
Net Neutrality and Modern Exchanges - dlauer
http://techcrunch.com/2015/09/24/net-neutrality-and-modern-exchanges/
======
chollida1
This analogy is really stretching it.

I appreciate that the author is probably trying to cross the chasm to find an
analogy for techies, but its very strained.

Net neutrality didn't mean that you got Netflix 300 micro seconds after your
neighbor who paid more, it mean that many people just flat out would not be
able to afford Netflix period.

Compare that to the cash equity markets...

Hands up those of you who have been negatively affected by HFT firms having
faster quotes, I see that no one has their hands up and that's the correct
response as the average investor has it better now than in the past. Fee's are
down, access to information is up, fills are much.... much...much better than
they were in the past.

For most people here, you'll never make a stock trade that actually matches on
an exchange as your trades will almost certainty be matched by KCG, Citadel,
or some other internalizer.

You won't care as you'll still get the best price. The only people who get
screwed by the cost of running a modern trading firm are the hedge funds and
arguably most hedge funds are perfectly fine using the SIP for their quotes,
or getting them from Reuters, ActiveData, Bloomberg, etc.

Or put another way, say tomorrow the exchanges do away with their proprietary
data feeds all together and everyone uses the SIP. Would the average investor
be better off?

I can't see a plausible scenario where they would be. HFT firms would still
race to be the fastest, so collocation, specialized hardware and software
would still be as valuable as ever. In fact what would change is that you can
make a very strong case that there would be less liquidity. Since firms can't
use proprietary feeds they are more "exposed", and hence they'll be less
willing to take one side of a trade, meaning spreads widen, liquidity goes
down, hence trading volumes go down, which has a negative feedback cycle
whereby profits go down, hence more market makers leave the business and
spread continue to push out.

now you've reached a point where the average investor is very much affected as
they'll now pay more for each trade.....

TL/DR, slower feeds means more risk, leading to less trading, leading to
smaller profits, leading to fewer players, leading to wider spreads, leading
to things being worse for the average person.

Someone want to take the other side of this argument?

