Tesla Stockholders Can't Take a Joke
bloombergview.com
bloombergview.com
We should be worrying not that Tesla released a joke PR that moved the price, but that we live in such an apparently unstable financial world where in the quest for milliseconds, HFT algorithms create non-negligable price swings in response to completely de-contextualized information.
Five years ago this wouldn't have been a blip on the radar. If the rules have changed, so be it, but we should recognize that it's the system we've built that has changed the rules. We can yell 'securities fraud' at Tesla's PR department, but if so, we should recognize it's fraud because Tesla was releasing information that confused the dominant traders, which are now algorithms. If that's fraud, do we now have a fiduciary duty towards the algorithms?
More troubling, if the system we've built is so unstable around just PR releases, what's going to happen next time there's a serious problematic signal?
That was on purpose though. The title was meant to be deliberately misleading to highlight the fact that what we think of as "stockholders" is wrong: increasingly, the "stockholder" is an algorithm.
And if some reasonable humans choose to employ algorithmic trading systems, and then as a result lose some money because the algorithm wasn't properly tuned, that's not a regulatory issue either. People lose money on stocks because of bad decisions all the time.
Only possible role I can think of would be if there was some additional evidence (like an email chain or something) that Tesla did this release specifically to cause this stock movement. Seems unlikely.
What if Tesla has press releases that aren't human readable but trolls automated trading systems? Like a spam trap but for trading?
It worries me when even people on HN are talking about banning 'harmful' algorithms.
The SEC shouldn't get involved. The people whose algorithms ran up the stock and lost a bunch of money over a joke will learn their lesson, or will go out of business, soon enough.
It's not like Congress is passing a law that regulates what encryption standards can and cannot be used. It's the SEC regulating trade on the stock market no matter who or what is conducting the trades. Whether they should or should not ban it, it's well within their authority.
You're trying to make it into an all-computing type of issue. It's not. There is no slope, and it's certainly not slippery.
What would a regulation against "bad" algorithms even look like?
Suddenly, microsecond trading algorithms are dead.
What actually happened in those cases is liquidity went away faster in drastic moves and the spreads had to account for the risk.
Further, you'd have all manner of snake oil consultants that would be selling true secrets of the NASDAQ randomizer (this exact thing happened before the exchanges standardized colocation. Guys would claim only they knew where in a data center had the shortest cable runs for instance). All of that inefficiency gets priced into the spread and is paid by all market participants.
If you really want to get rid of microsecond trading (I don't know why you'd care honestly, but if you did) get rid of the sub-penny rule. Make market making algorithms truly compete on price. Speed will still be important for canceling orders/gathering information, but you could counteract it by trying to do what we actually want the algos to do. Discover the right price cheaply.
The goal here is to cut down on automated meltdowns caused by people trying to get a microsecond jump on everybody else.
A stock price is supposed to have some relation to the value of the company. With HFT, it is pretty clear that we left that realm many moons ago.
A random time within 10 seconds is hardly going to affect the stock price significantly. The fact that stock is going to be a couple of pennies more expensive isn't exactly going to gather any sympathy from me. And, a bigger bid/ask spread will stop stock price meltdowns which are more momentum-based (aka trader driven) rather than actual real information (aka business driven).
You've misunderstood what is meant by "bad" algorithms. They aren't universally "bad". The vast majority of the time they make a ton of money. The problem is, the reason they make money is because they have limited safe guards that protect it from doing something stupid 99% of the time, but the remaining 1% is left a mess in order to ensure that 99% of the time they execute faster than the next guy. Unfortunately, they are an increasingly dominant force during that 1% window because they are a few nanoseconds faster to make a trade the rest of the time.
> What would a regulation against "bad" algorithms even look like?
You don't regulate the algorithm, just like you don't regulate against bad traders. What you do is set the rules so that the risks & rewards favour a healthy ecosystem. If sub millisecond trading yielded no benefit, it'd do a lot to prevent problems.
Why? Algorithms can be harmful as much as anything else.
> The people whose algorithms ran up the stock and lost a bunch of money over a joke will learn their lesson, or will go out of business, soon enough.
The problem is that won't happen. The advantage of trading stupider, but slightly faster, than the other guy is too huge. Sure, sometimes you lose money, but most of the time you make money. It's classic game theory: the stupider but faster algorithm benefits from the slower but smarter algorithms... unfortunately though, it damages the ecosystem, and if it is allowed to continue it might actually grow to kill the ecosystem. While in theory, it is improving the liquidity of the system, the way the game is rigged, the rewards for the improved liquidity far outweigh the benefits.
> The SEC shouldn't get involved.
I'd argue quite the contrary. Now, the SEC shouldn't be saying, "you can use this algorithm" and "you can't use that algorithm", but I think there is a case to be made for imposing trading rules that don't reward a 5% speed improvement over 100ns equally to a 5% speed improvement over 100s.
Algorithmic traders don't benefit by simply being faster, they benefit by being faster to the correct price.
They therefore deserve zero sympathy when their algorithms fuck up. They knew what they were getting into, so they should accept the consequences with grace.
But that shouldn't be a reason to consider making operating on those algorithms illegal.
What cbsmith makes complete sense:
The advantage of trading stupider, but slightly faster, than the other guy is too huge.
The fitness landscape for these algorithms hasn't been designed by computer scientists, it just kinda happened through circumstance. As society gets more computerized, this sort of explicit design of computational spaces will become increasingly important.
The point they seem to be making is that benefits of fast trading massively outweigh the losses from making dumb decisions like there, so algorithms that integrate more and more input signals into decision making win in long term - no matter how rough are their assumptions about those signals.
It's not about algorithms being fast and simple - it's about algorithms doing more and more complicated stuff (not in "how", but "what" they do), so they can easily make (and will make more often with time) dumb decisions when looking from human point of view - but at the same time they can quickly react on much more types of events that normally would have to be noticed by human first, or already deduced from market actions.
It is easy to do this, as demonstrated by the article. Just con the algorithms with fake newsfeeds.
That's also illegal though, so no one is going to go out and prove it. They shouldn't need to when we can see natural experiments like this.
Let's remember that this discussion was kicked off by some of these algorithms being tricked by a blatant April Fools joke.
The way some people talk about trading algorithms, you would think that they believe they are Strong AI that is lurking in datacenters biding their time. Really though, compared to a human, they are quite dumb. They just happen to be fast. Being smarter than the algorithm isn't sufficient if it is somewhat smart but blazing fast.
Sure it is. There are lots of people that make money in the stock market by making long term bets.
So what the hell was your point?
> "There are lots of people that make money in the stock market by making long term bets."
Is not actually a counter to:
> "Being smarter than the algorithm isn't sufficient [to trade against it] if it is somewhat smart but blazing fast."
There are always less-informed bystanders, and an efficient market is supposed to be about getting prices right. Adding noise to the signal isn't helpful.
I agree, though, that it will probably self-correct.
In any case, I don't really care much about punishment. I do care about fixing things.
If one buys shares because some other person's algorithm pushed them up, isn't (s)he gambling just like them? Why should (s)he be protected?
True, but remember that the degree of influence can vary by several orders of magnitude.
What if the firm which loses money has cascading effect on the market?
I think you should reread the article. It is pointing out that the problem is the automated trading algorithms (and most importantly, how those algorithms prioritize expediency over intelligence). It points out that what Tesla did wouldn't be a problem except for the fact that we've got computerized traders.
Elon doesn't want to take SpaceX public because of this very fact, the market doesn't know how to have a 20 year vision of putting people on Mars let alone the ability to read under the headline.
All great jokes are rooted firmly in reality.
With that said, I had between 60-75% success rate on predicting the direction, depending on how I set different things like requiring multiple sources, confidence required to execute prediction, NLP tweaking, etc. The tiers was worse, but I think it was around 40-45% on the last iteration. Obviously, I would want to get better at predicting magnitude before I used it in any real life trading. It also was highly dependent on the company/industry. It performed better on something like Apple or Google, but worse on some smaller companies in industries that are not near as news heavy.
The main goal of the project was just to satisfy my curiosity with algo trading, web scraping and data analysis while giving me another cool project to talk about in interviews, as I'm a college student. I used scrapy, NLTK, pandas mostly.
Shorting has no true floor to the amount of money you can lose. This isn't true of going long, as an instrument can only go to zero. There is a natural imbalance between the max risk associated with shorting vs going long (and there are lots of other risks associated with trading, this is very simplistic) that means that no one who has done this sort of thing before uses a predictive ability without risk as a serious basis for a trade.
In fact, predictive ability is not that special. There are trivial algorithms that can predict movements with high levels of accuracy (much higher than 60% for instance), but don't perform well on a risk adjusted basis in modelling or in reality.
A second order predictor may benefit from it, giving less gains more reliably guessing algorithm behavior instead of stock trends.
(University of Amsterdam)
> And when I say "people" I mean mostly "algorithms," which are faster and more literal than humans.
He's a huge nerd and the wall at Tesla Motors that was once covered in framed patents is now covered in a giant picture of CAST from Zero Wing, and the announcement that they were giving them away was titled, "All Our Patents Are Belong To You".
He literally announced their sharing of patents with a meme from like 2002.
Looking into it a little bit more, apparently the British put punctuation outside quotation marks, and Americans put it inside. Interesting.
Do you think it is reasonable to make a trade based on a headline without reading the article? What happens if a company accidentally screws up the headline, are you going to sue them? Any reasonable investor that read the article knew it was a joke, especially if you saw the picture.
And you see, that's exactly why it is a problem: we are both humans, both might be not completely stupid, both have opinions and our opinions don't match. So if we are both judges it would cost somebody (some human exactly like us, I would add) something important — it would matter dearly to him if you or me is a judge this time. And it would be "just our job". Huh. As if we (they) were gods and not some mortal humans just like himself. A guy he sees first time in his life: not even a king or a village elder (who at least did earn his respect somehow).
So that's why I argue it is a shame that some judge can decide what is "reasonable" and what's not, especially when the whole "guilty/not guilty" thing depends on that single word.
P.S. Ah, and let me comment on that last sentence of yours. I can be blind investor. From Asia. Maybe too literal or not very bad-humor-sensitive. Just smart enough to make money by trading — as these algorithms are. So I didn't see a picture, don't pay much attention to that "April 1'st" thing, and don't see why Tesla couldn't release a watch. I guess I'm in trouble! And even if there's no single person like this imaginary me: you have no rights to decide if he deserves to be protected by "securities fraud law" like everyone else or not.
Then why didn't you add that when you said
>it is a shame that some judge can decide what is reasonable and what isn't
when that is your opinion?
And whether or not it's an opinion is irrelevant, because it is exactly the way the system is intended to work. And there are checks and balances against your hypothetical situation, namely appeals. Hyperbole about duly appointed judges being 'gods' notwithstanding. (Also, a king by definition earned respect? Do you know how monarchies work?)
That it was a joke is not even important, anyway. If you misread a post that Teslas R&D researched a new battery with hundreds of hours capacity, loading in 5 seconds into "all new Teslas will include a battery that .." and start buying Tesla stock then it is your problem, too. The information was there. Whether you use it or not is your own problem.
That's where we disagree, so we probably won't come to an concensus: The whole post (i.e. headline + context) was not false information, because it was clear to any reasonable reader what was going on. If they had only put out the headline, then waited till the market closed and then added the post I would agree with your position. But that didn't happen. All information needed to understand the topic were presented. You just had to use them.
Though I think reasonable people can understand when something is an opinion as opposed to fact. I think you probably disagree and want disclaimers separating opinion from fact. I think that's stupid. Maybe we should have a law requiring companies to make it clear what is fact and what is their opinion in all documents? I think it would make the world just a touch less fun though.
I've read hundreds of pages of engineering specs for my day job. No humor. All facts. It's pretty soulless. That would certainly avoid incidents like these. But I think if we don't have some fun with life, it get's pretty boring.
I think a prosecutor would consider it a waste of time and resources to prosecute this as fraud. I would hope any reasonable judge would see there was no intent to commit fraud here.
My point is that it doesn't really matter what anybody thinks: it matters what everybody does and what happens because of that. Laws should not be ambiguous. It's widely known that legal system is a mess and a machine or a human without special education cannot operate in that, but we should strive to improve that and not nod and smile at examples of how imprecise and complicated it is.
If it is allowed to tell lies on financial market on 1st of April — it should be specifically pointed out in the corresponding law. If it's not allowed — we shouldn't assume it's allowed. And, more specifically, we shouldn't allow that: meaning that everybody who does break a law, should be punished. If it's not always true — the law must be rewritten to be made more clear, and NOT "ah, we'll put some ambiguous definition: some guys later(=judges) will decide if it's ok".
If "some lies" on financial market are ok "because it's a joke!" — it has to be specifically described in that law which lies are allowed, and what attributes does a "joke" have. Again, if there's no exceptions — then there's no exceptions and any lie that produces changes in the market is a fraud, no matter if you/me/somebody else likes that lie or not.
While I agree the legal system is definitely a mess and needs to be made clearer, more accessible, and more machine readable, I think you're also dismissing (or unaware of) any and all scholarship in law or philosophy. Laws will always have some ambiguity, values precede laws and thus there are 'just' actions that go against the written law, interpretation is a necessity in human matters, the legal system evolves with the changes in the world and can never be all-encompassing, Judges have at least some training in these matters, language is ambiguous and evolves and is the medium of law, etc.
And fwiw, it sounds like the 'joke' was actually a statement about the public markets, and produced evidence to show that the automated trading systems we have can be destabilizing. This evidence, in the form of a joke, is memorable, and can be recalled and used by people during a time that they may be building consensus or making decisions around these matters. And then those decisions may become laws, superseding the ones you're interested in enforcing. A bit of subversion, demonstration, and tests of legality are how the system moves forward.
Applying the reasonable person standard, the reverse with GMail might be even more interesting: reasonable persons disregarded true information, and Google could have predicted that (especially giving the timing). Is a `false negative' also some kind of securities fraud?
And it may be not reasonable to expect a company to be held responsible for what an algorithm would think about a statement in general, but I'd say it's very reasonable to hold a big company responsible for whatever it says or does, when it affects market operating amounts of money some of us can't even imagine.
Moreover, strictly speaking there's no such thing as "algorithm thinks" or "algorithm decides". There's a trader: he thinks and decides. If he does it with a dice, or a brain, or a pen and paper, or computer — doesn't matter. As far as I know, machines still are not responsible for what they do: their masters (programmers) are.
To me, this seems like a flaw in the financial system. I realize that public companies are held to higher standards of behavior in their communications, but I really feel that the standard should be enforced based on what a reasonable human would conclude, not based on what a currently state-of-the-art computer program would conclude.
> If he does it with a dice, or a brain, or a pen and paper, or computer — doesn't matter.
I agree with this 100%, but I would then say that a company shouldn't be responsible for a trader deciding poorly. If the trader uses an algorithm that can't handle a well-known custom like April Fools Day, then, to me, that is the trader's problem.
On the other hand, I tend to think it's generally bad practice for companies to put out fake press releases as jokes. It's an official communications channel and one person's obvious joke is another's weird but legitimate announcement--especially if they only made it through the first paragraph. And it's one small step from releasing jokey press releases for fun to releasing jokey press releases to intentionally manipulate the market in the short term.
Companies can certainly have fun in various ways although I tend to think the April 1 thing is getting old. But I'm not sure that official press releases are necessarily an appropriate vehicle.
It's all fun and games until someone loses an eye :-)
(of a person) having sound judgment; fair and sensible. "no reasonable person could have objected" synonyms: sensible, rational, logical, fair, fair-minded, just, equitable
...I would say that a computer isn't reasonable. I would go on to argue that whoever let a computer read headlines and use complex pattern-matching to bet large sums of money was also not very reasonable or responsible.
1. Buy stocks in X.
2. Hack X's blog (Hello Wordpress).
3. Put out a fake product announcement.
4. Sell stocks in X to stupid robot.
5. Profit.
1. Sell short stock in X.
2. Put out a fake, negative press release.
3. Buy back shares at a huge profit.
In case you are wondering, this is, in fact, very illegal. (edit: formatting)
Split among multiple people, and choose jurisdiction carefully?
But making fun of everybody jumping on the smart watch bandwagon by showing a stupidly large clock tower strapped to a wrist got a chuckle out of me.
Does an April Fools day joke really need to be that funny? I happen to like the tradition even when they're especially unfunny.
And in my book, jokes that are clearly jokes are distinct from lies.
A report of a tesla battery catching fire, and the cause is still unknown? Stock price drops. Elon writes an amazing article calming any fears about his batteries? Stock price drops. New SUV Model? Stock price drops. Earnings this quarter higher than expected? Stock price drops. etc.
Sounds like the market handled the joke incredibly well if it didn't even budge 1%.
edit: grammar
I'm on mobile but essentially if all the auto companies don't move and Tesla goes up 0.75% then it's a pretty good day for Tesla.
Edited to fix typo
1% might be a .01 sigma move. It might be a 3 sigma move.
Please don't present your opinions on a matter like this as if they are facts, especially when you are ill-informed.
I think that "percent change" captures the reader's imagination well, because it rather easily can be converted to an answer to the top question that a reader of a finance article is probably wondering:
"What potential returns were there to be made on the market, for this event, had you had knowledge that this event was going to happen?"
Otherwise, if you want to answer the reader's possible question of:
"How rare is this type of movement?"
I would prefer a metric of "mean time between events like this", with "events like this" having some reasonable definition, like versus previous history of this asset, or against similar assets, or against all previous April 1st movements of this asset.
In which case, neither of those really answer the question.
In the second you still need to compare the time period to other time periods, or you end up with "is that frequent?" Which is a very similar issue.
In the following minute, the stock jumped about $1.50 or about 0.75 percent from its level the moment before to as high as $188.50.
Nearly 400,000 shares traded in that time, and it was the heaviest one minute of trading volume in the stock since the opening 60 seconds of trading on Feb 12.
Tesla shares quickly retraced most of that upward move and ended the session at $187.59, down 0.63 percent from Tuesday’s close.
Musk feigns intolerance and disinterest in the games of the market. But more than any other CEO, he baits and stokes it. Several times in the last year, as TSLA stock takes a beating, he drops a tweet. He did it on October 1st with the "Model D" tweet. It creates a boomlet until the announcement, then a crash back down to reality. It creates a bag-holding moment for retail investors. It's not unreasonable to think that the CEO should not be meddling with the public market. I go even further and say: the investors and traders of TSLA have significantly helped the company succeed. Why does he keep kicking them in the teeth?
It's not your fault, but I think you've just been spun by the Michael Lewis Flashboys hype machine here. Frontrunning isn't really a problem. Did you know the majority of orders are price IMPROVED, in part due to the activities of high frequency traders? Meaning, you place an order to buy at $10 and it's filled at $9.995 because some HFT wanted your order flow so they improve the best quote by 1/2 penny to get to fill your order.
Moreover, if you're a buy-and-hold investor, even if you were "front run" you would never even know nor miss the 1/2 penny per share or whatever.
Respectfully, this is just a subject that's complicated and it to grok it you need to give it some real thought.
Let me just walk you through how an order is filled: Your brokerage sends the order to one or many of the firms that specialize as so-called "liquidity providers." These companies publish quotes for all securities, both a bid and ask. These companies make money by knowing what other people are doing -- capturing order flow -- so they try to publish the lowest quote possible in order to get the order because by law the brokerage must fill the order at the "national best bid/offer". This results in price improvement for the customer over half the time. This improvement doesn't get squeezed from another counter-party as I think you're thinking, and actually both counter-parties are likely to be price-improved. The improvement comes from smaller bid/ask spreads.
Here's what I know for certain: With high frequency trading tech comes more liquidity, with lower commissions, faster trade execution, and a small bid/ask spread. There are more penny-wide markets than ever before. Look, I'm just a retail trader. I have no reason to shill for HFT firms. And I even love Michael Lewis. But flashboys and this whole dark pools, front-running boogeyman is just so much bs.
But what if you removed either piece of that? What if they'd done this same announcement on the 3rd wed. of October? What if they'd sent out announcements, rented a convention center, setup a "One More Thing" reveal? Then a couple days later admitted it was a joke. Pretty epic prank really. In many ways, much much more funny. Also pretty clearly illegal.
What if on April 1st they announced something that was so drastic that people thought it was an April 1st joke but it wasn't?
I've been surprised lately how few people seem to recall Google's launch of Gmail on 04/01/2004. There was a lot of back and forth debate about whether or not it was a joke. What they promised was pretty incredible for the day. Adding to this was the tone of the announcement...
http://googlepress.blogspot.com/2004/04/google-gets-message-...
I have no doubt that you could find such a person. Similarly, I can find people who believe that the earth is flat, that the queen is a lizard, and that nuclear bombs do not exist.
Finding a person who believes something stupid is no feat. That is why the law has the concept of the reasonable person. Anyone who believed this joke was not reasonable.
Maybe it'd be good to have a machine-readable companion for PR releases?
OK, they are building a company and maybe even an industry. I get it.
Yet the problem is one of ridiculous valuations. There's huge risk. It is nothing less than legalize gambling. This coming from someone who day-traded full time for over a year. The things I experienced during that time made me decide that the stock market was nothing more than a form of gambling.
Don't blame the joke or the algorithm. Blame a regulatory system that does not protect the masses from "going to Vegas" any time they touch the stock market.
SO no they haven't turned into anything; they always were vapor-ware.
Sure, in the short term things can get crazy. Will TESLA achieve wild success and own 50% of the auto market, or will they go out of business when Toyota clones their cars? Reasonable people can disagree on these predictions and hence the stock will be relatively volatile.
But in the long run we will have the answer to this question and the value of Tesla will directly relate to it's ability to generate a return on capital just like it does for every other mature business.
Take baseball cards, which are almost exactly the same thing as stock certificates except we believe different things about them. You have all sorts of stats on the back. But nobody believes they control the value of the card.
That non-sequitur about TESLA predictions and the price of the stock are more of the same witchcraft. Sure I believe the stock will go up if the company is successful, but only because other people believe it too. Not because there's any cause and effect relationship other than belief.
Sure, the return might not go directly into your bank account the way bank interest does but it does exist. It's either being reinvested into the business, or returned to the shareholders in the form of dividends or stock buybacks.
It is a huge error in thinking to believe that a piece of stock is a baseball card. It is not. It is, in a very real sense, actual ownership of an actual business and all that represents.
No, its a polite fiction that a 'share' is related to the business. Its related to the right to bet on the business' performance, and a little bit more. If the business fails, you have certain rights. If its sold, your share is handled specially.
That the return doesn't go into your bank account is especially damning. The company money is entirely kept separate from your money, because they are not legally related.
Dividends are a red herring, used by few companies and factored in/out of the stock price near the dividend date. Stock buybacks are another anomaly. The company can decide at any time that you don't own your share, they want it back!
There have to be special rules put into place to avoid 'abuse' during buybacks, mergers etc. Because otherwise the non-existant connection between the share and the company would be exploited to the fullest, by leaving the shareholders out of the money entirely. SO rules get made to force the company to pretend the share is meaningful.
2) The company's money and you are, in fact, legally related when you buy a share of their stock. That is a legal contract.
3) Of course the timing of dividends are factored into the stock price around the time they are being paid. If I know that I own something at 12:00:00PM I'll get a $1 dividend, but if I don't own it until 12:00:01 I get nothing it makes perfect sense for the price to change by $1 at exactly that time. This actually support the argument that stock prices are related the the profitability of a company (and hence their ability to pay dividends).
4) A company cannot, in fact, decide at any time that you don't own your share anymore. It can decide to offer you money for that share and you can choose to sell it or not.
5) Most of the rules around buybacks, mergers, etc have to do with information disclosure and exist to help prevent company employees from stealing from shareholders. That's not pretending that there is a relationship it's protecting the legal rights of the owners of the company.
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I will tell a parable. Scientists have an understanding of gravity. Masses are attracted to each other and behave in certain ways based on certain mathematical rules. One could come along and say "That's hooey, it's all just witchcraft! It's only because we all think that we're attracted to the Earth that we can't fly."
I wouldn't really know how to respond to that other than to say that there are logical reasons to accept the laws of gravity and further there are mountains of evidence to support the hypothesis.
It's the same way with the stock market. A share is, legally speaking, fractional ownership of a company. It has certain legal and financial rights. Hence we would expect the value of shares to move in relation to the success or failure of companies. This is, in fact, what we have witnessed in reality over and over and over again.
You can keep on believing it's witchcraft all you want and I don't know how to prove you wrong. But it just means you are ignoring both a logical line of reasoning and all available evidence.
Start dealing with something that has similarity to liquid instruments (many buyers and sellers, equivalence of goods) and the same exact shit'll happen.
Or did you think Uber's pricing surges were due to people sitting down at a table and hashing out what the best prices for rides were during a given day?
You want to hand over all of our trading to computers to make more money? Fine (well not 100% fine but this is not the forum to discuss that) but I'm not going to feel sorry for you when your algorithm bites you in the ass.
http://faculty.chicagobooth.edu/eric.budish/research/HFT-Fre...
Note that this doesn't deal with the distributed systems problems of multiple exchanges so would require a universal exchange monopoly (ie an impossible and unwanted condition).
Batch auctions in and of themselves do not mitigate latency advantage because the people that propose them never remember 2 things:
1) venue arbitrage - not only does the exchange have to batch all the trades on its book, it has to coordinate that with all the other exchanges.
2) tiebreakers - if in a given auction you have more people on 1 side of a price than on the other (more people offering to buy at x than people willing to sell for instance) who gets to trade?
1) This is a sentence.
2) This captcha is on this page.
3) This captcha is super awesome.
To me, the most interesting part is that eventually, how we interpret the laws about what publicly traded companies can legally say may change.
>come on, put out your fake press releases at 4:05, not 3:55. There is no reason to tempt fate, or annoy your shareholder-algorithms, like this.
Looks like the author is bothered by this.
"I think that materiality means what it says, and if people or algorithms do dumb things with trivial information that's their problem."
I'm guessing Tesla told their PR agency to release it at 4:00, after market close, but the person pushing the button didn't realize the significance of that time and figured early was better than late. oops.