Completely understand why HFT must exist
- Thread starter nitro
- Start date
It's gibberish because you have the same basic tools as "them", and can easily force them to execute on those "flashed in a loop" orders that seem to be bothering you so much.
Correction: they do not bother me a bit.
I do not think that you can execute on quote that has been cancelled even if I had resting order somewhere - usually it would be in the different segment of the market ( ECN broker exchange ) and regular routing re-routing would not be able to catch it before cancel.
Whatever I see on the screen or my computer senses as a signal is history and as long as I know that it is OK with me.
I care more about tight spread and immediate fill rather than some minor slippage which can be defined as a difference between perceived and actual quote at the time of execution (sometimes is not minor but I can get even with "them").
You're really not getting it, mate.
Anyway, as it doesn't bother you, no point in going any further.
Cheers.
I think the idea is similar to that of a track and field event where the race has to go around at least one turn. In that case, "fair" just means that lane 1 starts farther back than lane 2 and so on. Proximity to exchange should similarly be made as fair as possible, IMO.
With the advent of virtual servers this is getting more and more democratic IMO because affording colocation is then within the retail trader means.
I get the 'fairness' argument here, but upon reflection, I'm not sure I fully agree that it's necessary for proximity to exchange to be fair.
First, it's never been fair. Recall the days when the ol' time traders would employ their own agents and runners at the ports for information coming off of ships and send them to the agents physically sitting at the exchange? That's colocation in a sense. Proximity to exchange and the asymmetric information has always been a part of the market place. It's not new,
Which brings me to my second point: the market place is suppose to be a mechanism of information discovery. It's not predicated on symmetrically informed participants. In fact, it's great feature is that it doesn't need it. So why force some arbitrary standard of fairness on its participants? Arguably, the disparity between the capital level of different participants is another source of unfairness: should we do something about that too?
Finally, I'm not convinced that all this hurting the market. Sure, old ET-style scalpers are done with - but so what? Why should they be entitled to earn a living. Is Buffet hurt by HFT? Are buy-side institutions more hurt by HFT or helped by the execution algorithms that are encompassed? Does it hurt my 401k investments?
First, it's never been fair. Recall the days when the ol' time traders would employ their own agents and runners at the ports for information coming off of ships and send them to the agents physically sitting at the exchange? That's colocation in a sense. Proximity to exchange and the asymmetric information has always been a part of the market place. It's not new,
Which brings me to my second point: the market place is suppose to be a mechanism of information discovery. It's not predicated on symmetrically informed participants. In fact, it's great feature is that it doesn't need it. So why force some arbitrary standard of fairness on its participants? Arguably, the disparity between the capital level of different participants is another source of unfairness: should we do something about that too?
Finally, I'm not convinced that all this hurting the market. Sure, old ET-style scalpers are done with - but so what? Why should they be entitled to earn a living. Is Buffet hurt by HFT? Are buy-side institutions more hurt by HFT or helped by the execution algorithms that are encompassed? Does it hurt my 401k investments?
The problem with letting a private exchange set its own rules is that we need a capitalist system for this to make sense.
Take the CME Group. This is now a TBTF institution. There are huge barriers to entry in this industry and no effective competition for it's contracts. It has been allowed to buy up any exchange that has offered any competition.
It's hard to back any of the decisions/policies of the CME when it has proved unable to police the clearing firms and safeguard client money (FUCK YOU JON CORZINE).
The arguments backing HFT on the premise that the exchanges operate in a capitalist environment with a competent, rational management are without foundation.
Take the CME Group. This is now a TBTF institution. There are huge barriers to entry in this industry and no effective competition for it's contracts. It has been allowed to buy up any exchange that has offered any competition.
It's hard to back any of the decisions/policies of the CME when it has proved unable to police the clearing firms and safeguard client money (FUCK YOU JON CORZINE).
The arguments backing HFT on the premise that the exchanges operate in a capitalist environment with a competent, rational management are without foundation.
True enough there will always be criminals like Jon Corzine -there was no value to me mentioning his name -I just find it cathartic to say FUCK YOU JON CORZINE at any given opportunity.
I'm not proposing nationalized exchanges. As a capitalist I find that goes against the grain but we have left capitalism so far behind us that it is an option among others that I would consider.
I remember back in the 80s and early 90s in the country where I grew up there used to be a monopolies and mergers commission that mostly stopped any merger that would result in over 20% market share for the newly formed entity.
Economies of scale and synergies after takeovers, abundant in Econ textbooks rarely take place in the real world. I think having the CBOT and CME competing was a good thing and I think it's a shame the members sold out and let the place get taken over by lawyers and accountants.
So many arguments these days are made on the basis of capitalism versus socialism (esp with the election coming up) and this is a false premise given the falacy that what we have today bears any resemblence to capitalism. Look at the LIFFE exchange where RSJ have made claims that if you trade certain products there, then there is an 80% chance that they will be the counterparty -that's a monopoly in my book.
I know it's getting a bit long winded here, but my simple point was that we have wondered so far away from competition and capitalist concepts such as price discovery that to me, to introduce them, as the foundation of an argument, is false.
I'm not proposing nationalized exchanges. As a capitalist I find that goes against the grain but we have left capitalism so far behind us that it is an option among others that I would consider.
I remember back in the 80s and early 90s in the country where I grew up there used to be a monopolies and mergers commission that mostly stopped any merger that would result in over 20% market share for the newly formed entity.
Economies of scale and synergies after takeovers, abundant in Econ textbooks rarely take place in the real world. I think having the CBOT and CME competing was a good thing and I think it's a shame the members sold out and let the place get taken over by lawyers and accountants.
So many arguments these days are made on the basis of capitalism versus socialism (esp with the election coming up) and this is a false premise given the falacy that what we have today bears any resemblence to capitalism. Look at the LIFFE exchange where RSJ have made claims that if you trade certain products there, then there is an 80% chance that they will be the counterparty -that's a monopoly in my book.
I know it's getting a bit long winded here, but my simple point was that we have wondered so far away from competition and capitalist concepts such as price discovery that to me, to introduce them, as the foundation of an argument, is false.