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Is Prop Trading equities/commodities DEAD?
- Thread starter SlyFlo
- Start date
Quote from TraderZero:
Actually, I can explain the trading profits, and if you can't, you really aren't qualified to even hold an intelligent discussion on the inner workings of an investment bank because you have no clue how a trading desk operates.
You do realize that the VAST majority of their trading revenue comes from their fixed income desks, right? You do realize that a huge portion of the corporate market, both above and below investment grade was trading at distressed levels at the start of the year. And I'm sure you realize that when trading debt at distressed levels the bid-ask spread widens to compensate for the added risk. And based on that knowledge, I'm sure you're also aware that when you can buy at the bid and sell at the ask, and the spread between the two is measured in multiple points, the result is lots and lots of profits at basically zero risk unless inventory is involved. And when you combine the above with a market that is rallying beyond belief (to levels not seen since before the credit crisis) along with a new issue calendar that has done a moonshot compared to the year previous, you have the recipe for an absolutely perfect trading environment where anyone not making money should be fired on the spot.
Thanks for clarying that (i'm being sincere), even if firms like GS where their equity trading accounts for only 20% of trading revenues it doesn't take away from the topic of this thread...prop trading and the issues regarding the lack of liquidty. These are the issues we can educate the public on (compared to broader measures such as fed policies?).
Quote from GGSAE:
Thanks for clarying that (i'm being sincere), even if firms like GS where their equity trading accounts for only 20% of trading revenues it doesn't take away from the topic of this thread...prop trading and the issues regarding the lack of liquidty. These are the issues we can educate the public on (compared to broader measures such as fed policies?).
No, but it did completely take away the fact you just used to support your hatred of HFT. Without that fact, a logical person would rethink their position on the subject, but much like a typical conspiracy theorist, you've simply stated that the fact you previously cited doesn't really matter and that your conclusion is still valid. The reality is, when a supporting fact is invalidated, the conclusion needs to be re-evaluated not simply restated.
That, in my mind, removes a lot of credibility I might have attributed to you were we actually having a logical debate on the subject of HFT.
PS - the actual percentage is much, much lower.
The fact is, liquidity is much higher now than it was 10 years ago. You can look at something as simple as the average bid-ask spread in the equity markets to see thats the case. The issue twofold, 1) there's a structural problem presently thats being exploited by the HFT's and it needs to be fixed (easy enough) and 2) lots of traders have simply failed to adapt as the world around them has changed and they are flailing around in an attempt to place blame.
This attempt to blame their newfound lack of profitability or probably more appropriately, reduced profitability, resonates with many retail daytraders as they struggle to explain why they can't make money in the markets. They rationalize that they should be smart enough to be profitable, when in fact they simply aren't. The fact is they don't understand the market, they don't understand its structure, they don't understand the forces that drive it, etc and they aren't, or haven't, taken the steps to learn. Given the world we live in today, rather than look inward in an attempt to figure out why they aren't making money, they look outward and attempt to find some sinister outside force to blame for their own shortcomings. It couldnt' be their own fault, someone or something else has to be to blame.
Let the HFT have the jackass stocks...bac,c,aig.ge and the like and then have the remainder of the stocks trade in 5cent increments, if they trade over 20 bucks...also make all orders remain live for 2 seconds before they can be canceled...
Quote from TraderZero:
No, but it did completely take away the fact you just used to support your hatred of HFT. Without that fact, a logical person would rethink their position on the subject, but much like a typical conspiracy theorist, you've simply stated that the fact you previously cited doesn't really matter and that your conclusion is still valid. The reality is, when a supporting fact is invalidated, the conclusion needs to be re-evaluated not simply restated.
That, in my mind, removes a lot of credibility I might have attributed to you were we actually having a logical debate on the subject of HFT.
PS - the actual percentage is much, much lower.
The fact is, liquidity is much higher now than it was 10 years ago. You can look at something as simple as the average bid-ask spread in the equity markets to see thats the case. The issue twofold, 1) there's a structural problem presently thats being exploited by the HFT's and it needs to be fixed (easy enough) and 2) lots of traders have simply failed to adapt as the world around them has changed and they are flailing around in an attempt to place blame.
This attempt to blame their newfound lack of profitability or probably more appropriately, reduced profitability, resonates with many retail daytraders as they struggle to explain why they can't make money in the markets. They rationalize that they should be smart enough to be profitable, when in fact they simply aren't. The fact is they don't understand the market, they don't understand its structure, they don't understand the forces that drive it, etc and they aren't, or haven't, taken the steps to learn. Given the world we live in today, rather than look inward in an attempt to figure out why they aren't making money, they look outward and attempt to find some sinister outside force to blame for their own shortcomings. It couldnt' be their own fault, someone or something else has to be to blame.
FICC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,386 $ 6,557
Equities trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,473 1,027
Equities commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 881 974
This is taken from GS latest quarterly earnigns, sorry about the bad paste job, from 10/09, the net percantage gain in their equity trading was actually higher...you talk about liquidity in trading, but volumes for prop firms have fallen off a cliff over the last number of years.
I said before my timeframe is longer, in fact very few trades I execute now are daytrades, but how does that help the prop firm that rely on the volume for negotiated rates?
Quote from TraderZero:
No, but it did completely take away the fact you just used to support your hatred of HFT. Without that fact, a logical person would rethink their position on the subject, but much like a typical conspiracy theorist, you've simply stated that the fact you previously cited doesn't really matter and that your conclusion is still valid. The reality is, when a supporting fact is invalidated, the conclusion needs to be re-evaluated not simply restated.
That, in my mind, removes a lot of credibility I might have attributed to you were we actually having a logical debate on the subject of HFT.
PS - the actual percentage is much, much lower.
The fact is, liquidity is much higher now than it was 10 years ago. You can look at something as simple as the average bid-ask spread in the equity markets to see thats the case. The issue twofold, 1) there's a structural problem presently thats being exploited by the HFT's and it needs to be fixed (easy enough) and 2) lots of traders have simply failed to adapt as the world around them has changed and they are flailing around in an attempt to place blame.
This attempt to blame their newfound lack of profitability or probably more appropriately, reduced profitability, resonates with many retail daytraders as they struggle to explain why they can't make money in the markets. They rationalize that they should be smart enough to be profitable, when in fact they simply aren't. The fact is they don't understand the market, they don't understand its structure, they don't understand the forces that drive it, etc and they aren't, or haven't, taken the steps to learn. Given the world we live in today, rather than look inward in an attempt to figure out why they aren't making money, they look outward and attempt to find some sinister outside force to blame for their own shortcomings. It couldnt' be their own fault, someone or something else has to be to blame.
you're undoubtedly someone who works a high frequency book or are in that arena, which can only explain your decisive angle. it's quite clear when you read things as such that there is a clear defense of the realm you're working in....
same defense from off the floor traders towards floor traders when the floor volume disappeared...
HF does NOT provide liquidity no matter what nonsense those who are operate in it promise it does. 40% of the volume seems to be in the same 4 stocks and you think liquidity is far better than 10 years ago...
nice defense.....people are not stupid, certainly not the way you try to spin it, again as a defense tool. spare us...
Quote from SlyFlo:
HF does NOT provide liquidity no matter what nonsense those who are operate in it promise it does. 40% of the volume seems to be in the same 4 stocks and you think liquidity is far better than 10 years ago...
liquidity provision is run at will. firms providing bids and offers don't get guaranteed order flow so there is no incentive to continually provide a market through all environments.
If I was guaranteed all customer order flow for a set of stocks I would always provide bids/offers at the spreads that were common prior to 1997