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More Warnings About High-Frequency Trading

timothy posted more than 2 years ago | from the financial-chicken dept.

Networking 500

bfwebster writes "From The Big Picture (a great finance/econ blog) comes a link to this New York Times article on some of the risks and problems of high-frequency trading on financial markets and a couple of 'gadflies' who are pushing hard to get some changes and reforms in how Wall Street handles HFT. Key question: when is fast trading too fast?"

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Reincarnated (-1, Flamebait)

Anonymous Coward | more than 2 years ago | (#41298327)

If I am reincarnated
I hope I'll be a Nigger
My brain a little smaller
But my cock a whole lot bigger

Re:Reincarnated (-1)

Anonymous Coward | more than 2 years ago | (#41298813)

My brain a little smaller

More than a little. You will think gang violence, no education and knocking up nasty unattractive fat chicks you don't even know is a great plan for your future. You will think a gutter form of pidgin English is just so cool.

You will be in constant danger of bodily harm, not from Whitey but from other more aggressive niggers. If you do get arrested and incarcerated from your gang violence, theft, failure to pay child support, etc you will swear it's just Whitey's racism. As if your own decisions had NOTHING WHATSOEVER to do with it.

You and over 90% of knee growz like you will vote for a president even worse than Jimmy Carter because he has a similar skin tone. I mean that's all that matters right? Of course you have everything in common with a wealthy Harvard educated legal professor who has a traditional nuclear family and his own personal entourage including chauffeurs and pilots . He's just like you in every way! Clearly he understands what the 'hood is like. Why just the other day his baby-mama took him to court, again, and on the way there he had to be careful not to wear the wrong gang colors. Sure! He's one of you! All because he has brown skin. Because that's what matters!

But my cock a whole lot bigger

Yes. You will need it. The superobese white women have SO MUCH "cushion for the pushin" that you'll need a 10 inch cock just to get 3 inches inside her. But watch out. Super obese nasty women of all colors seem to be especially fertile... In fact the definition of surprise is when you see a super-lardass white woman that you wouldn't fuck if the fate of the world depended on it, because you have standards ... and she has a kid, or three, of course ... and the kid is NOT half-black! That's what real surprise is made of.

Seriously do blacks really wonder why they're not more widely respected? Honestly it's a fucking miracle they have so much sympathy. Yeah there's a few decent ones and they're pretty damn cool. But the rest, well... all the suburban white boys who get angry at this post would never receive any mercy from the rest. I hope for their sake they never take a wrong turn one day and end up in the 'hood, because they won't care how not-racist you are, they will be too busy mugging you and putting your car on blocks. It's the goddamned truth, so you can't deny it. All you can do is mod it down and hope it goes away, you pussy.

2.45 GigaHertz is my favorite trading frequency (-1)

Anonymous Coward | more than 2 years ago | (#41298339)

I LOVE microwave food.... 2.45 GHz is my favorite trading frequency

Trading's Too Fast When It Ceases to Mean Anything (5, Insightful)

eldavojohn (898314) | more than 2 years ago | (#41298343)

Key question: when is fast trading too fast?

Trading is too fast when it ceases to mean anything. The rate at which these decisions are being made indicates that it is not going through a human mind. The stock market is about people being able to buy and sell securities that allows businesses to raise additional capital. It was originally a very social thing so much so that it could reflect the mood of the populace's strength and development.

Many ordinary Americans have grown wary of the stock market ...

Right you are! It's no longer about humans making decisions. It no longer reflects social aspects of a sector or country or world market. It's more and more about what algorithms your "opponents" are using and what your algorithms are set at. And that's where it ceases to make sense. I'm okay with some guy waking up at 3am and reading every newspaper in the world and beating me at stock trading. I'm not okay when the name of the game today [wired.com] is who can pay tons of money to have their own servers set up across the street from a major exchange with a special dedicated fiber going straight to them as they pay off said exchange. That's starting to become so abstracted from the initial concept of a stock exchange that these big firms have walled everyone else out.

... which they see as the playground of Google-esque algorithms, powerful banks and secretive, fast-money trading firms.

If only they were Google-esque algorithms, they'd at least be innovative. SNAFUs have shown they're far from complex and often so stupid they loose hundreds of millions. But, yeah, who in their right mind would play a game like that?

What the algorithms are buying and selling no longer make any sense, the turn around is so insanely quick on these trades that there is no point at which a normal human can say "Oh, that algorithm thinks that Microsoft stock is going up and will hold it for some amount of time." No, instead what's going on is someone put out a big pre-order for Microsoft stock and so the HFT guys are buying stocks at a lower price than that only to turn over and dump them almost instantly as the order actually comes through netting fractions of a penny.

Re:Trading's Too Fast When It Ceases to Mean Anyth (2, Insightful)

Anonymous Coward | more than 2 years ago | (#41298539)

It's more and more about what algorithms your "opponents" are using and what your algorithms are set at.

Only if you are in it for day-trading profits. And if you are, well, you deserve to be beaten senseless by some HFT algorithm.

If you're a long term investor, with a time horizon of many decades, this doesn't matter. For example, I have a stock I bought 15 years ago. It has gone up by around 3X in that time. HFT makes no difference to me when I've held a stock over many years or decades. The exact microsecond it sells doesn't matter to me after a period of decades.

The fundamentals are driven by stock valuations, which are based in what people guess about the future of the company. You can be as informed about that as anybody. If you believe a company will do well over the long haul, buy some of their stock. Don't worry about HFT. You don't have to microsecond-time your sale and beat some other HFT algorithm when you've made a lot of money over years, rather than little bit over seconds.

Re:Trading's Too Fast When It Ceases to Mean Anyth (1, Insightful)

roman_mir (125474) | more than 2 years ago | (#41298571)

The root cause behind HFT is high level of inflation (money printing), artificial interest rates that are forced down to support inflation [slashdot.org] and thus the consumers, who are forced into the stock markets, which become gambling mechanisms rather than investment platforms.

The real solutions are shunned [slashdot.org] , the real solutions is to allow the people (market) set the interest rates, allow the people (market) choose what to use as money, prevent government from printing, from interfering with the economy, prevent gov't from deficit spending, ensure that all bonds pay actual interest rates, not fake ones, that support deficit spending, things like that.

Of-course the actual solutions aren't even accepted on silly public forums, and they are definitely not going to be accepted by the politicians.

Re:Trading's Too Fast When It Ceases to Mean Anyth (5, Informative)

vlm (69642) | more than 2 years ago | (#41298791)

The root cause behind HFT is

SEC rule 612

My advice is if you don't know the rules don't pontificate on the philosophy of the game's rules. You accurately listed several things that suck. I agree with you on your list and your interpretation of your list. Unfortunately your list has very little to do with why HFT exists.

Of-course the actual solutions aren't even accepted on silly public forums, and they are definitely not going to be accepted by the politicians

The SEC is controlled by private firms that control politicians, not the other way around. If you really want to destroy HFT, for whatever reasons, the way to do it is to convince trading firms that if you want sub-penny price discovery, you could continue the buildout of your rather baroque and expensive HFT infrastructure, or you could just tell your elected pawns in the govt to tell the SEC to modify rule 612 to force rounding to the nearest dollar or the nearest millionth of a penny.

If you round to the nearest dollar no one will ever (famous last words) accumulate enough capital to HFT. If you round to the nearest millionth of a penny then millions of dollars of infrastructure will only bring in fractional millionths of a penny times perhaps millions of trades per day or about a thousand bucks a year. Which compared to buying federal bonds at roughly 0 percent or soon to be defaulting muni bonds at -100% is actually not that bad of a return on equity, but anyway...

Either way the only way for HFT to exist is to set the quantum interval for trading to be "about a penny" which ... tada happens to be right exactly what its set to. I think the way the game's rules are set up precisely perfectly to maximize HFT profits does kinda indicate the people in charge of the market at the big firms want it to be that way, this is not some kind of weird coincidental engineering accident.

The only real long term effect of destroying HFT would likely be to heavily reduce the transfer of wealth from the FIRE sector to the telecom and IT sector. I'm not sure anyone outside the FIRE sector would benefit by that... I like having the FIRE sector crooks, in a small way, subsidize my IT and telecom service.

Re:Trading's Too Fast When It Ceases to Mean Anyth (0)

Anonymous Coward | more than 2 years ago | (#41298605)

[...]tons of money to have their own servers set up across the street from a major exchange with a special dedicated fiber going straight to them as they pay off said exchange.

All major exchanges are providing or are going to provide a co-location service, i.e. the servers directly hosted in the exchange datacenter.
Plus it's not only stock exchanges, but also for instance commodities [reuters.com] ).

Re:Trading's Too Fast When It Ceases to Mean Anyth (4, Interesting)

Anonymous Coward | more than 2 years ago | (#41298661)

Posting AC as I've been working in HFT for 5 years now. You have no idea what you're talking about, errything you just wrote is absolute rubbish. It seems as if you would have the markets swinging wildly based on people's moods. There have been many many fat finger mistakes that were nothing to do with HFT, but you rarely hear about those these days. And when trading systems do go awry most exchanges have built-in and often automated undo not to mention penalties. Some exchanges even changes modes to auction when shifts over a certain percentage occur. This stuff is almost always blown out of proportion and you'd never read about the actual workings of the regulation and clearing processes which protect all players - believe me it is pretty tough building in some of the mandatory short circuits and all the realtime accountability documentation. There hasn't been the likes of Citi's "Dr Evil" algorithm since regulation caught up. Obviously I can't really elaborate on algorithms, but suffice it to say your understanding is naive at best - you're talking 2004 type games.

Re:Trading's Too Fast When It Ceases to Mean Anyth (2, Informative)

Anonymous Coward | more than 2 years ago | (#41298665)

The stock market is about people being able to buy and sell securities that allows businesses to raise additional capital

FYI, the raising of capital stops when the IPO is completed. From then on, the securities change hands between investors, not between investors and companies. All the buying and selling that happens in the stock market, on any given day, is purely between independent investors. The company is no longer involved in the process, and the fate of their stock is entirely up to the market participants.

Human minds are emotional and inaccurate. (1)

Anonymous Coward | more than 2 years ago | (#41298709)

The rate at which these decisions are being made indicates that it is not going through a human mind.

That's a good thing.

One of the worst crashes in history didn't involve computers (1929) - that was ALL humans panicking and getting caught up in the margin call downward spiral.

Human traders trade on gut instinicts and emotions - even when there are no computers. Gut instincts are mostly wrong.

The best traders are actually folks who've had brain damage so that they don't feel much emotion [wsj.com] .

And since HFT, I've been seeing much less large market moves because of piddly bad news. And any day to day volatility has no effeect what so ever on my investments - my strategy is measured in years.

It's all about the numbers and frankly, I prefer it that way.

Re:Trading's Too Fast When It Ceases to Mean Anyth (2)

jickerson (2714793) | more than 2 years ago | (#41298727)

No, instead what's going on is someone put out a big pre-order for Microsoft stock and so the HFT guys are buying stocks at a lower price than that only to turn over and dump them almost instantly as the order actually comes through netting fractions of a penny.

Actually, this isn't what is going on. Their access to the trade flow doesn't let them see the market book (what would record the "pre-order"). Instead, they are looking for patterns in the limit orders representing large institutional traders trying to unwind their position (think mutual funds). Since these big players can't place an sell order for 10,000 shares, they break them up into smaller chunks using their own sell algos. If a HFT can identify these trades, they can jump in and buy ahead of the fund and sell to them. They are simply trying to outwit the other institutional fund's trading algorithms.

Disclaimer: I'm a finance doctoral student, and one of my colleagues actually does research into HFT using proprietary data

Re:Trading's Too Fast When It Ceases to Mean Anyth (0)

Anonymous Coward | more than 2 years ago | (#41298875)

Agreed, HFT is about "tricks" not about "rational choices."

How fast should it go? (1)

GPLHost-Thomas (1330431) | more than 2 years ago | (#41298359)

My answer to this is very simple: more than once a day is too fast, and it should be forbidden.

Re:How fast should it go? (1)

91degrees (207121) | more than 2 years ago | (#41298439)

I could easily see a legitimate rationale for trading twice in a few minutes. I see a news story and speculate that this is going to make people overvalue the shares, so I buy some shares as quickly as possible and sell them when I think the stock is close to peaking.

Re:How fast should it go? (3, Insightful)

etash (1907284) | more than 2 years ago | (#41298507)

stock market should not be about what you said: speculation. it should be about long term investments, that way, speculators, adventurers and all sort of thieves will go way. once or twice per day is more than enough. the way stock markets are now, is simply a distortion of its purpose. p.s. shorting should be outright banned too.

Re:How fast should it go? (3, Informative)

h4rr4r (612664) | more than 2 years ago | (#41298529)

Why should shorting be banned?

Why should I not be able to promise you a stock tomorrow at less than todays price?

Either I made the correct prediction or you get a great deal.

Re:How fast should it go? (2, Insightful)

etash (1907284) | more than 2 years ago | (#41298743)

shorting should be banned for a couple of reasons. first of all because you don't own the stock that you are trading. secondly because it leads to manipulations ( people not just predicting that the stock will drop but having interest in that stock dropping and thus acting through various means towards that end ). Which brings us to the third reason: it's just a fraud. the only person who gains from shorting is the guy doing it not the actual stockholder, the stockholder loses money.

Re:How fast should it go? (2)

h4rr4r (612664) | more than 2 years ago | (#41298777)

I think selling stuff you do not yet own is legal, otherwise how would drop shipping work?

Regular trading leads to manipulations ( people not just predicting that the stock will go up but having interest in that stock going up and thus acting through various means towards that end ).

Re:How fast should it go? (1)

etash (1907284) | more than 2 years ago | (#41298841)

if only the analogy of drop shipping was well..analogous. manipulating stocks to go down is way easier than making them go up. Plus, like i said it's a pure fraud: so you tell me that if i lend you my 1000 shares ( worth 10.000 usd today ) you will give me back that exact number of shares tomorrow plus 200 usd. What you omit to say is that the value of those 1000 shares i will get back tomorrow will be 8.000 usd, which makes you a fraudster and thus a thief.

Re:How fast should it go? (1)

h4rr4r (612664) | more than 2 years ago | (#41298887)

If it is pure fraud then don't lend me your stock.

No one hides the fact that the hope of the shorter is that the price goes down. It is well known that this is the only reason to do it.

How is manipulating stock prices down easier than driving them up? Please explain, examples would be even better. Lets remember that pump and dump, the opposite, is still very popular judging by the spam I get.

Re:How fast should it go? (4, Informative)

swalve (1980968) | more than 2 years ago | (#41298847)

Incorrect. Every short trade has a corresponding long trade. If the guy borrowing the stock loses money, the guy lending it makes money.

Re:How fast should it go? (0)

Anonymous Coward | more than 2 years ago | (#41298771)

Because those of us who don't think Randian rape is a nifty idea are rapidly growing tired of defining our society by people who can crunch numbers better than the rest of us getting 40000 times the salary as someone that clean's out bedpans for old people.

Re:How fast should it go? (1)

h4rr4r (612664) | more than 2 years ago | (#41298821)

I am no Rand fan. I am far enough opposed to that I am often called a socialist right on slashdot.

I still don't see what shorting has to do with that.

Re:How fast should it go? (1)

Nursie (632944) | more than 2 years ago | (#41298779)

Yeah, I don't really understand the anti-shorting rhetoric.

HFT I vehemently disagree with, it's so divorced from anything to do with the stock or company being traded that it's ridiculous. But shorting?

Shorting is trying to monetise knowledge (or presumed knowledge) of a stock movement. It's just that the knowledge is about a future fall instead of a future rise.

Re:How fast should it go? (1)

VortexCortex (1117377) | more than 2 years ago | (#41298787)

Because the stocks are no longer about the actual worth of the company. Shorting doesn't change anything for the better, it's not more accurate, it's fucking gambling you fool. Go bet on horses, that's where your shorting game is best played.

Re:How fast should it go? (1)

h4rr4r (612664) | more than 2 years ago | (#41298851)

All stocks are gambling.
We got rid of dividends and made it no different than collecting trading cards.

Shorting is no different than any other selling, it cannot make anything worse. The market sets the price.

Re:How fast should it go? (5, Insightful)

miffo.swe (547642) | more than 2 years ago | (#41298525)

The function of the stock market is not to make you able to buy and sell stocks based on what other people might pay for them. That is an unfortunate side effect.

Some people like you have long since abandoned stocks as a way to distribute risk and capital investment among more than one investor. Instead you view it as a game where its all about tricking some poor sod out of their money. Where the fuck do this contribute in any way to anything? Personally i would be all over a stock market that was regulated back to what it was first meant to be, somewhere i could invest in good ideas and ventures based on how much they would pay off in dividends, not inflated stock prices.

Re:How fast should it go? (1)

Anonymous Coward | more than 2 years ago | (#41298651)

You can still buy stocks based on dividends and ignore the price.

Re:How fast should it go? (3, Insightful)

gorzek (647352) | more than 2 years ago | (#41298687)

Nothing so extreme is necessary. You can kill the HFT nonsense with a few straightforward tweaks:

1. Put a random delay on every order, up to 60 seconds. This makes millisecond-level speculation worthless.
2. Assign a small fee (0.1%, 0.5%, something on that level) to every transaction.
3. Require sellers to make good on their offered prices. Don't offer a price you aren't willing to actually take.

Some combination of those would eliminate HFT as a useful vector of profit-taking.

Common Sense (0)

Anonymous Coward | more than 2 years ago | (#41298361)

The only way to objectively have a "too fast" is to have the time duration based on a constant.
Hence I recommend a plank's time constant (10 ^ -43 secs) as an objective time duration.

Too fast when humans cannot react (0)

Anonymous Coward | more than 2 years ago | (#41298389)

When the trading is done at a speed such that a human cannot observe the trade (or attempted trade) and react, then it is too fast.

Or to put it another way, trading should be limited to maybe1 trade every 2 to 3 seconds per stock.

High Frequency trading (2)

rossdee (243626) | more than 2 years ago | (#41298395)

If you pay a flat $9.95 per trade, and you do it fast enough (say 1 gigahertz) you'll be spending more money than the national debt in a few hours.

Re:High Frequency trading (1)

h4rr4r (612664) | more than 2 years ago | (#41298469)

That seems like a rational solution, but it would need to be a percent of the stock value. For BRK.A $9.95 is nothing, but if you were trading only a few shares of GKNT then this would pretty much prevent you from ever making any money.

Re:High Frequency trading (5, Interesting)

gorzek (647352) | more than 2 years ago | (#41298749)

This is why I favor a 0.1-0.5% fee. If we really want, we could also assess the fee as an inverse function of how long you've held it: the longer you've held the stock, the lower the fee, and it gets exponentially smaller with time until it is insignificant.

But if you want to trade something you bought 5 seconds ago? Enjoy your 90% fee.

Re:High Frequency trading (1)

h4rr4r (612664) | more than 2 years ago | (#41298801)

That seems like an even better idea.

Re:High Frequency trading (1)

slashmydots (2189826) | more than 2 years ago | (#41298745)

Since large companies don't care about $9.95, that means it's big dollar amounts. You're on to something here. Either fees should be a percentage-based deal which would slow them way the hell down or just lower the allowed frequency based on how large the dollar amount is. That way anyone can make $10,000 purchases and sales as often as they want but when you start throwing around $10 mil, then you get to wait 5 minutes.

it's too fast (5, Insightful)

circletimessquare (444983) | more than 2 years ago | (#41298397)

when your average investor is having an unseen tax applied to his transactions

which is what HFT is: an unfair tax by those who can afford the screamiest servers, the closest fibre optic connection, and the scariest code. it renders the idea of a fair marketplace a lie

the solution is easy: queue all trades on a heart beat

once every second, once ever three seconds, once a millisecond... whatever is agreed upon, all trades are queued up and then released on this schedule, and no one or nothing can surpass it

there are many complex unfair problems in life. but this is one with an easy solution. the problem is no finding the willpower to enact the change. as with many problems in american civil and political life, the will to do the right thing is polluted by the plutocrat's money

Re:it's too fast (2)

brxndxn (461473) | more than 2 years ago | (#41298473)

I like your solution.. Mine, in previous posts, was to add a random delay (less than a second) to all trades and apply a tax. The tax would be very minute - it would go unnoticed to everyone except the people making a ton of trades.

Re:it's too fast (1)

gorzek (647352) | more than 2 years ago | (#41298775)

Those are the same ideas I've had.

There are plenty of ways to approach it, but the reality is, there are too many people making too much money to go along with any of this willingly. It would have to be mandated by law.

Re:it's too fast (5, Interesting)

Sprouticus (1503545) | more than 2 years ago | (#41298491)

Wish I had mod points for the parent here.

The key point HFT people keep harping on is increased liquidity. The issue is that at some point, a point we reached long ago, that increased liquidity became meaningless to investors and the HFT tax became a burden. Even institutional investors pay this tax. Only other HFT traders care now.

They are skimming money off the top, adding ZERO value to the market, and pissing off just about everyone.

But they have the money, so they can prevent regulations from limiting this... (plus regulaiton are always bad, right?)

Re:it's too fast (1)

GigsVT (208848) | more than 2 years ago | (#41298693)

If they are skimming money consistently, then by definition they are still adding liquidity. You can't make money off of arbitrage unless there's a market inefficiency to be corrected.

Re:it's too fast (4, Insightful)

gorzek (647352) | more than 2 years ago | (#41298819)

"Liquidity" as the argument for allowing HFT doesn't really prove anything, either.

Okay, so it grants near-perfect liquidity. Great. So what? Is that more important than market stability and sane trading practices?

That is the real problem: that traders on Wall Street think the system should be set up exactly how they want it so they can make as much money as possible, but taxpayers will be there to bail them out when the shit hits the fan. Well, fuck that. The economy is too important to just let it run wild in this way. No one is guaranteed a completely free and open market. We have rules for a reason. Ending the HFT shell game won't drive anyone out of the market who was making a genuine contribution in the first place.

Re:it's too fast (1)

Walterk (124748) | more than 2 years ago | (#41298579)

So basically what you're saying is that the stock market should be a game of Civilization [wikipedia.org] .

we're talking about the stock market (1)

circletimessquare (444983) | more than 2 years ago | (#41298793)

civilization is not the turn based game to compare it to

this is [wikipedia.org]

Re:it's too fast (0)

martin-boundary (547041) | more than 2 years ago | (#41298681)

which is what HFT is: an unfair tax by those who can afford the screamiest servers, the closest fibre optic connection, and the scariest code. it renders the idea of a fair marketplace a lie

the solution is easy: queue all trades on a heart beat

No. You're just shifting the advantage to other assets. The same companies that can afford the screamiest servers, closest fibre optic connection and scariest code can also afford the smartest mathematicians on Wall Street. Unless you're proposing to outlaw smart people in the "fair" market, you're not solving anything, just rearranging the deck chairs.

The problem is that the stock markets have too much money in them, which attracts the gamblers and causes market events to have too much influence in the real world.

sorry but a queue actually does solve the problem (4, Insightful)

circletimessquare (444983) | more than 2 years ago | (#41298827)

pause. think. then post

Re:it's too fast (5, Insightful)

tobe (62758) | more than 2 years ago | (#41298857)

"the solution is easy: queue all trades on a heart beat"

That's exactly the conclusion I came to after a recent tour of a bunch of HFT shops here in London.

Right now the fastest responder wins. This leads to co-location (putting your hardware physically in the exchange) and something called Flash Trading where, for a fee, you get access to bids fractions of a seconds before they enter the market.

This clearly isn't a fair, transparent market.

Put a heartbeat, 1ms or even as high as 5s, on the market. Market state only updates, in it's entirety, on that edge. And get rid of Flash Trading. That stuff is clearly not fair or even ethical.

The smooths out the unequal access to the best prices that currently exist for those that can afford it and even gives the algo shops time to more sophisticated analytics.

It's pretty shocking that, contrary to what you might think, the models that are driving the algorithms are pretty-simple minded and stuffed full of magic numbers. A senior guy at UBS admitted to me that there's absolutely no science involved in their construction. Verification is done on a monte-carlo type simulation with historical data and the model must continually be updated as trading conditions change. The quants are generally just looking for a new set of magic numbers that make the simulations profitable. Literally no-one understands how the models work and they bear absolutely no relation to the kind of 'Frost in Florida, Orange Juice futures up' kind of market conditions the man in the street might expect.

It's kind of frightening really that our pensions are changing in value based on the execution of these algorithms

Here's The Thing (1)

Anonymous Coward | more than 2 years ago | (#41298403)

HFT is very bad for the little guy, especially the individual investor. But, it's a straight up money printing machine for the big boys and they're not going to give it up. If you had managed to cobble together some code that printed money for you, would you be willing to turn it off simply because other people couldn't keep up? Hell no.

So it seems unfair, disingenuous at the very least, that we should expect them to turn off their money machines. But, even if laws were passed that said they couldn't use HFT, a possibility in light of the recently increased war on prosperity, do you really think they will stop? Or, do you think it far more likely that the HFT will simply go underground? Even if it is illegal, the little guy will still lose.

Re:Here's The Thing (2)

h4rr4r (612664) | more than 2 years ago | (#41298511)

War on prosperity?
Have you lost your mind?

Yes, we should expect them to turn it off. For the same reason that if I had a machine that stole money out of your savings every night I would have to turn it off.

How would it go underground?
If the NYSE says all trades must occur at the same time, or in a queue, or charges $1 per trade, what would they do about it?

There are lots of solutions here, the NYSE should select one.

Re:Here's The Thing (1)

L4t3r4lu5 (1216702) | more than 2 years ago | (#41298797)

the NYSE should have one forced upon it by the appropriate regulatory authority, with hefty financial penalties for gaming or bypassing the system.

You think these people will take regulation or profit-limiting by choice? Don't make me laugh.

Re:Here's The Thing (0)

Anonymous Coward | more than 2 years ago | (#41298523)

That's just because it's expensive right now. Just wait until the next generation hardware platform comes out with open source code. Once the tech makes it easy/possible for everyone it will naturally fall out of fashion.

Re:Here's The Thing (2)

h4rr4r (612664) | more than 2 years ago | (#41298557)

The hardware could be free, the code installed on every machine shipped and HFT would still be very expensive in capital costs.

You have to be physically close to the exchange, the speed of light being a real bitch and all. Then you have to pay for the fiber link to the exchange and pay the exchange for the privilege.

Re:Here's The Thing (2)

gorzek (647352) | more than 2 years ago | (#41298849)

Exactly. This is a game the small investor will never be able to play, because of how the exchange is set up. It's a fundamentally unfair advantage.

Re:Here's The Thing (0)

Dunbal (464142) | more than 2 years ago | (#41298635)

HFT is very bad for the little guy, especially the individual investor.

How?

it's a straight up money printing machine for the big boys

Again - how?

The internet is full of people who have strong opinions about things they have absolutely no knowledge of.

Re:Here's The Thing (2)

swalve (1980968) | more than 2 years ago | (#41298905)

The implication is that the little investor loses out on his rightful chance to screw the other guy. The people who hate HFT are the same ones who bitch and moan when someone at a blackjack table "steals" their card by hitting when they shouldn't.

too fast (3, Insightful)

O('_')O_Bush (1162487) | more than 2 years ago | (#41298415)

I would say whenever the system is operating faster than humans can understand or react. The way it is now, HFT is just a layer to siphon off money from people who do not have their own system.

A 5 minute hold on a purchased stock, either before delivery or before another transaction with it, would fix the HFT problem.

Though, if you listen to the people making money off HFT, there is no problem, and HFT benefits everyone through "increased liquidity". The problem is, the HFT system is flipping stocks on the ms scale, causing stocks to be less volatile (stagnant), and not really filling large time gaps of supply or demand that would cause liquidity issues.

No Incentive (2)

Solstice (11486) | more than 2 years ago | (#41298425)

HFT could be curbed simply by raising the execution price for each consecutive trade a firm makes in an hour (or even in a minute). Won't affect most traders, but HFTs would become more expensive. There's really no incentive for the exchanges to do this, since they're raking in millions in co-location fees and they're able to claim lower execution times for most trades.

Re:No Incentive (1)

fa2k (881632) | more than 2 years ago | (#41298503)

A possible first step would be to make the companies fully responsible when there's a software glitch. That would be a good start anyway. For an example of a bug, see: http://developers.slashdot.org/story/12/08/02/165206/algorithmic-trading-glitch-costs-firm-440-million [slashdot.org] . They canceled some of the orders -- if they do that for everyone, then OK, but HFTers shouldn't get any preferential treatment.

Re:No Incentive (1)

smellotron (1039250) | more than 2 years ago | (#41298817)

A possible first step would be to make the companies fully responsible when there's a software glitch.

Agreed. Do you mean only trading clients, or the exchanges as well? NASDAQ set aside some cash to compensate traders who received untimely execution in the Facebook IPO, but the amount is not expected to cover all losses so from a financial perspective they still are not taking "full" responsibility. Or there's UBS, who (stupidly!) submitted more orders for FB when their earlier orders were not acknowledged (stuck in-flight) and ended up getting filled on all orders. They started litigation to recover those trading losses.

They canceled some of the orders -- if they do that for everyone, then OK, but HFTers shouldn't get any preferential treatment.

There was no preferential treatment. Trade cancellations were done based on price deviance beyond a deterministic cutoff (on 6 names, IIRC). The $440 million lost was trading within the cutoff across ~150 names.

Taleb (1)

puddingebola (2036796) | more than 2 years ago | (#41298427)

I hear the voice of Taleb warning of the rare event. I wonder what the possibility of many of these algorithm derived mass trades all hitting a stock simultaneously. Maybe they can make an entire company "blow up," or an exhcange, or an entire economy. But that is foolish thinking, by someone who doesn't know much of anything.

The system worked ... (2, Insightful)

Rambo Tribble (1273454) | more than 2 years ago | (#41298451)

... pretty well before they introduced that pesky telegraph.

Re:The system worked ... (1)

grumling (94709) | more than 2 years ago | (#41298547)

There's the answer. Tech happens, get used to it. The key is getting the price down so everyone can play in the sandbox.

Re:The system worked ... (1)

h4rr4r (612664) | more than 2 years ago | (#41298583)

So how can everyone afford server rack near the exchange?
Should the exchange provide those private fiber links for free?

Re:The system worked ... (4, Insightful)

gorzek (647352) | more than 2 years ago | (#41298897)

Nonsense. No one is against technology here. What is being decried is the unregulated use of technology to enable profit-taking by an elite class of investors who contribute nothing through their market manipulation, and instead have caused multiple "flash crashes" through their incompetence.

Just because we have the technology to do something, doesn't mean we should just do it, or allow it because it is possible. That our laws haven't caught up to this sort of thing doesn't mean it's perfectly fine.

Re:The system worked ... (1)

asifyoucare (302582) | more than 2 years ago | (#41298561)

.. and paper and pencil. Cuneiform chiseled into stone should be required for all exchanges. Seriously, what is the problem with allowing people (or their algorithms) to trade very quickly? If their algorithms make money, good luck to them. If they lose money, tough titties. (Not arguing with Rambo, who I think was making the same point)

Re:The system worked ... (1)

h4rr4r (612664) | more than 2 years ago | (#41298625)

They don't lose money. Look at the last time they screwed up in a major way, the exchange reversed the trades.

Re:The system worked ... (1)

ZmeiGorynych (1229722) | more than 2 years ago | (#41298891)

Which one? Knight? Unfortunately you're wrong there, Knight lost a sum that was a large fraction of their market value and had to sell itself to a consortium of other firms (ie lost its independence) as a result. The trades reversed were some of the trades done by other counterparties after the Knight trades effectively messed up price discovery for those 20 minutes or so.

So what's your problem exactly?

Re:The system worked ... (1)

Rambo Tribble (1273454) | more than 2 years ago | (#41298673)

Actually, to put a finer point on it, I was pointing to the fact that current technology applied to the market is an Atlas rocket strapped to a horse cart. But, hey, what could go wrong?

Speed doesn't matter (4, Insightful)

MSTCrow5429 (642744) | more than 2 years ago | (#41298481)

The speed of trading is irrelevant to the serious investor. Speculators will always make trades as quickly as possible to make a quick buck regardless of the fundamentals; investors will buy and hold based on the fundamentals, buying and selling after months, not fractions of a second. Prices will always revert to a more "intrinsic" value, regardless of any skewing by speculators.

Re:Speed doesn't matter (2)

h4rr4r (612664) | more than 2 years ago | (#41298567)

If we were not dealing with HFT you would be correct. Instead HFT adds a tax to all the transactions you are talking about.

shouldn't mess with the big boys (0)

Anonymous Coward | more than 2 years ago | (#41298759)

It is a price for doing business, just like stock broker commissions used to be. Since the top 1 percent of Americans have 40 percent of the wealth, the stock market consists primarily of the wealthy. If you are not good enough to play against the big, rich boys in the stock market, you shouldn't. Be best to settle for just buying and holding stocks for years on end.

Re:Speed doesn't matter (1)

MSTCrow5429 (642744) | more than 2 years ago | (#41298825)

HFT only adds costs to those that are trading at high-frequency. If one believes the benefits outweigh the costs, it's a rational course of action. Personally, I think re-evaluating a holding every 3 months makes more sense, but different people will use different strategies based on their own judgment. I'd rather avoid excessive commissions and have less complicated taxes.

Re:Speed doesn't matter (4, Interesting)

grumling (94709) | more than 2 years ago | (#41298573)

Except that if you have sell triggers set based on normal movements of a stock and it happens to get caught up in a flash crash, it could easily execute at the low price then bounce and you'd never have time to react.

Re:Speed doesn't matter (1)

GigsVT (208848) | more than 2 years ago | (#41298725)

You can use options to avoid limit sell crash losses. Instead of placing a limit sell you can buy a put.

Damn those "evil derivatives" and their benefits to the common investor.

I for one don't like the idea (1)

Chrisq (894406) | more than 2 years ago | (#41298485)

that my pension pot could become worthless in 0.005 seconds due to a programming error

Re:I for one don't like the idea (1)

grumling (94709) | more than 2 years ago | (#41298595)

Then don't put it all in the stock market.

*Disclaimer- I am not a financial expert, nor should anything I say be taken as advice. Contact someone who knows what the hell they're doing and they'll likely tell you to hand all your money to them for safe keeping.

Got a better idea? (1)

danaris (525051) | more than 2 years ago | (#41298781)

Then don't put it all in the stock market.

Most "pensions" these days are actually something along the lines of a 401(k) plan. How would you suggest that he not put his pension in the stock market? Do you think he actually has a choice in the matter?

Dan Aris

Re:I for one don't like the idea (0)

Anonymous Coward | more than 2 years ago | (#41298657)

You shouldn't have more in the stock market than you can afford to lose.

Don't worry about frequency (1)

ledow (319597) | more than 2 years ago | (#41298489)

Don't worry about frequency - just make them pay for it.

Price per stock traded per day. Trade in one stock, your daily fee is $X. Trade in two stocks that day? That'll be $X^2. Your third trade will cost $X^3 and so on. (Or some such similar mathematical relationship).

Then if you make the one good, careful decision, you aren't penalised. If you make multiple trades that are sure to make you money, you aren't penalised. If the market for that stock is collapsing and you NEED to get out, you'll pay it.

If you just want to play the numbers by trading in everything every fraction of a second and scoop off only the cream, then it's going to cost you BILLIONS per day.

It might have flaws but returning stability and reinserting good, thought-out decision-making back to the exchanges isn't one of them.

key (5, Insightful)

Tom (822) | more than 2 years ago | (#41298499)

Key question: when is fast trading too fast?

When it ceases to be trading and becomes gambling instead.

Basically, if you are looking at numbers and not meaning, you aren't trading anymore. Here's a suggestion for a totally impractical test: If you call up the trader in question and ask him what the company behind the shares does (i.e. which business it is in) and he has no clue, then he's not a trader, he's a gambler.

Re:key (1)

MSTCrow5429 (642744) | more than 2 years ago | (#41298603)

People have been looking at numbers and not meaning since the beginning, e.g. "technical" analysis. I suspect the majority gamble, and I don't think that's going to ever change. Security analysis takes work, isn't glamorous and doesn't deliver a fix or high. The problem is not when people gamble, but when people gamble and think they're doing something else; however, that has nothing to do with HFT, which only presents yet another gambling avenue. It also gives opportunities to actual investors, that can buy now "undervalued" stocks that have experienced a flash-crash.

Re:key (1)

mister2au (1707664) | more than 2 years ago | (#41298783)

Typically I'd expect someone with a 3-digit UID to be more insightful than most of the slashdot crowd but I'm not sure if you've missed the issue here ???

Perhaps you meant closer to "ceases to be investing and becomes trading instead" - still a fair point.

HFT is normally not gambling an practice ... maybe on a single transaction but not over millions of them.

Consider the most simple form of HFT that occur around the world:
- pretend a stock is trading with buyers at $0.99 and sellers at $1.00
- someone comes along and wants to buy A LOT of that stock knowing they will push the price up
- the HFT sees the order prior to it going to market and buy all stock between, say, $1.00 and $1.10
- the HFT then sells all of that stock fractions of second later at $1.10 to met the buy order they know is coming, making $0.00-$0.10 per share

It is simple creaming money off each trade - first one in makes the money ... although much of the science/black magic is working out exactly high the buyer is willing to go with the price on the order but again that's where high-speed trades let you test out the market.

Get your algorithms wrong (with trading in the opposite direction ie on big sell orders) and you can end up selling too much stock while hoping to buy it back or get into a downwards race with other HFTs.

It is really no different than the old days when someone could enter millions instead thousands of share, or get a price entered wrong ...

That said, I still think HFT is extremely evil

Trading vs gambling vs skimming (2)

danaris (525051) | more than 2 years ago | (#41298903)

Key question: when is fast trading too fast?

When it ceases to be trading and becomes gambling instead.

Basically, if you are looking at numbers and not meaning, you aren't trading anymore. Here's a suggestion for a totally impractical test: If you call up the trader in question and ask him what the company behind the shares does (i.e. which business it is in) and he has no clue, then he's not a trader, he's a gambler.

It seems to me that there's always been a significant element of gambling in the stock market. In excess it's a problem, but it doesn't have to be.

No, the problem is when it ceases to even be gambling, and becomes a sure thing. That's when you know that something's gone wrong. As I understand it, the whole point of HFT is to avoid the problem of actually taking any risk in the stock market, and making sure that the people running them can just make sure money at a certain rate.

That's waaaaay more of a problem than the gamblers in the stock market.

Dan Aris

Zero Sum, so where does the money come from? (3, Interesting)

nweaver (113078) | more than 2 years ago | (#41298559)

At such short timescales, trading is a provably zero-sum game. So where do all the fantastic profits that HFT operations claim come from? Everyone else. If you invest in a stock, during that process, an HFT algorithm (or ten) attempt to manipulate the market to cost you a fraction more, sweating the coins [wikipedia.org] that you might receive. (The rest of the time, the HFT algorithms end up fighting each other, but apart from driving the market unstable, its only the HFT operators who win/lose amongst themselves, the HFT industry gains nothing).

Yet they don't actually provide the much vaunted "liquidity": if they did, they couldn't extract the revenue by making the liquidity dissipate when its actually needed: if the HFT bots added liquidity, Knight Capital wouldn't have taken a huge loss, as they could have sold the stock they bought back to the market rather than having to lose $400M! selling the shares to Goldman Sachs.

It really is time for a microscopic but non-zero Tobin tax [wikipedia.org] on stock transactions: $.00001 per buy or sell request issued to the market. That should stop the bots from spamming the market with bogus requests, and level the playing field for everyone else.

Re:Zero Sum, so where does the money come from? (1)

BenJury (977929) | more than 2 years ago | (#41298675)

Yet they don't actually provide the much vaunted "liquidity"

Without them the spread would be wider, this is liquidity.

When it was the exception rather than the rule. (1)

jcrb (187104) | more than 2 years ago | (#41298599)

When H.F.T. first came out the approach of "buy when its going up and sell as soon as it ticked down" made some people a lot of money, because the H.F.T was just piggybacking on some human that had decided to move the stock for some reason that made sense. Now that so many of the trades are from H.F.T. algorithms what you have are computers piggybacking on computers moving the stock price all by themselves, and thus we have a feedback system with less and less damping as the percent of the trades that don't involve a person gets larger and larger.

Which of the many suggestions to prevent H.F.T. should be implemented is a whole topic by itself, but at this point H.F.T is now actively harming the purpose of the stock markets, that of providing a way for companies to get liquidity and for people to be able to *invest* in companies. It was good while it lasted for some people but it is time for H.F.T. to be consigned to the history books.

goals and chaos theory (4, Interesting)

Tom (822) | more than 2 years ago | (#41298621)

Here's what most magazines and newspapers discussing the topic are missing:

A definition of what we want the stock market to be like.

Everyone is focussing on what they don't want. But that's not how you build a resilient system. Basically, that's using default-allow for your firewall. You'll be spending the rest of your life adding rules of what you don't want.

Once you switch around your mind, the questions become a lot easier. Decide what you want the stock exchange to be, and you get your answers almost for free.

If you want the stock exchange to be a place where companies can meet investors and get capital raised, then everything that doesn't serve that purpose directly or indirectly is out. You define how the process should work and allow only that, done. Everyone who wants to play games will have to do it within the parameters you have defined.

The whole problem here is that too many people still believe the old nonsense about the invisible hand. Yes, to some extent you can build a sandbox and people will come and build their sand castles. You can provide a market place and have the participants sort out how everything works.
But you will get scammers, fraudsters, thieves, HFTs and all the other scum as well. If your sandbox is an MMO, you will get gold farmers and scammers and spammers. If your sandbox is a stock exchange, you will get HFTs and stock fraud and insider trading.

Letting chaotic self-organization create the rules of the game through emergence is an interesting experiment, one that I enjoy quite a bit when it comes to games or small settings (book a weekend with friends in a summer cottage and something will happen, no need to set up a schedule beforehand).

Allowing corrupt idiot politicians to base the world economy on chaos theory was one of the dumbest ideas we as a species ever had. Read some catastrophy theory [gold-eagle.com] first (at least check out the graphic if the article is tl;dr). There's a reason we call it chaotic systems, you know?

when is fast trading too fast? (1)

Anonymous Coward | more than 2 years ago | (#41298631)

Once all the mega-capacity, low-latency networks have been installed.

Simple answer (1)

aglider (2435074) | more than 2 years ago | (#41298643)

As there's no limit to human stupidity, there will be none to HFT!
HFT can only work as long as there are humans directly involved in the trade chain and inclided to make (evaluation) errors.
Algorithms can be easily adjusted and even made "intelligent" to auto-adjust and auto-tune.
Then, once all trading will be done by computers with adjustable and tunable algorithms, HFT won't bring any real advantege any more.
Just infrastructure costs.

Content free (4, Interesting)

vlm (69642) | more than 2 years ago | (#41298645)

The NYT article sucked. Can't wait for print journalism to die.
1) Here's some authorities who are authorities because we say so, who are fighting like little middle school drama queens
2) Everyone loves a good "rich people suck and they're corrupt
3) Rabble rousing tired old cliche of "kids have no idea what they're doing vs old people are obsolete"

If you want the real story try Stucchio's blog series beginning at:
http://www.chrisstucchio.com/blog/2012/hft_apology.html [chrisstucchio.com]

My pitiful TLDR summary of Stucchio's work combined with some other observations

1) Idiotic SEC rule 612 quantizes share price into small enough increments that you can raise the capital to HFT and increments that are large enough that you can make some serious dough doing HFT. HFT is not caused by Bolshevists in your bathroom or too many atheists or gobblin infestations, its caused by a stupid SEC rule that was created in a snap of the fingers and can go away just as quick.

2) Ask ANY EE or "real" telecom guy HFT is a real world application of dithering to improve resolution. Oh the "real" price of a share is 100.003 but we're only allowed to report price to a resolution such that its either of two quantum states 100.00 or 100.01. Simple system solution? Dump out 10 orders, 3 at 100.01 and 7 at 100.00 to meet some idiotic SEC rule. Now "everyone" knows the real free market price is signalled at 100.003 even if the unfree market is only allowed to trade at one cent increments.

3) Most of the whiners on both sides have a dog in the fight, if they are in the business and can't HFT for whatever reason they hate HFT and if they can they love it. Or they're just doing witchcraft style persecution where no logical mechanism is necessary... my sheep died therefore we should hang some old woman is no different than my dotcom bombed therefore we should punish a successful HFT trader "just because".

4) The ratio of HFT trading vs retail trading is absolutely exploding not entirely because HFT is growing (although it is...) but because retail trading is absolutely dying. Retail is dying for two reasons: Headed into next down leg of the second great depression (bubbles usually melt up in price and down in volume) and demographic stuff like looking at labor force participation graphs tens of millions of working age americans are no longer working, therefore there is no need to invest their 401K and IRA money from non-existent jobs. So yes HFT is growing but don't make the mistake of thinking the ratio of HFT to retail is in any way relevant, because retail is terminally ill and almost dead.

5) Some elderly/lazy people get all confused about frontrunning (which is illegal) because both frontrunners and HFTers are nuts crazy about low latency and fast execution. Therefore they obviously must be the same, at least to an idiot. This is about as intelligent as the anti-vaxers ... "Getting hit in the head by a 2x4 causes stupidity... high levels of lead in the blood cause stupidity... therefore getting hit in the head by a 2x4 results in high blood levels of lead". Morons.

6) Some lazy people enter market orders instead of limit orders. Probably not a wise idea any time in the last 150 or so years, although it is an even worse idea when retail volume is melting down and HFT volume is melting up. You could ban market orders for retail investors, but stupid people are always going to find a way to lose money, so I'm not sure there's any point to it. There's an infinite pool of ways for morons to lose money so removing one isn't going to really change the outcome. Its not the end of the world in that any average long term retail investor trade has just about zero odds of being stuck in a "flash-anything" related HFT event.

Re:Content free (0)

Anonymous Coward | more than 2 years ago | (#41298833)

The big firms "bought" the regulation they wanted. Even before 2004, there were firms doing HFT in hedge funds. The reason retail trading is dying is HFT has eroded people's confidence in the shell game Wall Street setup. I used to work in the financial sector building trading systems. Contrary to what HFT proponents claim, HFT does not result in higher liquidity. It's just skimming with no intent on long term investment. It's no different to ticketmaster. Back in the 90's pearl jam tried to fight ticketmaster and lost. Everyone felt ticketmaster's service charge was out of whack. The same is true of HFT. The idea of slowing down HFT is reasonable to me. There's no way to get rid of HFT, but slowing it down slightly would help.

create a new standard for trading windows (1)

Anonymous Coward | more than 2 years ago | (#41298711)

#1: require all level 3 trading and market makers to be on custom low latency ntp servers/atomic clock etc
#2: establish a minimum time slice of 1 second
#3: if there is a descrpancy of more than 500ms between the timestamp in your transaction, and the recipient clock, the receipient clock is honored and the trade is bumped to the next time slice.
#4 each trader is allocated a maximum number of transactions per time slice of no more than f(n), where f() is a function something like f(n)= X * 1/f(n-1) + X )
( where X is a constant set by the exchange ) This way the maximum volume you can have in your trade is 2*X, but at the next time step ( n) your maximum can only approach X . I'm sure something more sophisticated should be done here. IANA mathematician
  #5 Or as a possible "reward" scenario, X could be not constant, but be a variable that starts low and the longer the period between trades from an entity, the larger the value X can grow ( to fixed ceiling )

I'm just making this stuff up on the fly, but it would seem to me that all sorts of stuff like this could be done to minimize gaming the system. The exchanges should hire brains from Video game anti-cheat system coders ( like the old punkbuster ). That would seem to be a good place to start!

too fast when the robots sell off (1)

cod3r_ (2031620) | more than 2 years ago | (#41298835)

It's too fast when they sell off the entire market, but it's just fine when the market explodes upward and everyone makes a ton of money. So lets just put restrictions on selling but not buying. Why bother with a free market. Let's just control which way it goes.

Manipulating HFT for Fun and Profit (1)

Passman (6129) | more than 2 years ago | (#41298865)

Everyone is asking the wrong sort of questions.

What we should be asking: How secure are these HFT systems from outside manipulation? If I wrote a HFT system to manipulate other HFT systems...

  1. How much money could I get away with?
  2. How many of those "Too Big to Fail" money-houses could I kill off along the way?

Just make them keep the share for a month (1)

captainpanic (1173915) | more than 2 years ago | (#41298871)

If you buy a share in any company, it means you invest in it. That means it makes sense you hold on to that share for a minimum duration. A month seems reasonable.

They can sell it in the blink of an eye, but only after they've held on to that share for a month. If they don't trust the value will remain stable enough for a month, don't buy it.

It would mean a share in a company is once again a share in a company. It means that people buy it because they believe in a company... not because a computer predicts a trend for the next 5 microseconds.

Stock market is a rigged game (1, Insightful)

HangingChad (677530) | more than 2 years ago | (#41298883)

James Angel, a professor at Georgetown University and a member of the board of Direct Edge, said Mr. Arnuk and Mr. Saluzzi were stoking irrational fears of a market that is providing good returns to investors.

Oh, really? And just which investors would those be? Certainly not retail 401(k) investors.

The problem with the stock market is not that nobody is making money, the problem is a handful of people at the top are making a crapload of money and everyone else gets bupkis.

The big institutional traders have faster-than-lightning systems that limit their downside losses. By the time most people get their 401(k) statement it might as well be scribed on clay tablets dried in the sun, it's ancient history. Those people are the ones getting boned by the Math of Loss.

Simple solution, introduce a microtransaction tax (1)

jonwil (467024) | more than 2 years ago | (#41298885)

They should introduce a very small tax (not sure exactly what rate would work) on every trade. Not just on shares but on bonds, commodities and any other financial instrument that's bought and sold on these markets.

People doing high-frequency-trading will have to slow down or stop because it will quickly become too expensive but the tax amount that would be paid by regular people buying and selling these instruments (e.g. to invest retirement money in) would be so small that it wouldn't be an impost.

hint, hint (1)

sribe (304414) | more than 2 years ago | (#41298889)

It's too fast when a 0.001% per-trade tax would make it unprofitable ;-)

Grumbling of old losers. (1)

macson_g (1551397) | more than 2 years ago | (#41298895)

It's all grumbling of old losers.

Back in the day investment bankers, traders and brokers - all the fatcats who knew each other from private schools - met for launch and made business over Martini.

Now big share of their profit is snatched by bright kids working in funky offices, using top-of-the-line hardware, and all wearing shorts and flip-flops. No wonder the old guard is trying to lobby they out of the picture.

HFT by definition does not hold position for long, and therefore does not influence the long-term instrument price. And so-called 'average investor' is interested in the fact that the stock went from $18 to $36 over few months (or the other way around in the case of Facebook), not in the $0.2-amplitude intraday price jitter.

And all the scaremongering about flash crashes are exactly that: scaremongering. Each of these "crashes" lasted no longer than few minutes, after which stock price returned to the previous level. Once again: no impact for long-term investors.
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