
The invisible hand that pushed Apple up and down for six years - pedalpete
http://tech.fortune.cnn.com/2013/12/16/apple-odd-lot-hft/
======
minimax
This article (and the comments here on HN) are cringe inducing. The author of
the post has no idea how financial markets work. None.

So what if 45% of all trades were odd lots? What was the value of those trades
relative to the trades that were on the tape? It's a simple and obvious (and
important) question that they don't address in the article because the article
is all about pushing some BS agenda that AAPL was somehow being manipulated.
Are we really supposed to expect that a bunch of one lot trades were pushing
AAPL "to extraordinary highs and confidence-shattering lows"? Are we really
supposed to believe that the mom and pop investing public makes trading
decisions based on the tiniest orders on the tape?

This article is complete joke and if this is the kind of financial markets
reporting you're reading you are grossly misinformed about how the markets
actually work.

~~~
anonu
Totally agree: cringe inducing article. The paragraph that really got me was
the following: "Why does this matter? For one thing it means that for years,
trading volume in Apple was being misreported -- a situation that can lead to
a stock being mis-priced. The system also advantaged one kind of trader over
another."

This is wrong on so many levels. Trading volume was not "misreported" it was
simply under reported. There is absolutely nothing wrong with that. And it
certainly would not lead to any mis-pricings. There is absolutely no way this
could advantage one trader over another... none.

~~~
yummyfajitas
_There is absolutely no way this could advantage one trader over another...
none._

I don't think this is right. Many traders run technical strategies that
incorporate trading volume. A trader using the consolidated tape is at a
disadvantage relative to another trader running the _exact same strategy_ who
uses the full feed.

For example, consider a simple predatory trading algorithm (someone trying to
buy ahead of a big player who wants to move lots of shares). If a big player
makes a bunch of trades in 99 share lots, they will completely sneak past the
predator.

~~~
anonu
By using the word "predator" you are somehow implying that this is bad
behaviour. I disagree with that. Is it somehow wrong to buy because you think
the price will go up?

You are further implying that there is 0 market impact from trading odd lots.
By "taking" 1 share you are reducing the supply in a symmetric manner. Both
demand and supply will adjust to this new information, whether its
disseminated to the tape or not.

~~~
yummyfajitas
I intend no value judgement by the use of the word "predator", it's simply a
technical term. I'm strongly in favor of predatory trading - it prevents
institutional investors from screwing over the little guy by hiding big trades
and forcing their counterparties to suffer the price impact.

I'm not implying that there is 0 market impact from trading odd lots. The
market will adjust to the new information. It's just that the guy looking at
the consolidated feed will not be making a profit by helping it adjust.

------
pjin
Here's the original Nanex source in question:

[http://www.nanex.net/aqck2/4500.html](http://www.nanex.net/aqck2/4500.html)

------
Aloha
Huh, Interesting.

Another sign in my mind that high frequency trading is a bad idea, and in my
opinion encourages bad behavior among everyone who touches it.

~~~
elemeno
The conclusion wasn't that this was caused by HFT but because NASDAQ and the
NYSE only showed trades that had a size of 100 or greater in their public
feeds. Since a 100 shares of APPL is worth $50,000+, there's a lot of trades
being made for less than 100 shares and, until the reporting changes made a
few weeks ago, they didn't show up on the public feed. This means that trade
volume wasn't being reported accurately, and that the public feed wasn't
representative of the active price of a stock like APPL - which is a fairly
big deal when, according to the article, 45% of APPL trades are in lot sizes
of under 100 shares.

For professional traders (and here's the only place where HFT is relevant)
it's not a big deal since they don't use the public feeds but instead pay for
feeds from the exchanges which include all trades.

~~~
crag
It's a big deal to everyone who is not a "professional" trader. Oh and by the
way, HFT mostly trade low volume at high speed. In other words, trading 5
shares of Apple 5 million times an hour. That makes money. It's not about the
big pay-off. It's about the pennies all adding up. And also explain why the
stock was wildly moving all over the place.

Personally I think this type of trading should be illegal. Right now, unless
you have a data center right next to the exchange you are trading at a
disadvantage. And it just adds to the many reason why I think the game is
rigged. To favor the big houses. You're almost better off at Vegas.

~~~
cmdkeen
If you're investing over anything approaching the short term then it is
exactly like playing at Vegas, except the card counters aren't banned.

If you _invest_ , i.e. over 10+ years then HFT doesn't matter other than
giving you better liquidity and lower spreads. There is much, much less
competition in that space, no computer trading and you are capable of actually
doing research.

Investing and watching daily stock moves is a sure fire way of losing your
hair and becoming miserable.

~~~
pbhjpbhj
> _If you invest, i.e. over 10+ years then HFT doesn 't matter_ //

Is there any proof of this. How long have we had this sort of HFT?

Strikes me that HFT is extracting value from the market. The prices are
usually relatively stable they're increasing the draw of money away from
smaller traders but also removing value overall (in the form of money) from
the system and not adding much value. Yes, liquidity, yadda-yadda but surely
market liquidity is no greater now but HFT is far more effectively removing
money (a proxy for the value extracted).

In other words other people are creating value and HFT is a sink for it. The
bar to entry to the HFT camp means there should be an overall movement of
capital towards the most wealthy in this sort of system.

~~~
cmdkeen
HFT extracts the value from transactions. It won't extract the value from a
company becoming twice as valuable.

Invest because you think the company is going to be successful and thus more
valuable. The actual amount of stock that is HFT traded is tiny relative for
each company, long term price is driven by what institutional investors are
willing to pay for actual percentages of a company.

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miralabs
some institutional trades aren't available for the public to see..

[http://en.wikipedia.org/wiki/Dark_liquidity#Dark_pools](http://en.wikipedia.org/wiki/Dark_liquidity#Dark_pools)

~~~
ahfttrader
False. Some institutional ORDERS aren't available to see. The trades must be
reported.

~~~
miralabs
agreed they need to be reported but its only after, you won't be able to see
them via the normal bid/ask volume from your broker for example.

~~~
ahfttrader
The normal bid/ask is not trades. It is orders.

This is the same as OTC, which is not a new technological development.

