While i find the technological challenges in HFT very exciting, i would never want to work for the companies benefitting from that work. If that means i will make less money and someone else will come in and do it, then so be it.
It's not a case, btw, of being pro- or anti-. HFT is just a tool. You can use any tool in any way, it doesn't care because it has no moral agency of its own.
Er.. One of the fundamental reasons that HFT exists is increased market liquidity. Re-read what you wrote. You imply HFTs reduce risk and at the same time seem to accept that they are risk-averse - ergo unable to reduce risk as they shutdown when the markets risk profile increases. So which is it?
Oh and btw, since no humans trade securities at such a high frequency, The HFT trading that takes up such a sizeable portion of the total pie, is just an electronic game being played between two competing firms. So, even if they did reduce risk, it would not help human participants.
IIUC Your position seems to be that HFTs amongst themselves can allow for an order execution strategy of breaking up the order into chunks to discount for the price change that occurs when you increase supply of a security while selling it. If that is your position then I withdraw my protest because I agree with it.
One reference: http://www.advfn.com/nasdaq/StockNews.asp?stocknews=CME&arti...
I've looked, Where did you look? That is kind of a big one to miss.
He's saying that you could use a periodic-submission order system. Say that the period is (for ease of discussion), 1 hour, ending on the hour. All orders made during the hour are queued up and simultaneously executed at the start of the next hour. If there are too few bids/offers to satisfy all trades, then trades are satisfied using some fixed rubric (i.e., pro rata, max/min price buyer/seller will accept, etc.) Until execution, the orders remain secret (not published to the orderbook). In theory, this allows people to place orders based on a known price.
In practice, in the past (before electronic trading took over), the published orderbook was updated manually as traders submitted bids, offers, and executed sales information to the exchange.
If you do a simple two phase system, you don't have to worry about the exchange leaking orders. You send in a cryptographically binding commitment to your order(this hides the order now, but prevents you from changing it later). After the time period is up, the exchange publishes a commitment to their randomized order of trades , then every party reveals their actual order. Then trades execute.
I don't think you quite understand that these trades aren't simply converting money to something else. They are actually buying and selling things, abstract things to be sure, but things that your counterparty will either already own or be able to acquire on your behalf. You might as well say Amazon should send things to random addresses and everyone has an equal chance of getting what they ordered.
Someone/some algorithm has to match offers for sale with offers for purchases. Buyers are willing to buy at up to some price and seller sell at down to some prince. The question is when the matching is done, how frequently and whether you gain any advantage by being faster (other than having marginally more time to analysis). By contention is that you can accomplish this.
While this may not work for, I don't think amazon or anything like that has much to do with it.
This is exactly backwards. Without a published order book there is no "known price" since everything is secret. Your hourly blind cross will go off at whatever price satisfies the rubric but there is no way for a participant to know what that price will be before hand.
It's kind of like an opening cross, happening like a metronome every second of the day. (They also do these or similar crosses when a stock restarts after a halt, or during an IPO.)
Probably there would be some attempt to game the system by measuring open interest on either side up until the time the cross operates (i.e. when one second 'ticks' into the next). If such numbers were made available.
They're not saints, but it's very hard to remove oneself from where they have impact.
Likewise, I am also very concerned about the sustainability of the human culture in general, still i dont stop eating meat completely or stop driving my car. But i will try to balance things and reflect my consumption patterns on a regular basis.
Sorry, i am not a native english speaker and can not really word this in the way i want, but well, you might get the idea ;)
The ‘good’ players thrive until they reach maximum size for their niche. The ‘bad’ players leave the business. Customers such as long term investors, institutional money, etc, benefit through narrowed spreads and reduced transaction costs.
You could call it a vicious, dog-eat-dog business, but the dogs aren’t really a threat to anybody else.