Stories
Slash Boxes
Comments

SoylentNews is people

posted by martyb on Sunday October 16 2016, @12:53PM   Printer-friendly
from the where-were-the-air-bags? dept.

Navinder Sarao has lost his appeal and is set to be extradited to the USA, where he faces charges with a possible maximum sentence of 380 years. He is accused of causing the "flash crash" in 2010, when the Dow Jones index dropped by 1000 points. He ran his trading from his bedroom in his parents' house and it is claimed that he made more than £30M (approximately $40M) in 5 years. His parents had no idea what he was doing, nor the scale of his income. He is accused of placing trades that he never intended to fill, so, to this naive person, it's hard to distinguish what he did from that of the large high-speed trading firms.


Original Submission

 
This discussion has been archived. No new comments can be posted.
Display Options Threshold/Breakthrough Mark All as Read Mark All as Unread
The Fine Print: The following comments are owned by whoever posted them. We are not responsible for them in any way.
  • (Score: 0) by Anonymous Coward on Monday October 17 2016, @01:12PM

    by Anonymous Coward on Monday October 17 2016, @01:12PM (#415185)

    So the very time liquidity is needed the most HFTers run for the hills.

    You are basing your claim that the prices that move around just magically due to HFTing go back to normal and the prices other people buy and sell at are unafected as soon as a mere mortal tries to buy or sell? How is that even mathematically possible.

    You are probably getting tired of repeating yourself because you aren't saying anything usefull and just shilling. Just repeating trust me liquidity will solve all your problems, and that the $Billions HFTers 'earn' don't come from anywhere but magic.

    You keep claiming the same nonsense. If a fund sells and another fund buys, what benefit is there that a HFTer skimms a bit of money from both? Their days long portfolio change happens a couple microseconds quicker and at a worse price. No benefit to anyone but the leeching HFTers.

    Facts are, HFTers are privileged above any other traders. They have lower fees, special access, and extra information that regular traders don't ever get to see etc. The complete opposite to a free and fair market (,to anyone who isn't financially benefiting from said shenanigans that is).

  • (Score: 0) by Anonymous Coward on Monday October 17 2016, @06:32PM

    by Anonymous Coward on Monday October 17 2016, @06:32PM (#415307)

    So the very time liquidity is needed the most HFTers run for the hills.

    Huh? What are you talking about?

    You are basing your claim that the prices that move around just magically due to HFTing go back to normal and the prices other people buy and sell at are unafected as soon as a mere mortal tries to buy or sell? How is that even mathematically possible.

    Look, prices move. They go up, they go down, sometimes a lot, sometimes a little. That is the nature of the markets. The way prices move now is just like this the way prices moved before HFT trading existed. The only difference is one of those single tics of movement might occasionally be due to HFT (or it might not). Here's the important part -- that single tic of movement that may or may not be due to HFT makes absolutely no difference to the buy-and-hold trader -- THE BUY-AND-HOLD TRADER DOESN'T LOSE WHEN THE HFT TRADER WINS ONE TIC!

    This concept is very simple. It is analogous to tuning in a low power radio station against a higher power station at a higher frequency. The powerful higher frequency station my cause an occasional tiny static pop, but you will have no problem getting your lower frequency station.

    Regarding the flash crash, it is doubtful that this single HFT trader caused it. Even the SEC has changed where it placed the blame. However, occasional large down moves have always been part of the nature of the markets. Such moves aren't new since HFT appeared. If a trader is not prepared to contend with such possibilities, then perhaps that trader should not be in the game. And I will remind you once again that the flash crash in question was followed by an immediate rebound.

    You are probably getting tired of repeating yourself because you aren't saying anything usefull and just shilling. Just repeating trust me liquidity will solve all your problems, and that the $Billions HFTers 'earn' don't come from anywhere but magic. You keep claiming the same nonsense. If a fund sells and another fund buys, what benefit is there that a HFTer skimms a bit of money from both? Their days long portfolio change happens a couple microseconds quicker and at a worse price. No benefit to anyone but the leeching HFTers.

    I don't think that you really understand the situation nor how markets work, nor even why people make certain trades. I can't give you an investing course in this thread, but it all basically comes back to the explanation above about how the market moves and how, hence, buy-and-hold traders are unaffected by HFT trading (except for the benefit of added liquidity).

    Facts are, HFTers are privileged above any other traders. They have lower fees, special access, and extra information that regular traders don't ever get to see etc. The complete opposite to a free and fair market (,to anyone who isn't financially benefiting from said shenanigans that is).

    Don't be naive.

    HFT traders have to contend with higher fees. It is tough to use HFT (especially with all of the current competition) if you can't buy at the bid and sell at the offer. The primary tradeoff of having such a privilege is extreme cost of entry/fees.

    On the other hand the tradeoff for being a retail investor (without the high entry fees) is that you cannot buy at the bid and sell at the offer. Here's the thing, when there is a lot of liquidity, it is great to be a retail investor -- no exorbitant market maker fees, while you might pay only a penny for the bid/ask spread! By the way, liquidity is also good for the market maker, even though the spreads are tighter, because they get more occurrences.

    Furthermore, with the advanced retail platforms that are currently available, market makers don't have any extra information over retail investors. In fact, many such big traders use retail platforms for their indicators and order book ladders.

    • (Score: 0) by Anonymous Coward on Tuesday October 18 2016, @05:30AM

      by Anonymous Coward on Tuesday October 18 2016, @05:30AM (#415550)

      It's common knowledge (even wikipedia mentions) that the liquidity HFTers claim to supply, is the first to dry up if there is any 'unexpected event'. ie they disappear when liquidity is needed most, like in flash crashes.

      There are many documented examples of patterns when looking at the trading data of HFTers. To not know this is also ignorant in the extreme. To pretend that HFTers don't change the price by more than one tick is completely disingenuous. The way prices move now is clearly not the same as the way prices moved before.

      People make trades for variety of reasons. Some of those reasons are due to price or volume data that is fake due to HFTers. Momentum and other trading strategies that are also disrupted by HFTers manipulations.

      Are you seriously claiming HFTers pay the same or higher fees for the trades they execute. Thats funny. Paying a higher cost to set up your special privledged connection, is quite different to having cheaper trades than any one else. Especially as is often the case of being paid by the exchange (getting a rebate) to make those trades.
      The exchanges aren't charities, the money they pay to HFTers comes at least in part from the fees that everyone else pays to trade.

      How could you possibly think that HFTers don't have extra information over and above everyone else? If my computer is places closer to the exchange I get the information sooner than you do. HFTers pay to see data that the average person will never be in a position to see.

      It's clear you haven't even tried to look objectively at any of this but have been told HFT good, now go convince every one else.

      The Billions of dollars of profits they make even after taking into account the hundreds of Millions they pay to set up their infrastructure and buy their special access, must come from somewhere. It does, it comes from everyone else.

      • (Score: 0) by Anonymous Coward on Tuesday October 18 2016, @06:38AM

        by Anonymous Coward on Tuesday October 18 2016, @06:38AM (#415563)

        Dude, liquidity disappears all together in a crash, period. HFT traders have nothing to do with this phenomenon. Disappearance of liquidity happened in all crashes before HFT trading existed -- it is simply an integral part/symptom of a crash.

        There are many other fundamental reasons why folks make trades which you have not mentioned, usually in derivatives, which is actually a much bigger market than stocks. I am not here to school you on these strategies.

        HFT traders usually want market making privileges for which they (and everyone else) have to pay hefty fees. Furthermore, they try to get a fast, close-proximity-to-the-exchange connection, which also adds a lot to their costs. I can't help it if you are ignorant of these facts.

        Are you claiming that the exchanges pay HFT traders with fees from retail traders? Really?

        HFT traders don't have any unique information, but they do have unique algorithms and strategies.

        I don't have time to school you.

        • (Score: 0) by Anonymous Coward on Tuesday October 18 2016, @09:59AM

          by Anonymous Coward on Tuesday October 18 2016, @09:59AM (#415603)

          You are a completely delusional fool.