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Comment by jhales | Hacker News Reader

All comments so far are negative, but I fail to see how this video shows anything other than incredible engineering.

The negativity seems to be a result of previous bias.

It is incredible engineering and it has incredible downsides, not the least of which is the ability to destroy a market in seconds, due to a blip in information, with cascading domino effects.

Which market has been destroyed in seconds?

None. This provides profit opportunities to those who will "heal" the price.

Also, exchanges will revert back trades that happen over these flash crashes.

How long before someone (a hacker no doubt) games the system to create a selling spiral, just waiting to take profit of the rebound. If it´s well planned the one causing the dive is not going to be the one taking the profit (at least that it can be proved).

Well, it's been a common enough movie plot (cf. Casino Royale where the Antagonist engineers terrorist attacks on high-profile companies whilst short-selling their stocks).

We need not wait for that to happen. Such shenanigans have been observed and documented already, such as in the book "Reminiscences of a Stock Operator." It was written in 1923, and worth reading today.

It will probably happen when one of the stock exchanges says "we won't revert fraudulent trades anymore". Until then, I kind of doubt it.

Assume you are referencing the flash and twitter crash? I always wondered why people never mention how fast it recovered... the ability to heal a market in seconds. The '87 crash was a cascade much more severe and actually involving the whole market that happened without HFT.

Also the incredible focus on these two events, considering all the other turmoil in the financial markets, has always struck me as a clear case of scapegoating with Luddite underpinnings. Pretty soon, we will all believe that the recession was caused by HFT's.

I agree. The speed at which markets respond to news reveals how efficient the system works. Flash-crashes and what not are either caused by human programming errors or it is simply the right reaction to new information about the environment. We want the new price to be discovered ASAP.

I don't know if "destroy" is the right word, although that can happen. It has the ability to act extremely quickly, which is actually what we want. We want markets to respond to new market conditions quickly so that we know the information has been disseminated throughout the markets. The faster it behaves, the more efficient it is. The problems we see come from human programming errors, not from a mis-networked market. This is incredible engineering.

I cannot see a downside to improved networking infrastructure...and an eager market for advances.

I'm not sure I understand what you are saying. Would you elaborate?

The HFT arms race eventually results in systems/ algorithms/ networking advances that benefit us all.

You can justify anything, and therefore nothing, with that speculation.

Imagine if HN had an army of animatronic robots run an arm-wrestling tournament every hour to determine which stories reach the front page. That would also be an impressive feat of engineering, but it wouldn't tell us anything about which stories deserve to be on the front page due to their inherent value, so it'd be a huge waste of resources, and make HN worse for readers.

HFTs are not publishing a lot of useful results in AI or game theory. They are in a zero-sum game against each other as well as all legitimate investors, and all their profits come at the expense of people trying to better route society's resources.

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