
Fast money: the battle against the high frequency traders (2014) - walterbell
https://www.theguardian.com/business/2014/jun/07/inside-murky-world-high-frequency-trading
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tutufan
The boring truth is that average Joes, who interact with the markets only via
their retirement index funds, are better off with HFTs. Not necessarily a
_lot_ better off, but that's because HFTs really don't affect them much at
all.

Certainly some Wall Street firms have been displaced by HFTs. But really, who
cares?

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murbard2
The average Joe who interacts with the market by picking stocks or day trading
(which he shouldn't do) is _substantially_ better off with HFT (though he
still shouldn't do it).

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mac01021
Why substantially better off?

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jshaqaw
Because hft means the bid ask spread on most transactions has shrunk to
trvial/nonexistent (I am a professional investor but not hft...I'm very lft).

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mac01021
Doesn't that just mean that all the really attractive offers have been
snatched up by the high-frequency traders?

Wouldn't those lucrative, high-spread opportunities otherwise be available to
a regular day trader?

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mjfl
No... because regular day traders aren't market makers, they are market
takers. HFTs are bad for other market makers, because they are basically
competition. HFTs are good for market takers, because you get a good price.

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MRSallee
Disclosure: I know almost literally nothing about trading stocks. (The
following will likely prove it.)

Seems to me that automation should be a massive benefit to everyone in stock
trading, except for the folks whose jobs are directly displaced by it.

The relatively small number of people in this profession command massive
salaries, largely because of their position as a bottleneck for financial
dealings. They are gate keepers, highly educated gate keepers, and their
relative scarcity means that the management of money is really, really
expensive.

If algorithms can do the job, well, it's much easier to duplicate an
algorithm. Shouldn't automation increase competition, the expertise and
leverage of a relatively small and powerful employment sector duplicated and
spread out, to the point that the cost of trading stocks becomes essentially
zero?

So while my 401k may be run by a human hedge fund manager who's competing
against automation, and is likely to lose this "battle against the high
frequency traders," shouldn't I hope that my hedge fund manager is replaced by
automation, rather than finds a way to beat it (or make it illegal)?

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shaftway
The point isn't that an algorithm is doing it. It's that algorithms are
actively poisoning the system with orders that couldn't possibly trade. By
stuffing the pipe with these orders, timely information to other traders is
delayed; the article states that the delay can be on the order of 30 seconds.

If I'm spending a half billion to colocate in an exchange's data center
because it'll trim a few microseconds off my data transit time, I'd be pretty
pissed if I was suddenly delayed by 30 seconds.

~~~
tutufan
Indeed you would. Which is why this sort of illegal behavior rarely happens.
(Keep in mind that none of this is anonymous or forgotten--the exchanges and
SEC know exactly who did what when.)

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brudgers
Article is from 2014. Probably should be noted in the title.

