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, Insightful) by Anonymous Coward on Sunday May 14 2017, @11:14PM (2 children)
...or allow losers in Las Vegas to write off their loses.
There's really no difference between the 2.
It's simply speculation.
Neither adds to the economy.
-- OriginalOwner_ [soylentnews.org]
(Score: 2, Informative) by Anonymous Coward on Monday May 15 2017, @01:08AM (1 child)
You can deduct gambling losses from gambling winnings when you calculate your taxes.
You can deduct investment losses from investment gains when you calculate your taxes.
It's not very different.
(Score: 4, Informative) by ese002 on Monday May 15 2017, @05:53AM
You can deduct gambling losses from gambling winnings when you calculate your taxes.
You can deduct investment losses from investment gains when you calculate your taxes.
It's not very different.
You can deduct investment losses from non-investment income and even carry it over to later years if you don't have enough income to offset. This is very different from gambling.
(Score: 3, Insightful) by wisnoskij on Sunday May 14 2017, @11:35PM (94 children)
The government is evil for not preventing me from gambling away my money at a slot machine.
The government is evil for not letting me gamble away by money on the stock market.
(Score: 2) by The Mighty Buzzard on Sunday May 14 2017, @11:50PM (93 children)
I tend to agree though I am also very much against HFT. It's at best gone from investment to pure gambling and at worst is blatant market manipulation.
My rights don't end where your fear begins.
(Score: 1, Informative) by Anonymous Coward on Monday May 15 2017, @12:17AM (92 children)
HFT is good for the small trader -- it doesn't affect the buy and hold, mom & pop traders and it only increases liquidity, creating smaller bid/ask spreads (making it easier for mom & pop to profit from long held trade). HFT doesn't move the price up/down more than one or two ticks (if at all), unlike the huge institutional scalpers do, but even the runs up/down by huge institutional scalpers are short lived, and, thus, great for mom & pop and liquidity.
On the other hand, this day trading restriction and other similar rules that prevent free trading hurt the little guy (although I doubt that the reason for this particular rule is to help rich people -- $25,000 is not very "rich").
(Score: 1, Informative) by Anonymous Coward on Monday May 15 2017, @12:41AM (67 children)
Spoken like somebody that doesn't know what HFT is. HFT is the latest version of a scam that's been going on since before the Great Depression. Back in those days, you'd get the prices for the following day early and could trade on them before the general public would. These days, the delay is only a matter of milliseconds, but it's short enough that if you slam in trades in that window you can be assured of making a profit. Hence why moving the servers even a couple meters closer to the exchange can add up to big bucks.
The mom and pop investors are less affected by this due to the duration of their holding period, but it's ignorant to say that that wealth being removed isn't something that's affecting them. It does, it's just a relatively small amount.
(Score: 2) by The Mighty Buzzard on Monday May 15 2017, @12:53AM (29 children)
Yes, very small amounts, millions of times a day.
My rights don't end where your fear begins.
(Score: 0) by Anonymous Coward on Monday May 15 2017, @02:10AM (28 children)
Nope. HFT micro trades go both up and down -- there is no cumulative effect for mom and pop.
(Score: 0) by Anonymous Coward on Monday May 15 2017, @02:34AM (1 child)
Seems to me this would contribute to inflation, which has the hidden tax effect. No, the economic pie isn't a fixed size, but the money that goes in these pockets has to come from somewhere. I would believe it were merely one of those rising tides if all boats were in fact rising. The vast majority of boats are not rising, and a very small number of boats are rising spectacularly.
(Score: 0) by Anonymous Coward on Monday May 15 2017, @03:32AM
I don't see how HFT increases inflation -- it's just more trading.
(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?
(Score: 0) by Anonymous Coward on Monday May 15 2017, @02:07AM (19 children)
You're an idiot who doesn't know what he/she is talking about.
HFT traders profit from: arbitrage (primarily); order book algorithms (usually single tic profits); millisecond spoofing (again, usually one/two tic trades). These transactions don't even amount to a perceptible "blip" for the buy-and-hold, mom/pop traders, and HFT trades are both up and down -- so there is no cumulative trend, and, hence, no effect on folks who are in trades for more than three tics.
Furthermore, HFT trading has become a lot less profitable in recent years because there is so much HFT competition.
HFT isn't "the latest scam" (as you put it) -- it has been around since at least the mid 1990s, and it is perfectly legit. Plus, it really helps make the markets more liquid for the smaller traders (like me). And again, HFT has absolutely no detrimental effect on the novice, buy-and-hold traders.
If you want to point a finger at who moves the markets the most, it would be the huge institutions, but not a single one of them can move more than a single stock significantly, and their trades are also perfectly legit. Folks buy stocks at various frequencies, and the prices move up and down. There's nothing wrong with that -- that's just how the markets work.
I am more concerned about the arbitrary restrictions with arbitrary limits mentioned in TFA. There are plenty of trades that I would like to close in less than a day, but I can't take profits which are right in front of me, because I don't have enough money in my account -- makes absolutely no sense (but as much sense as wanting to restrict HFT).
Perhaps you should trade actively in various financial instruments for one or two years, and then you can give a valid opinion.
(Score: 0) by Anonymous Coward on Monday May 15 2017, @04:46AM (18 children)
Invalid argument. I don't need to run a three card monte table for two years before I can recognize a scam.
(Score: 0) by Anonymous Coward on Monday May 15 2017, @05:05AM (17 children)
Obviously, you need to do something, because you are utterly clueless when it comes to the markets and trading.
(Score: 0) by Anonymous Coward on Monday May 15 2017, @05:37AM (16 children)
If I wanted to rip people off and lie to them, I'd have gotten in on the HFT scam.
(Score: 0) by Anonymous Coward on Monday May 15 2017, @06:18AM (15 children)
I wish you would get into HFT, because I have a feeling that as a non-HFT trader I could make a lot of money off of your clueless bumbling.
(Score: 0) by Anonymous Coward on Monday May 15 2017, @07:14AM (14 children)
Your feelings can't trump the ability to front-run others' trades, or fraudulently shift prices by ramming/cancelling millions of trades you have no intention of honoring in violation of law.
Someone shilling this hard for the High Frequency Trading fraud is almost certainly profiting from the scam.
(Score: 1) by khallow on Monday May 15 2017, @09:23AM (13 children)
Your feelings can't trump the ability to front-run others' trades, or fraudulently shift prices by ramming/cancelling millions of trades you have no intention of honoring in violation of law.
HFT can't front-run. They don't have the inside knowledge to do that. And it's not fraud when the bids (not trades) are honored when they are purchased.
Someone shilling this hard for the High Frequency Trading fraud is almost certainly profiting from the scam.
Or maybe he just really hates ignorance?
(Score: 0) by Anonymous Coward on Monday May 15 2017, @09:29AM (12 children)
The data shows that High Frequency Trading is used to front-run. [nanex.net]
How much did your HFTing scam net you this week?
(Score: 1) by khallow on Monday May 15 2017, @09:55AM (11 children)
(Score: 0) by Anonymous Coward on Monday May 15 2017, @09:59AM (10 children)
That bloody knife with my fingerprints all over it in the back of my dead landlord is no evidence that I murdered her!
Placing trades I have no intention of honoring is not violation of law against bad-faith trades because far fewer than 3.2% of my trades get sniped by other HFTers!
(Score: 1) by khallow on Monday May 15 2017, @11:57AM (9 children)
Placing trades I have no intention of honoring is not violation of law against bad-faith trades because far fewer than 3.2% of my trades get sniped by other HFTers!
It doesn't matter if it's 0.01%. It's still a contract that still gets honored when someone gets it.
(Score: 0) by Anonymous Coward on Monday May 15 2017, @05:26PM (8 children)
The term for offering an initial price and then changing the price to your advantage after someone tries to transact at that initial price is "bait and switch", a form of fraud.
(Score: 0) by Anonymous Coward on Monday May 15 2017, @05:52PM (7 children)
Except that really is not what HFT is -- you can't really bait-and-switch, even with HFT, because the other guy might be faster or because some big institutional player might happen to be taking the opposing side right when you try the bait-and-switch. You might as well play paddy-cake with an alligator, because at some point you will probably be eaten alive. That kind of spoofing is highly dangerous and not very common.
Furthermore, (and as has been repeated zillions of times in this thread) you are talking about single-tic moves, both up AND down, that only affect other HFTs and the big boys. Mom/pop feel no pain from such moves, spoofing or not.
(Score: 0) by Anonymous Coward on Monday May 15 2017, @06:09PM (6 children)
You're attempting the equivalent of claiming that stealing isn't possible, because some other thief might be faster at stealing.
(Score: 1) by khallow on Tuesday May 16 2017, @01:36AM (5 children)
(Score: 0) by Anonymous Coward on Tuesday May 16 2017, @01:55AM (4 children)
What you're trying to do is called "gaslighting". It's when the would-be manipulator (that's you) attempts to repeatedly deny obvious reality in an attempt to make others doubt their own faculties. It's also involves blatant lying. I can see how you're a good fit for theft-by-HFT advocacy.
(Score: 1) by khallow on Tuesday May 16 2017, @03:11AM (3 children)
The detractors of HFT have had plenty of opportunity to show harm from HFT and they've failed to date. You can call it "gaslighting". I call it "reason". Maybe you should try it sometime?
(Score: 0) by Anonymous Coward on Tuesday May 16 2017, @03:47AM (2 children)
It is not possible to reason with someone who is committed to blatantly lying in an attempt to cover up crimes. Evidence is presented, and the criminals (along with supporters like you) can protest until you turn blue in the face that nuuu, it was leeegal, it wasn't fraud or theft! when in fact you're just another in a long line of white-collar criminals trying to lie your way out of being caught.
(Score: 1) by khallow on Tuesday May 16 2017, @06:20AM (1 child)
It is not possible to reason with someone who is committed to blatantly lying in an attempt to cover up crimes.
Wow, I'm so convinced of the truth of your words now. You just say shit. This is the behavior of a child.
I'll summarize this cluster of threads for anyone who has endured to this point. I asked for evidence of harm [soylentnews.org]. Despite somewhere around 150 posts to date, no one has bothered to produce such evidence. What they have provided is peculiar.
For example, there's the common example of the trader who placed a 25,000 share order across multiple markets and had only part of it complete, due to impressively fast HFT reactions which pulled bids before the original order could arrive at later markets. Somehow that is supposed to be an example of "theft" even though the AC who keeps bringing up this example never points to anything actually stolen. Further, it is supposed to be an example of front-running. But as I noted in my analysis [soylentnews.org] of this event, the fact of the trade in question was public knowledge and hence, by definition of front-running, not front-running.
Another example is "spoofing" or the placement of bids and then their near immediate removal in order to confound computer trading programs. I stumbled across a study [soylentnews.org] that indicates spoofing is currently not that prevalent (they looked for "cancellation clusters" which would be necessary in order to spoof - you can't spoof, if your order sticks around for anyone to claim). Instead, they found most cancellations of this sort were price discovery strategies. Given the flaky nature of quoting (requesting bid/price data from the market in real time) which has lagged actual trading on occasion, this sort of price discovery seems a sound strategy when one is in a huge burst of market activity. But our Mr. AC refuses to acknowledge that spoofing isn't as common as he alleges.
But the peculiarly rarity of spoofing has been explained by another AC poster as poking an alligator. Namely, when one HFT trader exists, then spoofing is near risk free. But when there are many out there, then the spoofing strategy can be gamed by anyone else who is aware of it and willing to snap up all those short term bids. And since the spoofer is trying to present a misleading quote to slower traders, they are by necessity trading away from the market price and hence, creating a profitable opportunity for any other HFT to exploit. Basic issues like that appear to be completely misunderstood by our AC crusader.
The AC repeatedly asserts that HFT is illegal even though it's legal. The AC repeated asserts that HFT is front-running even though it's not. The AC repeated asserts a variety of other things even though I or someone else has already shown the assertion to be false. Then when repeatedly confronted with the errors of these statements, the AC starts accusing everyone involved of being industry shills. This is mental illness (though probably of a mild sort) not some sort of advocacy.
If there's anything I want the persevering reader to take away from this is that this ultimately is about someone wanting to use the power of the state to prevent an unpopular group from doing something they don't understand. It's the classic nanny response. Rich, smarmy Wall Streeters trading big money stocks in millisecond or less time? Sounds dangerous even though the nanny doesn't have a clue what that means. Plus, we hate those guys. We oughta ban that. The accusations of theft and whatnot follow because this prohibition impulse needs to be justified after the fact. I think this impulse should be firmly resisted wherever it rears its ugly head. Even if the nannies can't be helped, we can at least keep the plague from spreading.
It's a recipe for ugly stagnation, if we halt every activity just because some nanny doesn't like it. My view on HFT is that it doesn't do any harm (despite the huffing and puffing to the contrary), it does perform some useful roles in markets such as providing liquidity for slower time scale computer traders, it provides a quick means to remove bad computer trading programs, and it spurs the self-funded development of some pretty cool tech and milli/micro second decision making theory. Against that, we have the fear that mom and pop are losing pennies on a trade (particularly myopic considering mom and pop are losing much more on the games that brokers legally play with their clients) or shedding tears over some Bostonian trader who can't buy all the stock that his quote shows (and then portraying it as theft!). That is utterly ridiculous.
My view is that if you can't show compelling evidence of harm, then the activity should be allowed completely unimpaired. We've had plenty of time to show that bad things would happen and failed. There is nothing else to say. It's supposed to be a free society. Let's start acting like it is.
(Score: 0) by Anonymous Coward on Tuesday May 16 2017, @06:41AM
Conversely, trading data shows HFTers manipulating their own orders with foreknowledge of other non-HFT market orders which have already been placed but not completed. [nanex.net] The justification used to attempt to excuse this naked frontrunning scam is that the HFTs change their orders within milliseconds, exploiting network delays that affect non-HFTers. The elapsed time involved in a frontrunning scam is irrelevant. The harm is done via theft of value to the non-HFT trader who placed an order for advertised shares which were yanked away by HFTers, in the same fashion as a meatspace bait-and-switch fraud.
The SEC fined the NYSE $5 million for similar violations (improperly providing trading data faster to some clients than others), and paid a $750,000 whistleblower bounty [marketwatch.com] to the same outfit as has been providing the linked evidence of theft and fraud by High Frequency Traders.
(Score: 1) by khallow on Monday May 15 2017, @04:50AM (15 children)
Spoken like somebody that doesn't know what HFT is. HFT is the latest version of a scam that's been going on since before the Great Depression. Back in those days, you'd get the prices for the following day early and could trade on them before the general public would. These days, the delay is only a matter of milliseconds, but it's short enough that if you slam in trades in that window you can be assured of making a profit. Hence why moving the servers even a couple meters closer to the exchange can add up to big bucks.
"Scam" doesn't mean someone who has an advantage in trade or negotiation. My auto mechanic is more knowledgeable of cars than I am, and hence, has an advantage in negotiations involving repairs to my vehicle which I don't have a clue how to do myself. That doesn't mean that they are scamming me.
Instead, "scam" means a fraud or swindle - deception used to deprive someone of money or possessions. That is a very different thing than merely having some advantage in trade or such.
The mom and pop investors are less affected by this due to the duration of their holding period, but it's ignorant to say that that wealth being removed isn't something that's affecting them. It does, it's just a relatively small amount.
You don't have a clue what you're talking about. Market makers, which HFT are a subclass of, provide liquidity, which means the opportunity to trade, which otherwise wouldn't exist. The traders they are supposedly extracting wealth from willingly enter into these trades. And most important, trades happen which otherwise wouldn't happen (the providing of the opportunity to trade), merely because there is the market maker on the other side of the trade willing to take on the risk because they expect to reverse the trade in the future at a small profit. HFT does it over smaller time scales. That's it.
(Score: 0) by Anonymous Coward on Monday May 15 2017, @08:09AM (14 children)
It most certainly does mean "scam" when the law forbids trading on such advantages, including front-running and insider trading.
(Score: 1) by khallow on Monday May 15 2017, @08:18AM (13 children)
It most certainly does mean "scam" when the law forbids trading on such advantages, including front-running and insider trading.
The law doesn't forbid HFT. So not a scam. Meanwhile, front-running and insider trading aren't HFT (in fact, they almost never are associated with HFT). So what is the point again of claiming HFT is a scam?
(Score: 0) by Anonymous Coward on Monday May 15 2017, @08:27AM (12 children)
High Frequency Trading is front-running orders using their lower-latency connection to markets, in addition to placing orders in bad faith (never intending to have the orders filled by cancelling them near-instantaneously). Both are blatant violations of law. Both are used in HFT.
The law forbids High Frequency Trading.
(Score: 1) by khallow on Monday May 15 2017, @09:09AM (11 children)
High Frequency Trading is front-running orders using their lower-latency connection to markets, in addition to placing orders in bad faith (never intending to have the orders filled by cancelling them near-instantaneously). Both are blatant violations of law. Both are used in HFT.
For the first sentence, you are incorrect. Here's a real definition [investinganswers.com] of HFT:
High frequency trading (HFT) is a computerized trading strategy used to exploit fleeting market inefficiencies. These ultra-short-term positions can be in a wide range of assets: stocks, options, futures, currencies, exchange-traded funds (ETFs), and virtually any other asset that can be traded electronically.
Second, front-running is illegal because it's a form of insider trading commonly practiced by brokerages against their clients. They learn via a variety of ways all related to their special relationship to their client of the intent to trade and then trade in advance to profit from it. An HFT program can't read your mind and anticipate your trade before it hits the market. Once it hits the market, it is no longer front running. This debate is not served by attributing magic powers to HFT.
As to placing orders in "bad faith", once the order is placed, there is always risk it'll be traded before it can be removed. I'll note here that sniping such orders wouldn't be difficult for another HFT player since even with a high failure rate, they can just try an enormous number of times.
The law forbids High Frequency Trading.
Maybe if you assert this every three microseconds, it'll be true. But at current levels of assertion, it is false.
(Score: 0) by Anonymous Coward on Monday May 15 2017, @09:22AM (10 children)
Your "real definition" of HFT is nothing more than a blatant lie. In actual practice, High Frequency Trading directly harms the market [nanex.net], via HFT-enabled front-running [nanex.net] and massive numbers of HFT trades placed in bad faith [nanex.net].
High Frequency Trading as practiced today is a criminal violation of law. Your denial of reality changes reality not one whit.
(Score: 1) by khallow on Monday May 15 2017, @09:33AM (9 children)
Your "real definition" of HFT is nothing more than a blatant lie. In actual practice, High Frequency Trading directly harms the market, via HFT-enabled front-running and massive numbers of HFT trades placed in bad faith.
I notice your links don't support your assertion. No front-running is ever mentioned. Instead, they give examples of clumsy large purchases being exploited by HFT (clue: once an order hits a market, even if it hasn't hit other markets, it's open information and no longer insider knowledge). Second, massive numbers of HFT bids are alleged to be placed in bad faith, but they have to be honored once purchased. Another HFT (and there are more) can snipe those orders. Price discover is restored.
Third, once again, no harm has been mentioned.
High Frequency Trading as practiced today is a criminal violation of law. Your denial of reality changes reality not one whit.
Sorry, you're still not asserting this at a high enough frequency for it to become true.
(Score: 0) by Anonymous Coward on Monday May 15 2017, @09:46AM (8 children)
Now you're posting in bad faith. Examples with data were given to show HFT trades being placed in advance of other market orders, stealing value from the non-HFT trades.
Harm: HFT activity going from zero to 80,000 trades per second in advance of non-HFT trades; increased costs; misleading quotes; and market flash-crashes.
(Score: 1) by khallow on Monday May 15 2017, @10:04AM (7 children)
Examples with data were given to show HFT trades being placed in advance of other market orders, stealing value from the non-HFT trades.
No, it wasn't. This was merely asserted. And you have yet to come up with a mechanism by which this advanced knowledge was obtained.
Harm: HFT activity going from zero to 80,000 trades per second in advance of non-HFT trades; increased costs; misleading quotes; and market flash-crashes.
Which let us note, didn't actually happen. The large non-HFT trade hit first, but it didn't hit all the markets simultaneously. Those delays are exploited by the secondary trading reported.
(Score: 0) by Anonymous Coward on Monday May 15 2017, @10:14AM (6 children)
Gee. It walks like front-running, it smells like front-running, it talks like front-running... I know! It must be High Frequency Trading!
(Score: 1) by khallow on Monday May 15 2017, @12:29PM (5 children)
Finally he complained so loudly that they sent the developers, the guys who came to RBC in the Carlin acquisition. “They told me it was because I was in New York and the markets were in New Jersey and my market data was slow,” Katsuyama says. “Then they said that it was all caused by the fact that there are thousands of people trading in the market. They’d say: ‘You aren’t the only one trying to do what you’re trying to do. There’s other events. There’s news.’ ”
If that was the case, he asked them, why did the market in any given stock dry up only when he was trying to trade in it? To make his point, he asked the developers to stand behind him and watch while he traded. “I’d say: ‘Watch closely. I am about to buy 100,000 shares of AMD. I am willing to pay $15 a share. There are currently 100,000 shares of AMD being offered at $15 a share — 10,000 on BATS, 35,000 on the New York Stock Exchange, 30,000 on Nasdaq and 25,000 on Direct Edge.’ You could see it all on the screens. We’d all sit there and stare at the screen, and I’d have my finger over the Enter button. I’d count out loud to five. . . .
“ ‘One. . . . “ ‘Two. . . . See, nothing’s happened.
“ ‘Three. . . . Offers are still there at 15. . . .
“ ‘Four. . . . Still no movement. . . .
“ ‘Five.’ Then I’d hit the Enter button, and — boom! — all hell would break loose. The offerings would all disappear, and the stock would pop higher.”
At which point he turned to the developers behind him and said: “You see, I’m the event. I am the news.”
Later...
Katsuyama tried sending orders to a single exchange, fairly certain that this would prove that some, or maybe even all, of the exchanges were allowing these phantom orders. But no: To his surprise, an order sent to a single exchange enabled him to buy everything on offer. The market as it appeared on his screens was, once again, the market. “I thought, [expletive], there goes that theory,” Katsuyama says. “And that’s our only theory.”
It made no sense: Why would the market on the screens be real if you sent your order to only one exchange but prove illusory when you sent your order to all the exchanges at once? The team began to send orders into various combinations of exchanges. First the New York Stock Exchange and Nasdaq. Then N.Y.S.E. and Nasdaq and BATS. Then N.Y.S.E., Nasdaq BX, Nasdaq and BATS. And so on. What came back was a further mystery. As they increased the number of exchanges, the percentage of the order that was filled decreased; the more places they tried to buy stock from, the less stock they were actually able to buy. “There was one exception,” Katsuyama says. “No matter how many exchanges we sent an order to, we always got 100 percent of what was offered on BATS.” Park had no explanation, he says. “I just thought, BATS is a great exchange!”
One morning, while taking a shower, Rob Park came up with another theory. He was picturing a bar chart he had seen that showed the time it took orders to travel from Brad Katsuyama’s trading desk in the World Financial Center to the various exchanges.
The increments of time involved were absurdly small: In theory, the fastest travel time, from Katsuyama’s desk in Manhattan to the BATS exchange in Weehawken, N.J., was about two milliseconds, and the slowest, from Katsuyama’s desk to the Nasdaq exchange in Carteret, N.J., was around four milliseconds. In practice, the times could vary much more than that, depending on network traffic, static and glitches in the equipment between any two points. It takes 100 milliseconds to blink quickly — it was hard to believe that a fraction of a blink of an eye could have any real market consequences. Allen Zhang, whom Katsuyama and Park viewed as their most talented programmer, wrote a program that built delays into the orders Katsuyama sent to exchanges that were faster to get to, so that they arrived at exactly the same time as they did at the exchanges that were slower to get to. “It was counterintuitive,” Park says, “because everyone was telling us it was all about faster. We had to go faster, and we were slowing it down.” One morning they sat down to test the program. Ordinarily when you hit the button to buy but failed to get the stock, the screens lit up red; when you got only some of the stock you were after, the screens lit up brown; and when you got everything you asked for, the screens lit up green.
The screens lit up green.
“It’s 2009,” Katsuyama says. “This had been happening to me for almost two years. There’s no way I’m the first guy to have figured this out. So what happened to everyone else?” The question seemed to answer itself: Anyone who understood the problem was making money off it.
See? This is why your front-running is imaginary. A large trade on an exchange, any exchange is a public event. The article [nanex.net] you claimed showed front-running even mentions the above story:
The trader sent us his trade execution reports, and we matched up his trades with our detailed consolidated quote and trade data to discover that the mechanism described in Michael Lewis's "Flash Boys" was alive and well on Wall Street.
Further, note that the trader executed trades first before the HFT frenzy.
Looking at the table data, we note the first trade is 100 shares on BOST (NQ-OMX Boston) and belongs to our trader. Note, however, it was the 4th trade reported back to him ("4" in the last column). The first 3 trades, not shown here because they end up being reported dead last(!), were dark pool prints from Sigma-X (Goldman's dark pool).
So right there, this trade is public knowledge and thus, not front-running by definition (since there is no insider information). Goldman Sachs in particular would be particularly able to take advantage of this situation since their dark pool was first (and the report is suspiciously lagged compared to the rest). In fact, I wouldn't be surprised if they use their dark pool precisely for this purpose. Pays the bills, right?
This is why I keep saying that you don't understand HFT. This is straightforward exploitation of public information, but one would have to have very specialized infrastructure in place to take advantage of that information.
(Score: 0) by Anonymous Coward on Monday May 15 2017, @05:32PM (4 children)
Data shows clear evidence of theft [nanex.net] by HFTers who react to their own advantage over a trade already placed on the market, but before the trade could be completed.
Linking to a story where this HFT theft did not happen is equivalent to claiming that the blatant bloody murder of Joe Blow didn't happen because John Smith is still very much alive.
(Score: 1) by khallow on Tuesday May 16 2017, @01:31AM (3 children)
First, I quote at length extremely similar behavior witnessed by a developer at a major Canadian bank who both saw near identical symptoms and more importantly (!) found a way to make that behavior completely vanish by timing the sending of their bids so that the bids fell on the market at the exact same time (which incidentally demonstrates the absence of insider knowledge). Then we have a buyer who still engages in the sloppy behavior that leads to this behavior, years later.
You allege this is "theft". But what is being stolen? First, we have already established that the trader could have strategically timed the bids issued so that they arrive at the destination markets at the same time and this issue goes away completely! The trader could instead purchase in much smaller lots so that their trades slip by the automated trade programs that are doing this stuff. Or the trader could restricted their trading to the largest few blocks (or markets so widely separated that hostile communication can't happen before the trades complete) on these markets so as to give the least warning for the greatest gain.
if the trader has a bit of patience, then there's a variety of longer term approaches to making these trades without spooking the HFT fauna.
It's not a fraud issue because the bids are there ready to be purchased - the earlier bidder just happens to be so fast that they can react to sloppy, large bids as they propagate through the network of markets. Nor is it a theft issue since there is no expectation or right to a certain price level. Just because you saw a bid at a certain price at a certain time doesn't mean that you have a right to that price at any later time - even milliseconds later.
The key to this story is the quote from the Canadian protagonist of the first quote.
At which point he turned to the developers behind him and said: “You see, I’m the event. I am the news.”
This is routinely forgotten by people who have never traded on a market. Large trades are just as much news as anything else. By not placing the order at the same time on all markets in this situation, you are spreading the news of your bids far and wide to those who can respond to them faster than your orders can fly. And they will respond - because you are changing the market.
(Score: 0) by Anonymous Coward on Tuesday May 16 2017, @01:59AM (2 children)
So this is how you attempt to justify illegal frontrunning to yourself. "I can conjure up some handwaving to confuse most rubes enough to make them think I've found a way to make theft legal!" Legal theft; it's just like the legal murders of the National Socialist Party.
(Score: 1) by khallow on Tuesday May 16 2017, @03:28AM (1 child)
So this is how you attempt to justify illegal frontrunning to yourself.
Words mean things. Front-running only happens when there is insider knowledge. That is a key part of the definition of front-running. The front-running has insider knowledge of the existence of an incoming bid and uses that knowledge to trade ahead of the bid.
This is trading on public knowledge and thus, by definition is not front-running. That's it. As to theft, no property was taken. Those bids and the assets at sale didn't belong to the trader so it isn't theft when they disappear before his bid arrives. Thus, by definition it is not theft either.
It's quite clear by now that you don't understand anything in this debate: HFT, front-running, theft, etc and don't care to fix your ignorance. There is no value to your opinion as a result. In particular, I certainly won't start to care about your opinion that I'm some sort of industry shill. Do you even know what that word means? It doesn't mean someone who disagrees.
(Score: 0) by Anonymous Coward on Tuesday May 16 2017, @03:43AM
You don't like seeing evidence of theft and fraud by front-running, regardless of the small amount of time it took to commit, so I'll rub it in your face again. [nanex.net] Your blatant lies and gaslighting cannot change reality no matter how much you squeal.
(Score: 2) by VLM on Monday May 15 2017, @12:32PM
Spoken like somebody that doesn't know what HFT is.
This summarizes both sides of the flamewar
HFT is ...
... whatever is good or bad about the modern financial system.
As a definition it doesn't mean anything anymore. Reminds me of .net in its early days. What is dot-net? Who can keep up with microsofts marketing department and its wild swings? Who knows.
I miss the political debates. If this were a political debate the analogy would be unable to define political left and right but being more than willing to assign any ole random thing to either side and then either declare allegiance or 2-minutes-hate it, all completely driven by a random number generator. I could replace this entire flamewar with a very short Perl script...
WRT HFT, what it actually is and what its used for is OK to mildly good by a narrow reality based enough definition. Almost all of the people involved are crooked to one level or another so if they got ovened or helicoptered I wouldn't really mind; when they do HFT they're not doing anything wrong but since they're crooks about 50% of the time... Most of the claimed negative effects have been illegal for decades and attributing them to HFT is comical in that financial scamming is as old as markets; there's no point complaining about front running trades when thats been illegal longer than I've been alive and like many laws its either not enforced, only enforced politically, or "special people" never get it enforced against them, and any discussion about HFT is merely a (an intentional?) distraction from that fact. Some of the complaints are just "workers of the world unite" prattle with no relationship to reality. Most of the value extracted by HFT is gone, in the sense that trading on "Dow Theory" was actually a net positive trading strategy before it became popular a century or so ago and permanently priced in to the market and Dow no longer lives on as a trading theory, it was charmingly crude and simplistic but until everyone noticed it actually worked. Likewise you could make a lot of money off HFT in the old days, less so over time, and eventually the market will eliminate all the profit in HFT (because non-HFT traders don't like seeing their money go to the HFT folks and there are strategies to freeze them out, up to and including becoming HFT traders themselves, except much better capitalized...) On a very big picture its a waste of money energy and resources and the total systemic return isn't very much, so if the government outlawed it, that would be OK (and good luck defining it, and note all the whining about front running, which is also illegal and also common-ish).
(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.
(Score: 1, Informative) by Anonymous Coward on Monday May 15 2017, @12:09AM (2 children)
The thing about FINRA is that it isn't a legal body, it's brokerage firms governing themselves so that the government won't step in and hamfistedly regulate in ways that are impractical or pointless more than the SEC already does. There is no real connection between FINRA and the people in government who could do things like stop the lottery.
The NYSE put this rule in place when trading fees were 10x what they are now, before inflation. A Pattern Day Trader would be paying roughly $50 a trade minimum, which is $250 for 5 trades in a week. With a $12,500 account the brokerage firm would be taking 2% of a person's account value in a week just in trading fees. Then we consider margin cost for such small investors was likely 10-20% at the time. Then consider that the average small investor is abysmal at trading, and buys the equivalent of Snapchat IPOs if given the chance. The industry looked at the situation and said "We're already fucking the peasants three ways, lets at least give them a fighting chance so they don't have the SEC sticking their nose in our business", which is a good thing.
Personally, I believe noone without half a million or industry experience should be allowed to touch anything but broad based mutual funds and etfs, but that would collapse the whole industry since it thrives on idiots losing money to market makers and brokers.
(Score: 2) by n1 on Monday May 15 2017, @12:30AM (1 child)
Great comment, very informative. As someone who isn't a US citizen, I was aware that other brokers outside the US didn't accept US clients, but never understood why. This seems to be the reason.
You are correct that FINRA isn't a legal body as such, but they are regulated by the SEC to regulate the brokers.
http://www.finra.org/sites/default/files/NoticeDocument/p003881.pdf [finra.org]
NASD became FINRA. The current chairman of FINRA was a director at the SEC before moving over... So it's definitely not a legal/government body, but it is still influential in policy and does effectively regulate, since it sets rules and levies fines against bad actors in the industry and is itself regulated by the SEC.
(Score: 0) by Anonymous Coward on Monday May 15 2017, @12:46AM
The reason for that is the same as why foreign banks won't usually do business with us. The amount of reporting they have to do on the money makes it not worth doing in most cases.
But, in all honesty, there's no good reason to be an American having an investment account abroad in most cases. The main advantage of it would if for trading on one of the foreign exchanges and if you're doing that, it's usually easier to have somebody physically over there handling it or buying one of the many funds that specializes in foreign investment.