click for larger graphic

chart via WP

 

 

Source:
Is high-frequency trading a threat to stock trading, or a boon?
Dina ElBoghdady,
WaPo, October 25 2012
http://wapo.st/R3M01c

Category: Digital Media, Markets, Trading

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

8 Responses to “Milliseconds matter”

  1. NoKidding says:

    “Computer algorythms determine the value of Airline X is $20 a share”

    Then I was laughing too hard to continue.

  2. gordo365 says:

    Is it a threat or a boon? To whom?

    To me, individual investor, it reinforces my belief that Wall Street is run by crooks with super computers.

    If Wall Street doesn’t need the confidence of individual investors and their agents, then so what? If, however, Wall Street relies on the confidence of individual investors – then Wall Street is shooting itself in the foot hundreds of times per second.

  3. Dogfish says:

    Myopic greed blinding those at the top of the economic ladder that what they perceive to be a master-slave relationship is ultimately a symbiotic one.

    I really wish we could incentivize that old-timey concept known as “investment”. Perhaps by a tax based on the duration of a position. Less than a second? 100% tax. Under a year? 30%. 10 Years? 0%.

  4. Roanman says:

    To quote,

    “Big high frequency traders TYPICALLY trade more than 300 million shares a day.”

    How many “Big high frequency traders” are there out there.

    I’m thinking they’re the whole damn market.

  5. Frilton Miedman says:

    Every trade has a winner and a loser, if HFT’s are constant winners, day in day out, that means we’re the losers.

    Manoj Narang has been hard at work for years attempting to bewilder the average Joe into the belief that parasitic scalping and front running, flash orders, etc is good for the market because it incorporates “new technology”.

    If “new technology” alone is justification for theft, let’s design a high-tech electronic lock pick , then debate home break-ins as “new technology” when homeowners object.

    Computer hackers/identity thieves around the world are vindicated, their use of “new technology” makes them noble, justified to take what they want.

  6. Lyle says:

    One might observe that HFT is an unintented consequence of the decimalization of wall street. Back when trades were done in 1/8 of a dollar (a bit in money terms), it would have been hard to work on the bigger margin. Of course in addition the question is are you a trader or a buy and hold type (which wall street in general abhors, although there is not as much money in trading as their used to be in the days of fixed commissions). Since HFTs work on 1 to 2 cent margins, if you hold the stock a while the effect will damp down. Of course in addition the fact that the market worked on the 1/8 dollar basis is a good argument for a transaction tax, since it will be no more the old tick for stocks worth less than $100.

  7. kaleberg says:

    So, if there are two traders with Bid=19.98 and Ask=19.97, and new information comes in to the market, the trader who can go to Bid=19.97 and Ask=19.98 first will win, because the slower party would be unable to update his or her orders in time. In other words, it is not whether one is right or wrong, but how good a connection and computer system you have bought. That sounds like a broken market to me. No wonder my broker is offering me a hundred free trades a year and I maybe use one or two of them. Why would any rational actor, other than a high speed trader, trade any more than absolutely necessary?

    I’m sure high speed trading is allocating capital very efficiently by removing it from consumers and corporations producing actual goods and services and moving yet more money into the dead wood financial sector.

  8. capitalistpig says:

    The Post article was certainly lacking in real data. That seems typical of the media this days.

    Some of the more interesting observations on HFT, backed with hard data are from Nanex research.

    http://www.nanex.net/FlashCrash/OngoingResearch.html

    Their research indicates that HFT is not good for the markets and certainly does not provide any of the benefits that HFT claims.

    Check it out and come to your own conclusions.