under the comments section in the Problem field so it can be addressed @ ByThePeo.pl ?

And then can you explain to me if this is true:
"I had an IT guy at a large HFT tell me that if they could gain a 1 microsecond speed advantage, it was worth well over $100,000,000 annually. "

Does that mean that that $100 million would still be "in the system" so to speak if the HFT wasn't skimming it out of the market transactions?

And therefore doesn't that mean that the total value of financial instruments in the market would be higher, hence it is overall effecting all of our 401K's?

There is a reason that almost all large Pension funds use "dark pools" because when the HFT's get in front of their trades it results in a loss of value for the trade they are trying to execute.  And that loss comes directly out of your Pension.

Sure, is it substantive? Probably not.  And that is exactly why they will keep skimming off the top with HFT, unless a large proportion of us all stop contributing, for maybe a month, or even one pay period.   HFT makes money on the flow of transactions, the flow stops and their profits drop.

Oh and the whole problem with the Flash Crash, and the dangers that HFT causes in terms of a melt down in the market.

But yea, it only affects my 401K for a couple of $100 a year so what do I care if WE ARE ALL GETTING SCREWED.
 
2013-07-08 05:32:23 PM  
Tax every transaction in a manner that specifically renders this practice unprofitable.
 
2013-07-08 06:57:59 PM  

BumpInTheNight: Tax every transaction in a manner that specifically renders this practice unprofitable.


The financial transaction tax is a smoke-screen.  Because the argument against it is where does all that money go, who manages it, etc....  This means the regulation would be argued over for decades to decide the correct level of the tax.  .1% .05% 2% ?

The solution has been laid out by the Chicago Federal Reserve in painstaking detail -> http://www.chicagofed.org/digital_assets/publications/policy_discussi o n_papers/2013/PDP2013-01.pdf

The summary is that trades are blindly executed every half-second.  This gets rid of the war for microseconds.  Also, there is no reason to stuff the system with fake orders that are canceled and are only used to drive up or down prices before the price the algorithm wants shows up.  The other 5 recommendations deal with the false liquidity that the HFT's claim is the value add of having HFT.  This an extremely elegant solution.  It gets rid of the incentive of HFT wars for microseconds and protects the markets from Flash Crashes.  Best part is there is no argument over how much the Financial Transaction Tax should be and what the money should go to.

Oh if you don't have time to read the Chicago Fed recommendations, please stop yelling about a Financial Transaction Tax.  It is as intellectually lazy as screaming "Economic Justice!"

Only problem is that nobody in that organization has any power to see the solution implemented.  That is why someone has to organize a boycott of the markets until the change the way trades are executed.

Hence, http://www.bythepeo.pl/pins/18 .  Boycott starts Sept. 15, 2013.  You can support the issue and add to the discussion if you want.

// Blog still sucks!
 
2013-07-08 07:17:35 PM  

BankExaminer: Cool, can you post that under the comments section in the Problem field so it can be addressed @ ByThePeo.pl ?


Spambot says what?

And then can you explain to me if this is true:
"I had an IT guy at a large HFT tell me that if they could gain a 1 microsecond speed advantage, it was worth well over $100,000,000 annually. "


Sounds plausible.

Does that mean that that $100 million would still be "in the system" so to speak if the HFT wasn't skimming it out of the market transactions?

Well if you count what other HFTs would have made to be "in the system."

And therefore doesn't that mean that the total value of financial instruments in the market would be higher, hence it is overall effecting all of our 401K's?

The total value (i.e. total market cap) would be unaffected.  It only really matters on the transactions.

There is a reason that almost all large Pension funds use "dark pools" because when the HFT's get in front of their trades it results in a loss of value for the trade they are trying to execute.  And that loss comes directly out of your Pension.

So yes, that's an effective workaround if you are a gigantic fund that has to worry about its own effect on the market.

Sure, is it substantive? Probably not.

Unless you're a day trader, definitely not.

And that is exactly why they will keep skimming off the top with HFT, unless a large proportion of us all stop contributing, for maybe a month, or even one pay period.   HFT makes money on the flow of transactions, the flow stops and their profits drop.

Most people would lose more by foregoing their employer match for a week than HFT drains from them in a few decades.  Even if anyone would notice your little boycott.

Oh and the whole problem with the Flash Crash, and the dangers that HFT causes in terms of a melt down in the market.

That's more of a generic problem with automated trading.

But yea, it only affects my 401K for a couple of $100 ...

Maybe a few bucks a year.  If that.
 
2013-07-08 07:52:37 PM  

BMFPitt: BankExaminer: Cool, can you post that under the comments section in the Problem field so it can be addressed @ ByThePeo.pl ?

Spambot says what?



Yea, I guess I could see how that could look like a Spambot.  We really need to fix the ability to view issues without having to create an account, but we aren't verifying emails to signup so you could throw in anything.  It is a side project I have been working on to structure debates on an issue to come up with the best solution to a very specifically defined problem.  So I thought I would add your comment to the problem statement which is, "How much are we really being affected by HFT? Couple of bucks a year?"

Also, I wanted to add to the solution section what affect a certain percentage of boycotters would be needed for the markets to see an effect.

Say 100,000 people signed up and actually turned off their 401k contribution.  If they average, with employer match, $300 going into the markets, that is only $30 Million.  Probably wouldn't even be noticed.  If $300 million didn't not hit the market would that affect the HFT profits?  I am assuming the prices for stocks and bonds would not move because they are based on future returns and only changes to that information should affect the price.

Anyone know who much a HFT firm makes on a given day and how much a loss of "flow" would affect that?
 
2013-07-08 08:07:23 PM  

BankExaminer: Say 100,000 people signed up and actually turned off their 401k contribution.  If they average, with employer match, $300 going into the markets, that is only $30 Million.  Probably wouldn't even be noticed.


In the insanely unlikely scenario, it would still be less than 1% of the average daily volume of the NYSE.
 
2013-07-08 08:08:10 PM  

BMFPitt: BankExaminer: Say 100,000 people signed up and actually turned off their 401k contribution.  If they average, with employer match, $300 going into the markets, that is only $30 Million.  Probably wouldn't even be noticed.

In the insanely unlikely scenario, it would still be less than 1% of the average daily volume of the NYSE.


Actually, less than a tenth of a percent.
 
2013-07-08 08:36:54 PM  

BMFPitt: BMFPitt: BankExaminer: Say 100,000 people signed up and actually turned off their 401k contribution.  If they average, with employer match, $300 going into the markets, that is only $30 Million.  Probably wouldn't even be noticed.

In the insanely unlikely scenario, it would still be less than 1% of the average daily volume of the NYSE.

Actually, less than a tenth of a percent.


Program trading amounts to about 30% of overall trading at the NYSE.  Average daily trading in $'s is about $8 billion for the NASDAQ so $300 million is about 3.5 %.  If you take out the program trading which probably needs the churn of actual new money to execute all their trades the percentages could be even higher.

If HFT makes money by manipulating prices before the large pension firms send their orders through, how much of a reduction of that "seed" money is needed to throw a wrench in the system?
 
2013-07-08 11:32:41 PM  

BankExaminer: Program trading amounts to about 30% of overall trading at the NYSE.  Average daily trading in $'s is about $8 billion for the NASDAQ so $300 million is about 3.5 %.  If you take out the program trading which probably needs the churn of actual new money to execute all their trades the percentages could be even higher.


NYSE average daily volume is $35 billion.  Even if you throw out all program trading, that's a drop in the bucket.  Assuming that 100,000 people decides to throw away a few hundred bucks to prevent some random company from making (maybe) a penny or two.

If HFT makes money by manipulating prices before the large pension firms send their orders through, how much of a reduction of that "seed" money is needed to throw a wrench in the system?

It could actually be more profitable if the volume dropped so much that the spreads got a lot bigger.  Depends on a few details.
 
2013-07-09 03:33:26 PM  

DubtodaIll: I really don't like this ultra-high speed algorithmic trading.   I'm curious as to when this kind of practice became popular as I'm suspecting it was around 2005-2006 and has undoubtedly contributed to the unprecedented volatility we've seen in the market over the past few years.


Using pigeons in the 17th Century and it has been a steady escalation ever since. More recently the SEC authorized electronic exchanges in 1998.
 
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