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http://www.nickbostrom.com/fable/dragon.html

Addepar | New York, NY & Mountain View, CA; Full time; VISA; ONSITE only

Addepar is looking for engineers to join our growing Mountain View & Midtown Manhattan offices! We're a fast growing startup trying to overhaul the data infrastructure of finance. Engineering is at the core of Addepar's culture and we are looking to add the best, brightest, and most passionate software engineers to our teams. If you are excited about doing the best work of your career in web development, distributed systems, analytics, data, automation, or infrastructure, we want to talk to you!

Contact us at: careers.addepar.com OR email careers [at] addepar [dot] com to learn more.


when there was no HFT and market makers were humans, you had to wait a long time for your trades AND spreads were huge (aka, prices were worse).

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You are making an assumption that computers mean high frequency trading. We can use computers to trade without having high frequency traders.

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its weird that in every industry where computers replace people, HN considers it progress, but when its making securities markets, its a scam.

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Back in the day I worked for financial traders on early automated trading systems, and I think your summary is fantastically poor.

First, people have long had questions about the societal effects and costs of trading, even when humans did it. Second, the automation of trading isn't merely replicating what humans do at a lower cost. I'd call it a fundamentally different activity. Third, one of the things that has become more and more attenuated is any sense of moral responsibility. Traders were never known for attacks of the warm fuzzies, but algorithms not only don't give a shit about how the affect humans, they can't. And fourth, instead of saving everybody money, finance eats up an ever-increasing share of the economy, and I think automation is part of that.

Automation isn't universally good. Sometimes it makes things better, sometimes worse. As technologists our job isn't just to automate everything. It's to use our professional skills and experience to improve the world, to improve human lives.

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I feel like you're side stepping the point of his argument. Maybe I'm misreading you both. It read (to me at least) more of a "why isn't hn this hard on other automation stories" and less of an indictment of the (fashionable) distaste for HFT.

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I suppose one could read it either way. But a) most engineers are pro-automation, b) he works for a financial company, and c) computers haven't really replaced people in finance, so absent other evidence, I am going to stick with my reading of his comment for now.

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How does one eat a share of the economy? Do I have to assume it to be zero sum for the concept to be clear?

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You don't have to assume zero sum in general. Just that some interactions can be zero or negative sum. The simple example is monopoly rents: monopolists can increase their share of total profits without increasing value delivered.

By a lot of measures, the financial industry captures a lot more money than they did in previous decades. But it's far from clear that they're delivering a lot more value, and given that computers have drastically reduced their costs, it's reasonable to expect them to be smaller, not larger. As a start, this has some good graphs:

http://esoltas.blogspot.com/2013/02/5-more-graphs-on-finance...

And here are a couple more general-audience articles:

http://blogs.reuters.com/felix-salmon/2011/03/30/chart-of-th...

http://blogs.wsj.com/economics/2011/12/10/number-of-the-week...

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Eh, using computers to replace people in front running was really not an improvement to the situation.

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Yes it was. Even stipulating your use of the term "front running"†, it's not hard to see how. When humans intermediated trades, spreads were denominated in dimes and quarters (and even higher as you go back further in time). Now they're pennies.

Google "odd eighths scandal" for a good starting point.

"Front running" has a specific technical meaning, which very few people who throw the term around seem to know about: a front-runner violates a fiduciary duty they have to a client, trading against their clients for their own benefit. Market makers and prop trading firms aren't generally brokers for other people and don't have that duty; they can't "front-run" the people they out-trade.

Your real estate agent would "front run" you if they knew you wanted to buy a particular house, knew your maximum price, bought the same house for less than that price and then sold it to you at a profit. Same with your stock broker and, say, IBM stock; they have a duty of best execution to you.

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I only know as much as I read in Flash Boys, and it sounds like front-running is generally the right name for this, but the difference is that it is not your broker but 3rd parties who are fishing for info on potential trades that are front-running.

By your analogy, the real estate agent knows you want to buy 5 houses, and suddenly after closing the first one, the price of the remaining 4 goes up.

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No. Your real estate agent has a duty to you and cannot trade against your interests. A prop trading firm (or "3rd party firm") has no such duty, and thus can't "front-run" you.

If your own real estate agent bought a bunch of houses to resell them to you at a profit, they would be front running you. If another real estate firm noticed that you seemed intent on buying 5 houses and bought a bunch of them to resell to you, that would not be front-running; in fact, that would basically be a description of how the real estate market works.

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> how the real estate market works.

I'm not saying it's your own broker or agent that is biding up the remainder of the lots you are intending to buy. It is "observers" who are manipulating the system in a way to make you reveal to them your intentions and price, so they can "front run" you for the next transaction a millisecond later at the next exchange.

And the reason I quoted observers was becuase in my limited understanding (if i had the book in front of me I would re-read this), the HFT traders would put up some token offers up on all the stocks for the purpose of exposing potential activity that they could abuse. A quick google of this suggests that this is called "Pinging".

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basically be a description of how the real estate market works.

For example: a commercial real estate developer may be putting together "an assemblage", which takes a bunch of disparate properties and tetris-style assembles them into a contiguous landmass to hold e.g. a larger commercial property with a signed anchor tenant and the plans for more. The developer has important, market-moving knowledge about the near-term prospects for properties composing that assemblage: they are all about to become sharply more valuable precisely because the developer has a use for them. The developer will send out someone who is isomorphic to my dad to discuss with the owners of each property, partially in serial and partially in parallel, to get them to sell to the developer. Their goal is to get the properties as cheap as possible and they are under no obligation to tip their hand as to why they want them.

It is highly, highly in the developer's interest to conclude all purchases before either a) the property owners or b) anyone else realizes what is going on. This is complicated by many factors, including e.g. planning commission approvals required in some places which are public records. A fairly common strategy among savvy local real estate investors is to a) identify assemblages before they are assembled and b) race the people putting them together.

"They bought the corner gas station? It's useless without Milly's house. Have they closed Milly yet? Quick way to check. calls Milly Milly, I was wondering, haven't you considered being closer to your children? Where did they live again, Florida? Yeah, yeah. Interested in selling your house if I give you a fair offer? Well, we can talk it over any time, but $300k cash and I can close immediately. Sure sure, let's chat."

Real estate developers hate, hate, hate when it happens, because sometimes the market maker here has correctly intuited "This deal doesn't happen without the property which was previously occupied by Milly, right? Man, that would be a shame. $700k." "That's an outrage. It's worth $250k." "You were certainly going to tell Milly that,which is why I gave her $300k. But, between businessmen, it's not worth $250k or $300k. It's worth whatever number your client is willing to authorize to get the assemblage done." "$600k you dirty dog." "$650" "DONE." "Pleasure doing business with you."

Now naturally, sometimes the market maker guesses wrong. He now is holding a house. That's the nature of the business.

This maps fairly directly to financial markets, except the "assemblages" are called "block trades", they're composed of fungible units rather than individually distinguishable properties, and this happens much faster and much cheaper because market makers are very, very good at their jobs.

You can imagine that the neighbor next door to Milly might notice the fact of Milly's transaction (e.g. via hearing directly) or the market maker's transaction (e.g. via public records). This is analogous to the tape being painted in a lit exchange. "Ooh spiffy, my property is more valuable than I thought it was!" The real estate developer hates this as much as Brad Katsuyama hates when someone spills the beans that he's putting a 100k trade together by painting the tapes with buy orders.

The real estate developer, and Katsuyama, should learn to deal with their disappointments or get better at executing on their only job.

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That's splitting hairs. Do you have a better term for when someone sniffs your trades on the wire and uses their advantaged position to buy up the market and then relist it at a higher price?

Arbitrage doesn't really cover it because people were buying at the original price and may not buy at the marked up price.

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As I understand it, "sniffs your trades on the wire" is an inaccurate description of what is going on. HFT is responding to information about trades that have already happened (possibily at a different exchange).

Where it really is wire tapping, I would say the right term might be (high speed) industrial espionage.

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> HFT is responding to information about trades that have already happened (possibily at a different exchange).

And that they were likely a party to. They would place small orders on all the stocks so that they could detect activity that they could exploit at the next exchange a millisecond down the wire.

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Right!

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you get a discount on insurance

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Or, isomorphically, you pay a premium to avoid being tracked.

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until they make it mandatory and then the discount will be as good as gone.

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The discount is partly there because tracking makes it cheaper for them to insure you, because they can estimate risk better. The better you are at estimating risk, the narrower your margins can be.

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Consumers don't win however if they are judged as now higher risk (which should be approximately half of them).

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A naive assumption of incentives would make one assume that tracking devices would make people drive safer and save everyone money. More likely consumers will not drive any safer[1] and instead not only have to pay for normal insurance, but also the tracking devices and than data analytics.

[1] Difficulty the incentives people already have to avoid accidents is likely cognitively saturated. See red light cameras.

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Consumers on average win, because average rates go down, because insurers have better estimates of risk. Or do you think that the good drivers should subsidize the dangerous ones? (Privacy issues aside.)

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I don't agree. The trends of insurers is to cover less and less and to raise their premiums as soon as they can. They are clearly profit maximizers, not "consumer-centric" organizations at all. Just like banks.

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Do you want to pay for someone else to be a bad driver? Or should that person put down the beer and the phone?

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Insurances should be there to cover risks, and they work because you have sufficient base size to cover for the % of people who will have accidents. Once you start discriminating it destroys the purpose of having an insurance for everyone in the first place.

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or maybe UX doesn't matter

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Then what does?

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i don't know. some possibilities i can think of: value proposition, features, market positioning, network effects

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life is meaningless. everything is meaningless.

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you are in between those 2 extremes and standups are useful?

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Right - some fraction of the team isn't zoned out, sure. Maybe working on the communication skills of those remaining ones is a better idea, than derailing everybody for a standup.

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Addepar; New York, NY & Mountain View, CA; Full time; VISA; ONSITE only

Addepar is looking for engineers to join our growing Mountain View & Midtown Manhattan offices! We're a fast growing startup trying to overhaul the data infrastructure of finance. Engineering is at the core of Addepar's culture and we are looking to add the best, brightest, and most passionate software engineers to our teams. If you are excited about doing the best work of your career in web development, distributed systems, analytics, data, automation, or infrastructure, we want to talk to you!

Contact us at: careers.addepar.com OR email careers [at] addepar [dot] com to learn more.

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it does not assume that.

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Then they should change title from "female" to "parent".

Anyway it is typical rant disconnected from reality. Why nobody hires me with my doctorate from "communications"?

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did you read the article? it uses words like "most" and "many". it talks about why older females have trouble finding jobs, but also about how older men have trouble finding jobs. its also an article about trends, not absolutes.

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