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Comment by throwanem | Hacker News Reader

> The idea is that letting algorithms decide will result in better/more productive allocation of resources

Is it? I thought the idea behind HFT was to make a shedload of money for the firms with the most effective algorithms. To be clear, I have no problem with that, and I'm not close to the industry. But it would surprise me to hear that those in it conceive of themselves as optimizing social resource allocation, rather than, say, setting themselves up to retire at thirty with all the money they'll ever need.

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There isn't just one argument. The liquidity argument is focused on why would we allow HFT, instead of limiting transactions to traditional investors only.

The algorithms talked about here are not HFT algorithms, but investment algorithms. Things like "if it's down for 3 days in a row, allocate 5% in the stock" type programs, written using machine learning. They generally will not change orders rapidly. They are about more efficient/effective investment, and the argument I gave is more focused on what the function of a stock market and investing is.

Because these algorithms are much more like traditional investors than HFT.

"Locking in the losses."

Can't you say that about any profession, especially other forms of middlemen? Does it really matter if your grocer's motivation is having a nice house and good schools for his kids vs. feeding people and providing a market for farmers?

Yes. A grocer with illicit intent can poison the food that they serve because some God told them to do it. We need to ensure that they both are sane and correctly motivated. This isn't simply about providing welfare for people; it also concerns the identification of malicious intent and the avoidance of harm. There may be a few professions where this doesn't matter, but by and large I'd say an individuals motivation for choosing a profession does really matter (especially with middlemen).

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