That’s pretty metal.
65 karma · joined September 22, 2019
Your original question was why MMs have to operate at HFT horizons. MMs by definition are liquidity providers (which means high availability and high volume at competitive prices). In some cases (DMMs) they're legally obligated to do so at some well defined baseline. And in that specific context HFT speeds are required.
Existing profitable MMs aren't all equally fast. So the slower ones that trade on the same exchanges or even the same indices have to be profitably trading at a wider spread.
HFT isn't a concrete term so I guess technically there's no hard line to draw for how fast your roundtrip times have to be to be profitable. But if you are trading wide enough where you think latency isn't a factor, aren't you really just predicting where you think the book will go "far" ahead in the future? MM is inherently a reactionary business (with some effort put into anticipating the price moving against you in the very very short term).
Also even if you do quote wider, to effectively capture the spread, your buy on one side and your sell on the other side still have to basically occur simultaneously which is where the demand for latency comes in so you really can't escape it.
That said there are ways to still be profitable even if you know you're not the fastest gun in the west across the most exchanges. Without going into too many details you'd have to selectively choose where/what you trade. Which is not trivial at all of course.
The arms race is a necessity due to rising competition. HFTs cannibalize each other every year. People on the outside seem to think being in HFT inherently means you’re printing money but they don’t acknowledge how tough the business actually is. Many firms have either collapsed or have been bought out over the past decade.
Market makers specifically (who inherently have to operate in HFT time horizons) don't even compete with low-mid frequency hedge funds and props. They don't compete with retail investors. They strictly compete against other MMs to capture the spread.
That said I do think the dynamics of poker change more than most other board/card/table games when going from live to online or vice versa, with my extremely limited understanding of chess, go, and Magic.
If you welcome general corporate blogs, I think Google AI's technical blog is quite good. Their frequent publications on distributed computing strike a good balance of academic and practical ideas:
Cloudflare also has one of my favorite more engineering focused blogs.
This is talked about with an example in this talk around 18m30s: https://www.youtube.com/watch?v=BysBMdx9w6k
Also as someone else mentioned, Jane Street doesn't try regularly competing (to my knowledge as someone in the industry) at trading horizons that demand lowest the lowest possible latency.
In the US my only exposure to Mercari have been low budget Youtube ads that make it look like a side project from a high schooler. I guess that's marketing at work (or not at work).
That's only true if AlphaGo never makes a mistake or if AlphaGo will 100% always make the better or equal decision than a human + computer at any given state of the board. I know the former certainly isn't true and I assume the latter isn't true either, but I don't know enough about Go to say for sure.
Of course you can just have a bunch of black car services in your phonebook that are dispersed around the city but.. at that point why not just use rideshare?
I don't know if private transport is ultimately unsustainable. That's something people much smarter than me will have to figure out how to measure. But I do know rideshare is objectively a better product for consumers across the board than the services it replaced.
I have hold no stigma against gambling, I used to gamble professionally. I just think it’s important to acknowledge what is and isn’t gambling and to acknowledge society and legislation generally have a stigma against it.