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Comment by lxgr | Hacker News Reader

It does seem like an incredible waste of resources of all kinds, but I'm not sure whether a tax would fix things.

This is a problem of market structures, if I understand it correctly; facilitated largely by Reg NMI in the US and its equivalents globally. And it's not like all was well before that: Instead of HFTs, it was market makers or specialists pocketing impressive, largely risk-free profits.

What you'd ideally want is to preserve the good that the HFTs facilitate (liquidity, more efficient price discovery, smaller spreads etc.) while avoiding the bad (siphoning off investors' money from the markets and math and physics PhDs from the world's top schools), but I haven't yet heard a convincing proposal for that.

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One proposal I heard was to make the market "tick slower". Accumulate orders for, e.g., a minute and then resolve them all at once (without favoring the early ones). This way a delay of a few seconds doesn't matter.

This is how options trade; with periodic auctions

> how options trade; with periodic auctions

Former options trader. This improves dealers’ profits.

Consider a once-a-day auction. The person who puts in an order at 9:35AM incorporates five minutes’ information. The person who does so at 3:55PM, all but five minutes’. Anything material that happened at Noon is extracted from the early order and benefited to the late one. If the orders are unsealed, the later order can incorporate the early order’s existence.

With options, that means the high-speed late order has better information about the underlying stock than the orders preceding it. So it generates risk-free profits from them.

What if the orders were sealed and the auction happened much more frequently, like every minute? It doesn't seem like late traders would get much of an advantage.

> What if the orders were sealed and the auction happened much more frequently, like every minute?

Reality remains real time.

What if the auction gets resolved at a random (uniformly distributed) point in time in some small time interval?

> What if the auction gets resolved at a random (uniformly distributed) point in time in some small time interval?

I'd put in lowball bids and ludicrous (but plausibly deniable) offers and wait for the unreasonably-short windows.

The solution to this problem is people not wanting immediacy. (Same with scalpers.) But people like immediacy. Unfortunately, there is also political capital in railing against those who provide that immediacy. In a way, it's a stable socioeconomic system: HFT provides liquidity, market partiipants take it, activists rail against it, regulators complain and win the activists' favour.

I don’t know what you’ll are smoking… :-)

https://cdn.cboe.com/resources/membership/US_Options_Auction...

And: https://www.cboe.com/us/options/trading/complex_orders/

How do you break ties?

JS does a lot of trading already where a few seconds don't matter. Firms like HRT and Virtu are more high frequency.

Either way I don't think this would resolve the issue with siphoning talent.

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