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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: 4, Insightful) by The Mighty Buzzard on Monday May 15 2017, @02:46AM (25 children)
You should really learn to math. HFT traders cumulatively make a lot of money or it would not be done. That money comes from both market manipulation via algorithm and via snagging a deal microseconds before mom and pop can. Both of those screw mom and pop.
My rights don't end where your fear begins.
(Score: 0) by Anonymous Coward on Monday May 15 2017, @03:28AM (24 children)
No. Quit reading Wikipedia and actually spend a year or two learning how to trade different instruments.
HFT profit comes from other HFT traders and from some of the institutional traders who are pushing large tranches. In the case of arbitrage, HFT profit also sometimes comes from market maker errors.
If mom/pop lose anything due to an HFT trade it would be a fractional tic -- which is no as big a problem as having bid/ask spreads that you can drive a truck through!
HFT is good for liquidity. As a small trader, I wish that there was more of it.
(Score: 1, Interesting) by Anonymous Coward on Monday May 15 2017, @04:33AM (23 children)
"High Frequency Trading" is nothing more than illegal front-running cloaked in the mystique of computers and increasingly-smaller fractions of a second.
A fraction lost, done millions of times a day. [youtube.com]
(Score: 0) by Anonymous Coward on Monday May 15 2017, @05:03AM (22 children)
You don't understand how it works, and neither does the writer of Richard Pryor's lines (probably best not to seek reality/truth from film dialogue).
It works similar to the way these two sine waves are mixed: http://tinyurl.com/mvwzpal [tinyurl.com].
The higher frequency represents the up/down movements of the HFTs, while the lower frequency represents the slower, larger up/down non-HFT moves. Note how the overall up/down non-HFT travel still occurs, so the non-HFT traders still experience the same highs/lows that they would without the HFT.
The only difference between this example and what actually happens is that each up/down HFT move can be 1/50th-1/1,000th of the of the daily move, and, of course, market movement is irregular.
(Score: 0) by Anonymous Coward on Monday May 15 2017, @05:34AM (21 children)
You missed the point, likely with intent. There is a LOT of money to be made in the "small fractions".
This is particularly so when you can front-run to steal value from others' trades, and place orders you have no intention of honoring in direct violation of law.
(Score: 0) by Anonymous Coward on Monday May 15 2017, @06:13AM (20 children)
No. I understood, and I have seen your linked film reference before used to support the same argument (it doesn't apply).
Spoofing is just one possible aspect of HFT, and it is very dangerous (regardless of whether or not it is legal), especially with all of the HFT competition -- one might as well play paddy-cake with an alligator. I don't think spoofing is done very much.
At any rate, spoofing doesn't affect non-HFT traders, as demonstrated by the mixed sine wave example. Perhaps you should go back and study this example. There is no value being taken from non-HFT traders with spoofing (nor with any other HFT) -- if anything, HFT increases value, because the spoofer will eventually trade (if successful) and increase liquidity for the non-HFTs.
(Score: 0) by Anonymous Coward on Monday May 15 2017, @06:27AM (19 children)
You're just a parrot, trying to dance around the issue of the front-running and non-execution scam you like so much. "Increases liquidity! Increases liquidity, awwk!"
Here's another clip for you. [youtube.com]
(Score: 1) by khallow on Monday May 15 2017, @09:20AM (18 children)
(Score: 0) by Anonymous Coward on Monday May 15 2017, @09:25AM (12 children)
There's "no counterargument" according to you, because you can't see the evidence that High Frequency Trading harms all other market participants [nanex.net] from your vantage point far up your own rectal cavity.
(Score: 1) by khallow on Monday May 15 2017, @09:48AM (11 children)
(Score: 0) by Anonymous Coward on Monday May 15 2017, @09:56AM (10 children)
$750,000 of SEC whistleblower reward money worth of worthless." [nanex.net]
I've led your horsiness to water. Can't make you drink. But I can call you a blatant liar.
(Score: 1) by khallow on Monday May 15 2017, @11:54AM (9 children)
I've led your horsiness to water. Can't make you drink. But I can call you a blatant liar.
And I ignore empty claims. Evidence, evidence, evidence, evidence. Nothing else counts, especially your emotional state. You simply don't understand what you are presenting to me.
(Score: 0) by Anonymous Coward on Monday May 15 2017, @04:01PM (8 children)
Different AC here. If I had to guess, you seem to be the one experiencing an "emotional state."
This has to be my absolute pet peeve. You cannot refute GP's argument simply by accusing him of being in an "emotional state."
Is that the only reason somebody could possibly disagree with you, because they're in an "emotional state?"
I admit, I am currently in an "emotional state" of severe irritation at every time I've seen somebody with right-wing-leaning views use language like "emotional state" as some kind of modern version of "Q.E.D."
(Score: 0) by Anonymous Coward on Monday May 15 2017, @04:52PM (7 children)
The poster to whom you responded has already given plenty of facts and pointed out flaws in the opposing arguments. Those complaining about HFT were revealed by the poster to simply have no grounds for their arguments -- they merely have their negative, jealous emotions regarding HFT.
So, after all the factual arguments had been exhausted, the poster in question logically addressed the HFT complainers' emotional state.
(Score: 0) by Anonymous Coward on Monday May 15 2017, @05:16PM (6 children)
Data shows HFT frontrunning [nanex.net] in that a large non-HFT order is placed on a quiet stock, and that HFTers "see" that large order after it has been made but before it takes effect, and cancel their open orders causing the price to shift in favor of HFTs and against the non-HFTer who placed the large order. It doesn't matter that mere nanoseconds are involved; what matters is that HFTs traded on advance knowledge to steal value from non-HFT trades.
The pro-HFT posters have ignored the evidence by trying to point to failed cases of HFT frontrunning as proof that HFTers never frontrun, or by simply denying the patently obvious in the style of flat-earthers. Except flat-earthers aren't know for wrecking peoples' livelihoods through market manipulation and theft.
(Score: 0) by Anonymous Coward on Monday May 15 2017, @05:44PM (4 children)
I am guessing that Nanex site has some peculiar agenda, because they seem to be bent against HFT and they are wrong on almost every point.
In the first place, there is no way for the HFT traders to see an order "before it takes effect," unless there is some crooked collusion with a broker. Such a situation would be very illegal, and those of us who support HFT for increased market liquidity are strongly against any such crooked collusion. Such criminal activity is not an inherent (nor common) symptom of HFT, but, of course, one must have a fast connection to do so.
Secondly, setting such trades as limit orders negates the entire problem -- any millisecond blip in the bid/ask spread caused by such an HFT move will have absolutely no effect on the price of a limit order (except, perhaps, it might delay the trade a fraction of a second).
Thirdly, we are talking millisecond, single tic moves (both up AND down) here -- only heavy hitting scalpers and other HFTs are affected by such actions. Mom/pop feel nothing from such trades.
Please learn trading.
(Score: 0) by Anonymous Coward on Monday May 15 2017, @06:03PM (3 children)
Nanex, like me, seems to have an agenda against theft and fraud. You seem not to like what you saw in the article, because what you described yourself as "very illegal" happened in the data presented [nanex.net]. That the theft happened in the milliseconds it took exchange networks to route data does not negate the theft.
(Score: 0) by Anonymous Coward on Monday May 15 2017, @07:51PM (2 children)
Oh my goodness. I actually read your last linked Nanex.net page. These guys are sensationalists trying to pass themselves off as legit finance researchers specializing in HFT. It's full of innuendo, trying to make boring trade occurrences look scandalous. In addition their terminology makes them sound like novices.
Anyway, the particular linked Nanex page is pretty much all BS. It involves an "incident" with some trader who evidently complained that he had limit orders of one to two hundred lots that occasionally did not getting fully filled (that's the scandalous incident?... really?).
The second sentence of the page reads:
"For example, if 25,000 shares were at the best offer, and he sent in a limit order at the best offer price for 20,000 shares, the trade would, more likely than not, come back partially filled."
Of course, the bold part (my emphasis) clearly indicates that there is a chance that all of those 250 lots might not get filled at once, and that is precisely what happened. Large tranches not getting entirely filled occurs all the time, especially if one places a limit order, instead of a market order. Anyone who's watched an order book flicker knows that the lot numbers can constantly change and that they do so in the blink of an eye, so there are many other possible reasons (buyers) why this guys huge limit order didn't go through all at once.
This guy is trading single ticks, so he just probably timed his limit when it also looked like a good order to other single-tic, HFT traders,and he merely got beat to the punch on a few lots by the other traders using market orders. Making his trade a limit order might have also slowed down his fills and "showed his hand."
By the way, such partial fills happened even prior to the advent of HFT.
At any rate, we are again talking about the difference of one tic, and in the case of folks trading 200 lots of company stock that amounts to no more than $200 total per tic. If some HFTs saw this guy's large limit order getting filled and then tried to use market orders to buy up the rest of the offers, they probably would be making less than $200 for their trouble (and that would be only if the guy buying decided to move his limit order up one tic to buy the lots that the HFTs were trying to resell).
If you've watched an order book for any length of time, you've seen all kinds of muscle plays from institutional scalpers that are non-HFT. The big boys can drive the price up or down 300%-600% more than the single tic HFTs.
There is nothing wrong with any of these activities -- HFT or not. This action is just the way the markets move, and all of this trading is good for us little guys. None of these plays affect the buy/hold, mom/pop investors.
There is nothing scandalous here, as Nanex makes it sound.
Please learn how to trade!
(Score: 0) by Anonymous Coward on Monday May 15 2017, @08:52PM (1 child)
"No, I'm not gaslighting! There's no theft going on here! That not-theft-that-looks-just-like-theft-trust-me happens all the time! Those guys just make up nonsense and the SEC Bounty paid out to them for whistleblowing on illegal market activity [reuters.com] is, uhhh... nothing! It's all part of the show! Learn to trade, fool!"
(Score: 1) by khallow on Tuesday May 16 2017, @01:34AM
Learn to trade, fool!
Excellent advice, You should heed it.
(Score: 0) by Anonymous Coward on Tuesday May 16 2017, @12:12AM
To be clear if you set a limit buy at, say, $4.50, and the current price is $5, and then you cancel your limit buy at $4.5 you aren't affecting the current price of the stock at all. Your limit buy plays no role on the stock price until the order is met. The stock exchange doesn't even know that you placed a limit buy at $4.5, it is your broker that knows and that is going to ensure the order is placed at your specification when the shares become available. There are many brokers and the stock exchange itself doesn't know anything about what orders any of those brokers plan on filling and at what prices until after those orders have been filled and so your order to buy a stock at $4.5 if it falls to that price is unknown by the stock exchange itself and hence the stock exchange is unable to change its current price based on your limit buy order until the order has been met. Your limit buy can't possibly affect the price ahead of time because the stock exchange has no way of knowing that you placed the limit buy ahead of time, it is only your broker that knows.
(Score: 0) by Anonymous Coward on Monday May 15 2017, @02:02PM (1 child)
What I find really annoying is that there isn't even a counterargument. You just have these vague feelings that Mom and Pop are getting robbed.
Exactly.
These HFT complainers have no clue -- they just have negative, jealous feelings about a financial market in which they will never participate, so they want to make it wrong for others to participate in that market (and, consequently, make it much more difficult for small traders in markets in which the complainers can easily participate).
To all the HFT complainers: please go out and actively trade various financial instruments for a year or two, and then see if you "feel" the same way as you do now. I have no way of participating in HFT, and I never intend to do so, but I am very happy that HFT exists, as HFT makes it much easier (and more profitable) for us small traders.
(Score: 0) by Anonymous Coward on Monday May 15 2017, @05:19PM
To all the mugging complainers: please go out and actively mug various people for a year or two, then see if you feel the same way about mugging people that you do now.
(Score: 2) by andersjm on Monday May 15 2017, @04:48PM (2 children)
The counterargument is that although liquidity has value, that value is a tiny fraction of the money being exfiltrated. The average price is so much more important than the deviation, and the professional zero-sum gamers lower the average price you get on selling and raise the average price you pay on purchase.
(Score: 0) by Anonymous Coward on Monday May 15 2017, @05:20PM (1 child)
No. With increased liquidity caused by HFT, the benefits of small bid/ask spreads dwarf any fractional HFT tic that may (or may not) be detrimental/beneficial to the small, non-HFT trader. Keep in mind that HFT price moves are tiny and that they occur both up and down, so there is usually never a significant cumulative effect in price from HFT.
Furthermore, "average price" means absolutely nothing when there is no liquidity and the bid/asks spreads are large, because you wouldn't be able to trade anywhere close to the "average."
By the way, bid/ask spreads ballooned to 9% in Canada when they tried to restrict HFT trades, so some Canadian mom/pop, buy/hold traders could have lost 9% on their "life savings" trade, because of reduced liquidity in the HFT-lacking markets. 9% is a lot compared to a tiny, last-millisecond HFT tic that might (or might not) be detrimental to a closing trade.
(Score: 0) by Anonymous Coward on Tuesday May 16 2017, @03:59AM
> HFT price moves are tiny and that they occur both up and down, so there is usually never a significant cumulative effect
Uh. That's not really how this works. If there's an agreeable price, and half the time I take money from the buyer, and half the time from the seller, the sum does accumulate.
> Furthermore, "average price" means absolutely nothing when there is no liquidity and the bid/asks spreads are large, because you wouldn't be able to trade anywhere close to the "average."
Uuuuuh. You can't trade (well, sell) at price+dividend either yet that's a useful metric especially just before a pay. Average price would still have both meaning and value, without HFT.
> some Canadian mom/pop, buy/hold traders could have lost 9% on their "life savings" trade
...you are trying to suggest people put all their eggs in one basket to hold onto? Have I just wasted my time explaining to someone who could never understand reality?