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Is High Freq Trading a Bubble?
- Thread starter jonnysharp
- Start date
Jonny,
You've nailed it here...
Wah! I lost money, and these big firms are manipulating the markets. While I agree that Goldman has a ridiculous advantage with its well-placed politicians, the average HFT outfit is just playing the game by the rules in place. And in reply to a certain head-in-the-sand poster here, the HFT guys *do* provide liquidity. Trust me.
As to your original question: Yes, we are in a HFT bubble. It's an arms race, and it's getting tougher to profit. What's left after this race? May the best alpha algo win!
p
You've nailed it here...
Wah! I lost money, and these big firms are manipulating the markets. While I agree that Goldman has a ridiculous advantage with its well-placed politicians, the average HFT outfit is just playing the game by the rules in place. And in reply to a certain head-in-the-sand poster here, the HFT guys *do* provide liquidity. Trust me.
As to your original question: Yes, we are in a HFT bubble. It's an arms race, and it's getting tougher to profit. What's left after this race? May the best alpha algo win!
p
Quote from jonnysharp:
So the massive CDO's and subprime mortgages underwritten to people who couldn't afford them then couldn't repay them back causing a disappearance of natural buyers had nothing to do with the increased volatility? it was the predatory algorithms of HFT shops that increased the volatility? even though their huge increase in popularity began at the turn of the century when volatility consistently decreased right up until 2007?
have you seen code of goldman's algorithms? otherwise your just speculating and have no hard evidence to support your claims, maybe your looking to blame your trading losses on someone else rather than yourself?
Have we all become that brainwashed by mainstream media? I mean this a classic politician/bankers ploy to shift the blame for their bad decisions, congress induced wall st to make loans to the less fortunate as early as 1999 and the bankers played along, now shit has hit the fan they look for a scapegoat, what more perfect that an industry that has been making good growth in profits? ah HFT you bad guys for making a buck when everyone else is losing, you guys must be stealing it from us! come on, haven't we seen this scenario over and over again, its called tall poppy syndrome. Are you mad because you can't play basketball as well as Kobe Bryant and he gets paid better?
Quote from jonnysharp:
Ive watched over the years firms like renaissance technologies, getco, wolverine, optiver, citadel, etc....grow into powerful profit generating machines and a true force to be reckoned with, and estimates is the top HFT firms made 21B last year when everyone else was looking into the abyss and over 70% of volume traded on stocks is conducted by these firms. Competition amongst exchanges has helped these firms flourish. Now the media spotlight is on them and social movement could change the rules going forward. My question is; is HFT a bubble? or is it a more fundamental shift into how markets are made? The more traditional on-floor market maker now competes for order flow with these firms and has loss significant business to them. Are these firms better equipped to price markets and provide liquidity than the traditional mm's? Maybe its an evolution towards those with the most sophisticated risk management systems, those with the best hedging capabilities to manage their inventory will win? But then again, we have seen many bubbles in finance over the last 10 years, IPO, CDS, CDO, stat arb, commodities, etc.....many players within those fields blew up.
Thoughts?
"Most sophistictaed risk management systems" ? LOL !!!
Quote from Bob111:
not sure what is your definition of HFT or flash ,but here is how rest of the world define this activity:
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Flash trading, also known as high-frequency trading, is a practice where stock exchanges can wait up to one-half second before publishing bids and offers, giving customers of the specific exchange the opportunity to act before customers of other exchanges.http://www.bloomberg.com/apps/news?...d=aO8DoToaITO81
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http://www.mahalo.com/flash-trades
Bloomberg is wrong, they are not the same thing. That is the correct explanation of flash trading. HF trading is more general a term for computerized algo trading, but you want to be fast, so some pay fees to co-locate at the exchange.
True, most lose money.Quote from jonnysharp:
Ive watched over the years firms like renaissance technologies, getco, wolverine, optiver, citadel, etc....grow into powerful profit generating machines and a true force to be reckoned with, and estimates is the top HFT firms made 21B last year when everyone else was looking into the abyss and over 70% of volume traded on stocks is conducted by these firms. Competition amongst exchanges has helped these firms flourish. Now the media spotlight is on them and social movement could change the rules going forward. My question is; is HFT a bubble? or is it a more fundamental shift into how markets are made? The more traditional on-floor market maker now competes for order flow with these firms and has loss significant business to them. Are these firms better equipped to price markets and provide liquidity than the traditional mm's? Maybe its an evolution towards those with the most sophisticated risk management systems, those with the best hedging capabilities to manage their inventory will win? But then again, we have seen many bubbles in finance over the last 10 years, IPO, CDS, CDO, stat arb, commodities, etc.....many players within those fields blew up.
Thoughts?
Yet they call themselves professionals?
Quote from risktaker:
Because they cancel their fake bids/offers and run like hell as soon as there are real orders hitting them, that's why. Their posted volumes are mostly fake.
Your mistake is defending the individual investor in the first place. The market doesn't exist for them, although it's always been marketed that way.
If they want to play in these waters, they accept the risk, and the fact that they are the patsy at the table. That doesn't give them the right to bitch about GS having better programmers or faster computers. All this anti-HFT scapegoating is garbage imo.