SoylentNews is people
SoylentNews
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: 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.