Doesn't Google had the leaders in auction theory now?
Would someone please devise a way to run a stock market as a repeated clocked auction, so that prices change, say, once every 5 minutes and high frequency trading doesn't work.
Sure. The cost is that trades are slower, and people selling a large block of shares will have to settle with many others. Oh, and also trading will stop when there is excessive market volatility.
Still interested? Here is the mechanism. There is a priority queue for open buys and one for open sells. The sizes of the buys and sells is 1 share. Both are ordered by time the order was received, with oldest first. And the market has a price.
Whenever both queues have entries that can match at that price, they do. At the end of every X time, if one queue is empty and the other is not, the price moves 1 cent.
If a large order is received, trading effectively stops and it can only move the price slowly. Because the price only moves slowly, there are no sudden price shifts for HFT to take advantage of.
Interestingly even if this market has low volume, it can still take large orders successfully. Because even though HFT traders can't make money by playing this market, they can make money off of arbitrage between this market and others. Therefore until a large order finishes settling on this market it serves as a ceiling or floor of what gets traded on other markets. Which means that the HFT traders do the hard work of trading this on other markets.
But for anyone who wishes to trade with each other on this market, HFT can't make money from them.
The rich get richer. I remember filling out school and early job applications. I was struck by how my list of awards and recognitions was kind of a sham—most of them were each a consequence of some earlier achievement, and so on. It felt like getting a check and being able to cash it more than once.
Achievement and power are runaway positive feedback loops which means we need damping forces to have any reasonable level of fairness where "fair" means reward is proportional to the effort.
The results and outcomes alluded to in each comment, mine and the one you're responding to, are consequences of essentially begging the question. It's that part where the flaw lies—because it leads, as in your comment, to justifying things as rational and fit even when they are not equitable.
Scientist A and Scientist B both produce results X and Y respectively that are exactly equally valuable to the world. However, Scientist A happens to already be well-known for other work. What we observe is that A will get more accolades for X than B gets for Y. Not because X is more valuable, but solely because people assume that since famous scientist A did X, it must be worth more.
I thought the 'penalties' associated with trading aged shares were pretty clever. Among the rules for the LTSE [1] is that you get increased voting weight for your shares as they age (IIRC). I've no idea whether any of those will really help in practice. But it sounds like it's worth a try.
Why? Because they know that they can buy those shares at some reported price then trade them on their own books then sell them at a price sufficiently different from the reported price that they make a profit.
This means that HFT is explicitly getting "in front of retail" and is actually trading at a price different from what retail hears about. That difference goes where? Oh right. Right into the pockets of HFT and out of the pockets of retail investors.
But on a reasonable assumption what he is arguing is that the competition in the marketplace means that they are paying competitive prices for that order flow. They are making money but not much considering what they are doing. And it is massively better than what used to exist.
I know this and agree with it. But as I said above, "The fact that it is better than what existed before doesn't change the fact that we can do better yet."
The first point is that Robinhood is the one that they negotiate with. So the extra profits go there, and not directly to consumers. Secondly the HFT middlemen are still playing market makers, which means that they still are being paid for. There are cheaper ways to make a market work than HFT, and I outlined one above. Third, automated algorithms as market makers have the potential for some pretty dramatic events - such as the flash crash. Alternatives can avoid that.
Yes, HFT manages to do better than the old market makers that had humans doing the same job that HFT does now in the same way with bigger margins. But that doesn't change the fact that for retail investors, I believe that my suggestion in https://news.ycombinator.com/item?id=24760841 would help them even more.
Whether you think that's a good or bad thing though I guess can be up for debate.
Those who can’t compete aren’t even going to try, nobody loses here.
Why would a flash crash never happen today?
Flash crashes still happen [3] and there were multiple rapid crashes triggering limit down circuit breakers in 2020. The circuit breakers stopped things from getting worse, but didn't stop the crash itself.
[0] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1691679
[1] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2573677
[2] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2573677
[3] https://www.cnbc.com/2015/09/25/what-happened-during-the-aug...
Assuming they work in the same building, now is Stanford's chance. The bigger flex is to have two or more adjacent parking spaces with signage that says "Reserved for Nobel Laureates" (plural).
Berkeley already has rows of NL parking.
I assumed there were so few that even world-class, elite universities would have in the low single digits, so that adding two would rocket Stanford (or any university) to near the top.
But there are some universities that have 50 or even over 100 depending how you count.