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If the government really wanted to protect us from ourselves they would limit gambling, which costs poor people a lot and is known to result in unfavorable odds, and they would discontinue the lottery. Instead because the lottery and gambling make the government and big institutions money they are legal. Restricting pattern day trading is, likewise, an attempt to give those with money more leverage over those without money. This law directly discriminates against those without money and it was passed by those with money. The government has essentially passed two sets of laws, one for the rich and one for the poor.
These laws were undemocratically passed by the rich for the rich under the false pretense of protecting the poor. Such is a hallmark of an aristocracy. No nation should have a different set of laws for the rich than for the poor.
The entire Wikipedia article, especially all the criticisms, are worth reading.
FINRA (formerly National Association of Securities Dealers, Inc. or NASD) rule applies to any customer who buys and sells a particular security in the same trading day (day trades), and does this four or more times in any five consecutive business day period; the rule applies to margin accounts, but not to cash accounts. A pattern day trader is subject to special rules. The main rule is that in order to engage in pattern day trading you must maintain an equity balance of at least $25,000 in a margin account.
[...] The SEC believes that people whose account equity is less than $25,000 may represent less-sophisticated traders, who may be less able to handle the losses that may be associated with day trades.
(Score: 2) by NotSanguine on Monday May 15 2017, @02:11AM (23 children)
HFT is good for the small trader
How exactly is that? My understanding is (borne out by multiple sources) that HFT is [investopedia.com]:
If by "small trader" you mean few actual employees, perhaps you're right. But in order to successfully profit from HFT, you need to be able to arbitrage [investopedia.com] the ask/bid of the "mom and pop" investors. As such, you're essentially sucking value out of the market (lowering and actual seller's profit, and raising the buyer's price) without producing or adding anything. Such "small traders need ultra-fast (and crazy expensive) private network links and millions in IT infrastructure.**
Yeah, it's the "small traders" doing HFT. Keep telling yourself that.
**Some examples:
High speed private network links [arstechnica.com]
High-end datacenters [datacenterknowledge.com]
No, no, you're not thinking; you're just being logical. --Niels Bohr
(Score: 0) by Anonymous Coward on Monday May 15 2017, @03:20AM (11 children)
How exactly is that?
Your link attempts to explain the the benefits of HFT trading to the small trader (except it should read that bid/ask spreads were large and then made smaller by HFT):
Benefits of HFT
The major benefit of HFT is it has improved market liquidity and removed bid-ask spreads that previously would have been too small. This was tested by adding fees on HFT, and as a result, bid-ask spreads increased. One study assessed how Canadian bid-ask spreads changed when the government introduced fees on HFT, and it was found that bid-ask spreads increased by 9%.
You also said:
My understanding is (borne out by multiple sources) that HFT is: High-frequency trading (HFT) is a program trading platform that uses powerful computers to transact a large number of orders at very fast speeds. It uses complex algorithms to analyze multiple markets and execute orders based on market conditions. Typically, the traders with the fastest execution speeds are more profitable than traders with slower execution speeds.
And what's wrong with that? You do understand that the passage you quoted is saying that HFT traders with faster speeds are typically more profitable than other HFT traders with slower speeds -- HFTs are not reducing the profits of non-HFT traders. It really is amazing that folks can't understand this simple, fundamental concept.
By the way, your link also mentions possible blame of the May6, 2010 crash on HFT. Nobody knows for sure about crashes like that. Right now, experts are blaming that crash on a spoofer who was trading out of his mom's basement in England. Such finger-pointing is all BS as they just don't know how it happened. In addition, the market bounced right back, so those who didn't panic were mostly unaffected. Furthermore, any competent trader should allow for crashes and flash crashes -- that's what happens in the market.
If by "small trader" you mean few actual employees, perhaps you're right. But in order to successfully profit from HFT, you need to be able to arbitrage the ask/bid of the "mom and pop" investors. As such, you're essentially sucking value out of the market (lowering and actual seller's profit, and raising the buyer's price) without producing or adding anything. Such "small traders need ultra-fast (and crazy expensive) private network links and millions in IT infrastructure.**
I am afraid that you do not have a clue as to what you are talking about. I have explained how it works in another comment here, and I am not going to do so again. Suffice it to say that HFT trades go up and down single tics a bunch of times during the trade day, so there is no cumulative move to affect the mom/pop, buy/hold trader. True, many HFT plays are arbitrage, but those arbitrage trades are usually single tic and by their nature, they further reduce bid/ask spreads and increase liquidity, which is extremely beneficial for mom/pop, long term, buy/hold traders.
Read the passage in your own link (quoted above) on how limiting HFTs increased bid/ask spreads in Canadian markets by 9% -- you could drive a fleet of trucks through that spread. So, some Canadian moms/pops lost 9% on their life-savings trade (instead of a fractional tic from an HFT trade that happened to occur a split second before mom/pop's order was filled), because some idiots (who probably have never made a trade in their lives) created arbitrary restrictions on HFT.
Yeah, it's the "small traders" doing HFT. Keep telling yourself that.
Perhaps you should learn how to trade and make plays with various financial instruments for a couple of years -- then you can offer a valid opinion.
(Score: 0) by Anonymous Coward on Monday May 15 2017, @04:36AM (8 children)
Gaslight some more, scum-sucking criminal-loving HFT shill.
(Score: 1) by khallow on Monday May 15 2017, @08:44AM (7 children)
(Score: 0) by Anonymous Coward on Monday May 15 2017, @08:49AM (6 children)
Bad faith trades make up ~97% of US exchange volume. [qz.com]
(Score: 1) by khallow on Monday May 15 2017, @08:52AM (5 children)
(Score: 0) by Anonymous Coward on Monday May 15 2017, @08:57AM (4 children)
A question this daft shows blatant shilling intent.
The money High Frequency Traders collect comes directly out of the pockets of other traders who would have gained more (both profit and loss) if not for the illegal HFT scam. Do you comprehend "zero sum"?
(Score: 1) by khallow on Monday May 15 2017, @09:38AM (3 children)
The money High Frequency Traders collect comes directly out of the pockets of other traders who would have gained more (both profit and loss) if not for the illegal HFT scam.
I specifically asked for harm not privileges that no longer apply. Am I harmed because you refuse to buy my used toilet paper for a million USD per sheet? Then why are "other traders" harmed by not getting as high a price as they would like?
Do you comprehend "zero sum"?
You do realize that trade is a positive sum game, right?
(Score: 0) by Anonymous Coward on Monday May 15 2017, @09:49AM (2 children)
I see your point now, thank you. You view yourself as entitled to the contents of other peoples' pocketbooks.
(Score: 1) by khallow on Monday May 15 2017, @10:04AM (1 child)
(Score: 0) by Anonymous Coward on Monday May 15 2017, @10:16AM
According to you, when market price moves, both the long and the short win!
The only evidence you seem primed to accept is of the caliber of the moon being made of cheese.
(Score: 2) by NotSanguine on Monday May 15 2017, @01:40PM (1 child)
You completely missed my point. Which doesn't surprise me, as you have an agenda to protect which strongly influences you to do so.
In keeping with *your* "I'm not going to explain it again" ethos, I'll let you read my original post again and again until you figure it out.
As an aside (and a hint to aid your reading comprehension), I didn't address most of your blathering, just a single part.
No, no, you're not thinking; you're just being logical. --Niels Bohr
(Score: 0) by Anonymous Coward on Monday May 15 2017, @03:56PM
You link to pages that actually contradict your assertions, and instead of addressing that blunder when it is pointed out, you accuse others of having an agenda. You also admit to not addressing other arguments against your position.
I am sorry, but you have utterly no clue as to what you are talking about.
As you do not seem to want to make the effort to read previous explanations, I will now try to make you understand how HFT affects the prices of financial instruments with an simple example posted earlier in this thread: http://tinyurl.com/mvwzpal [tinyurl.com]
The top sine wave represents the up/down price movement generated by non-HFT, while the higher frequency, middle sine wave represents the up/down price movement generated by HFT.
The bottom waveform represents the price movement of the non-HFT and HFT combined.
Note how the overall up/down non-HFT move still occurs in the bottom, non-HFT/HFT price waveform, just as if there was no HFT trading. So, the non-HFT traders still experience the same highs/lows that they would without the HFT.
Got it?
The difference between this example and what actually happens is that each up/down HFT move is usually much smaller, relatively -- often 1/50th-1/1,000th of the of the daily move, so HFT usually affects non-HFT pricing to a much lesser degree than the example shows. Another difference, of course, is that market movement is irregular (never a pure sine wave).
So, HFT does not hurt non-HFT traders. In fact, a lot of HFT trading increases liquidity and reduces bid/ask spreads -- extremely beneficial to the small non-HFT trader.
(Score: 1) by khallow on Monday May 15 2017, @05:01AM (10 children)
If by "small trader" you mean few actual employees, perhaps you're right. But in order to successfully profit from HFT, you need to be able to arbitrage the ask/bid of the "mom and pop" investors. As such, you're essentially sucking value out of the market (lowering and actual seller's profit, and raising the buyer's price) without producing or adding anything. Such "small traders need ultra-fast (and crazy expensive) private network links and millions in IT infrastructure.**
Patently false. Arbitrage means that you're creating trades (which happen to be risk-free for you) that wouldn't otherwise exist. This is a standard case of providing liquidity to a market. The "value" isn't being sucked out of the market. Instead, it is being created by providing an opportunity for traders to trade who otherwise would get worse value for their trades.
(Score: 0) by Anonymous Coward on Monday May 15 2017, @08:17AM (7 children)
Patently false. There is no value to be had for a non-HFT trader by having his bid price rammed upwards by High Frequency Traders who have no intention of honoring the rammed trades which are cancelled near-instantaneously, nor is there value for non-HFT traders in having their ask price rammed lower by the same HFT fraud.
The profits are the fruit of blatant violations of US law and are only created as they line HFT's pockets at the expense of all other market participants!
(Score: 1) by khallow on Monday May 15 2017, @08:33AM (6 children)
There is no value to be had for a non-HFT trader by having his bid price rammed upwards
How are they forcing a trader to change their bid? Mind control? I'll note here that you have to be really well connected to the market with a high sampling speed in the first place in order to even see the pricing bias of these "rammed trades" much less change your bid in response to them. It's basically a trap for computer-based trade and has no relevance to human traders who simply don't operate on fast enough time scales.
The profits are the fruit of blatant violations of US law and are only created as they line HFT's pockets at the expense of all other market participants!
What laws are being broken again?
(Score: 0) by Anonymous Coward on Monday May 15 2017, @08:38AM (5 children)
High Frequency Traders place huge volumes of orders which the HFTers have no intention of honoring because said orders are cancelled almost instantly. Placing such bad-faith orders are illegal.
(Score: 1) by khallow on Monday May 15 2017, @08:46AM (4 children)
High Frequency Traders place huge volumes of orders which the HFTers have no intention of honoring because said orders are cancelled almost instantly. Placing such bad-faith orders are illegal.
I disagree. They have the intention to honor those orders for the brief period of time they're present. After all, the exchange isn't going to roll back trades that happen when some other HFT program snipes those orders, right?
(Score: 0) by Anonymous Coward on Monday May 15 2017, @08:54AM (3 children)
96.8% chance you are wrong. [qz.com] A 3.2% success rate (which includes ALL other market participants) is clear indication of blatant fraud in regard to bad faith trades.
(Score: 1) by khallow on Monday May 15 2017, @09:43AM (2 children)
A 3.2% success rate (which includes ALL other market participants) is clear indication of blatant fraud in regard to bad faith trades.
That's much higher than I was expecting. So no, I think this proves my point. I'll also point out that there is no legal expectation that a bid will complete as a trade.
(Score: 0) by Anonymous Coward on Monday May 15 2017, @10:03AM (1 child)
A 3.2% success rate all-in on public offers is what is known as "false advertising", aka fraud. It's much higher than you were expecting because that 3.2% is the total of ALL successful trades, including ALL non-HFT market participants.
(Score: 1) by khallow on Monday May 15 2017, @11:50AM
A 3.2% success rate all-in on public offers is what is known as "false advertising", aka fraud.
It's actually a 100% success rate. The bid after all happens. It just doesn't result in a trade most of the time.
(Score: 2) by NotSanguine on Monday May 15 2017, @01:46PM (1 child)
I'm a little confused. I said arbitrage [investopedia.com] and linked to its definition:
You said:
I suppose that's true, but misses my point completely. Sigh. Perhaps I should start posting in other languages, since folks seem to have a hard time with English.
No, no, you're not thinking; you're just being logical. --Niels Bohr
(Score: 1) by khallow on Tuesday May 16 2017, @02:56AM
Then there's the two or more parties with the inefficiently priced bids. The arbitrager by making the trade allows these bids to complete which is a good thing for the bidders since that is their preferred state (else the bids wouldn't be placed) and it wouldn't happen in the absence of the arbitrager.
Finally, there's the market itself. Persistent inefficiencies are bad for the market. By trading on these inefficiencies, the arbitrager reduces the inefficiency in question and adds liquidity to the market making it a healthier place overall.
Consider the example that has been bouncing around, a wealthy trader slaps down a big order and it executes piecemeal over a variety of markets with HFT traders reacting at amazing speeds to alter their orders at the more lagged markets in order to profit from this trader. First, those bids wouldn't exist in the first place without this big fish to lure. So that creates liquidity and activity in markets that wouldn't otherwise exist. Even the trader benefits since he now has more bids to chose from. All those hooks have to be baited with something tasty or they don't work. The more such hooks there are, the better the overall deal for the wealthy trader.
And these markets becomes a better place in general because this activity results both in more overall interest and liquidity as well as a normalization across these markets.