
Banning Some HFT Strategies Helped This Market Grow: Chart - randomname2
http://www.bloomberg.com/news/articles/2016-03-08/banning-some-hft-strategies-helped-this-market-grow-chart
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Zenst
I often wonder, why the need for speed. If stock markets updated once a day,
would that really cause a problem?

The whole aspect of making updates faster, transactions faster will always
lead to those who can afford it looking for an edge in speed and in most cases
- getting it, aided or unaided.

But with such dysnimic speed any misdirection in price rise or fall can and
has been in the past exhausebated and when you look at the impact again,
wonder why so fast.

I can appreciete the fater exchanges operate the mroe transacitons and brokers
just love commision, more transactions more commision and it was and always is
a crux in any fiscal market.

Indeed the Llyods crash was due to many brokers factoring (watering down the
pools of money in effect) risks (groups of insurance poiceys) so many times
that when there was a big claim (asbestos) then the whole thing crashed as the
pools of money to cover the insurance were eaten away so much by all this over
factoring of the risks about with brokers taking a slice everytime it got
passed about and reinsurance became a rererererereinsurance style affair that
with so much commision taken out it was a financial timebomb awaiting to
happen. Again can look more recently at mortgages and how companies polled
those together as they do with insurance and reinsurance in much the same way.
Though more case of hiding potentual asbestos risks in with less risker
mortgages and the rest we all remember.

So can see why I do question the need for faster and faster stock markets
when, too me daily would work and indeed even hourly. Would eliminate HFT and
indeed make the whole market more stable and focused upon the companies and
not what todays market become based upon somebody famous doing or saying
something on twitter more then actual results.

~~~
TTPrograms
I've also wondered the same thing. I've always been replied to with "it
provides liquidity to the market" but I still don't see why anybody needs
microsecond level liquidity. Seems like it provides marginal benefit over a
minute or hourly quantized exchange at tremendous cost (to society).

~~~
wdewind
TLDR: Compounding effects that add up over time, and extremely dubious use of
the words "tremendous cost (to society)."

~~~
lberger
HFT is a tax on the markets (and by extension society).

~~~
wdewind
I mean...that's kind of a hugely controversial point to just say as a fact. It
also completely ignores the fact that HFTs employ a lot of different
strategies, some of which are uncontroversially beneficial to the market
(market making).

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murbard2
The problem isn't HFT per se it's adverse selection. Large trades are more
likely to happen if the exchange discriminates in _who_ participates in the
exchange, not _how_ they participate. Regulation NMS destroyed upstairs
trading in the US and is effectively making such discrimination
illegal/impossible unless you operate a dark pool which cannot openly show
prices.

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jakozaur
What if all stock market would adopt a strategy that orders are processed one
per minute. Same way it works during opening/closing market.

Some advantages:

1\. All assets will be as liquid as they are now. Still got opportunity to
buy/sell 8 * 60 = 480 times per day.

2\. Most of the HFT industry will be redundant. Instead of allocating super
smart people on made up problem, they can solve more important social problems
(e.g. robotics, curing cancer, aging, space exploration, high growth tech
companies).

3\. Less day trading, encourage long term perspective.

~~~
pc86
0\. Why once a minute? Why not twice? Why not once every 5 minutes? 15? 60?
You can still buy or sell eight times a day so once an hour should be plenty.

1\. Putting "high growth tech companies" (we know you mean startups) in the
"important social problem" bucket, especially in the same group as aging,
cancer, space exploration, is tenuous at best.

2\. Until any of the above pay half a million a year plus huge bonus
potential, I seriously doubt anyone going into HFT would give them more than a
passing glance.

~~~
jakozaur
0\. Just to be fair I think any discrete time auction would reduce HFT. No
matters less if it will be 100ms or 15 minutes. Just a parameter that you can
optimize based on your market.

1\. Not all startups are equal, but quite a few will create some lasting
value.

2\. Unsure if most of this career alternatives will ever give that sort of
gains. The question is where the gains come from? Inefficiencies in trading
strategies of your retirement fund? Maybe those inefficiencies are always
present if humans type orders? Maybe we should design stock market with human
first approach, not HFT exploitable?

~~~
fr0sty
> Just to be fair I think any discrete time auction would reduce HFT.

But is the reduction of HFT qua HFT really the goal? Making a market low-
frequency will by definition reduce/eliminate HFT as a strategy but you will
still have a lot of trading activity done by well capitalized companies using
lots of expensive equipment. They will just use different strategies.

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ryporter
It links to a slightly longer article [1], which provides a bit of detail, but
doesn't elucidate.

First of all, how do you only allow passive orders? If an order is marketable
when it arrives at the exchange, then is it rejected?

Second, how does this resemble IEX's speed bump? I'm very confused.

[1] [http://www.bloomberg.com/news/articles/2016-02-03/this-
upsta...](http://www.bloomberg.com/news/articles/2016-02-03/this-upstart-
market-hopes-to-grow-with-flash-boys-strategy)

~~~
minimax
Basically in their rulebook it says that all prop (as opposed to agency) flow
must be passive, and if they find aggressive prop flow from a member they can
terminate the membership.

The tie in to IEX is tenuous at best.

~~~
randomname2
Good explanation of IEX here: [https://www.fastcompany.com/3031242/a-no-
nonsense-explanatio...](https://www.fastcompany.com/3031242/a-no-nonsense-
explanation-of-iex-the-exchange-fighting-high-frequency-trading)

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chollida1
Really, the article is one paragraph.

It quotes Doug Cifu, the head of the largest HFT firm in the world.

I don't know much about Aquis strategy for growing their exchange but if its
anything like the aequitas exchange that has just opened in Canada then they
get inflated numbers by begin the exchange off record where some banks get
paid to report their large block trades.

~~~
randomname2
The article argues it doubled its share of public European stock trading since
Feb. 8, when it banned what it considers a problematic high-frequency-trading
strategy, just wanting to limit proprietary traders to passively providing
price quotes, i.e. banning HFT firms which are parasitic orderflow
frontrunners not market makers, and take zero risk which is about 99% of them.

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epx
As I commented in another related article, I think it in terms of "nuclear
reactors", whose reaction times are crafted to match human reaction times
(tens of seconds). Trading could follow the same principle.

Compounding with that, some studies say that trading itself causes most (2/3)
of the volatility, so it is expected that µs-scale trading creates even more
volatility.

~~~
vostok
> so it is expected that µs-scale trading creates even more volatility.

Could you help me understand why this might be expected?

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andylei
great chart bloomberg

[http://tylervigen.com/spurious-correlations](http://tylervigen.com/spurious-
correlations)

