Alan Kohler's Take on High Frequency Trading

[cynic]

Mommy, mommy it's so unfair!

Those dastardly HF traders are using their resources to gain a profitable edge in the market.

Somebody, anybody, please stop them! Stop them now!

Coz I wanna trade the markets but I can't seem to make a profit coz those nasty bots keep sucking all the opportunity out of the market!

It's so unfair. I can't seem to profit - so the traders making the money must have an unfair advantage over me, therefore we need more regulations and we need them now!

Mommy please make it all better!

 

[tech/a]

Mommy, mommy it's so unfair!

Those dastardly HF traders are using their resources to gain a profitable edge in the market.

Somebody, anybody, please stop them! Stop them now!

Coz I wanna trade the markets but I can't seem to make a profit coz those nasty bots keep sucking all the opportunity out of the market!

It's so unfair. I can't seem to profit - so the traders making the money must have an unfair advantage over me, therefore we need more regulations and we need them now!

Mommy please make it all better!

Interesting contribution.

 

[wayneL]

Interesting contribution.

Yes

Probably pretty close to the mark too.

 

[skc]

But HFTers definitely have a distinct advantage over everyone else. Furthermore, this advantage is constant and quantifiable. Having a bloomberg terminal doesn't mean you will make good decisions. Having the most economists doesn't mean they will form a hivemind to see the future. But having the fastest access to the ASX by a wide margin does mean that you can use mathematics and historical patterns to accurately predict what is about to happen, and profit from it - at the expense of other market participants.

Allow me to paraphrase your arguments again.

- Big institutions employing alot of expensive and finite resources but can't make them work has no unfair advantage.

- HFTs employing alot of expensive and finite resources that makes them profitable has an unfair advantage.

Is that right?

By the way, how do you know the bold bit? Especially the "accurately" part.

 

[skyQuake]

Their only competitive advantage over a retail trader is superior execution speed. Which is next to useless in that context. If you're going to fight them in their <1sec timeframes you will lose.

Different timeframes different trades.

The only benefit ultra low latency provides is over other algos using a similar strategy.

 

[Trembling Hand]

But having the fastest access to the ASX by a wide margin does mean that you can use mathematics and historical patterns to accurately predict what is about to happen, and profit from it

By the way, how do you know the bold bit? Especially the "accurately" part.

Because,

Let's say Joe Sixpack buys $100,000 CBA one day for $49, and it trades at $50 a fortnight later. Mr. Sixpax proclaims "yipee" and hits the sell button - but in that period of time, in between when he hit sell and the order is executed by the ASX, a HFT parasite has taken market actions which result in CBA trading at $49.50 - and good 'ol Joe with six kids to feed, and a wife that just won't shut up about a brand new BMW got 50% less profit.

:bunny:
Just cracks me up. :nuts:

The only benefit ultra low latency provides is over other algos using a similar strategy.

Xactly. Nothing here except a very poor journo's beat up.

 

[Starcraftmazter]

- Big institutions employing alot of expensive and finite resources but can't make them work has no unfair advantage.

- HFTs employing alot of expensive and finite resources that makes them profitable has an unfair advantage.

Is that right?

Yes. Is there a logical flaw? I don't see one.

By the way, how do you know the bold bit? Especially the "accurately" part.

Because they make money off of it? How many companies make money off predicting the lottery? None. That's because it's impossible. Clearly the existence of HFTers proves it is possible to do so with the stock market.

Their only competitive advantage over a retail trader is superior execution speed. Which is next to useless in that context. If you're going to fight them in their <1sec timeframes you will lose.

Challenge Accepted! Or at least it would be if I had equal access to the low latency execution speed, regardless of my financial wealth.

 

[Trembling Hand]

Challenge Accepted! Or at least it would be if I had equal access to the low latency execution speed, regardless of my financial wealth.

I'd be happy with just you running through your CBA example of poor old Mr Sixpax getting robbed by the HSTers.

Or is the lack of comment acceptance that your example is BS?

 

[skc]

Yes. Is there a logical flaw? I don't see one.

Your logic is...
- Companies employing a lot of expensive and finite resources has no unfair advantage if they don't make profit.
- Companies employing a lot of expensive and finite resources has unfair advantage if they do make profit.

Unfairness depends on whether one is profitable or not.

So the moment that a company makes money from their highly paid economist they change from having no unfair advantage to having an unfair advantage. At the same time, if HFTs stop being profitable it is no longer unfair.

Can you see the logical flaw yet?

Because they make money off of it? How many companies make money off predicting the lottery? None. That's because it's impossible. Clearly the existence of HFTers proves it is possible to do so with the stock market.

When does existence imply profitability? So all existing enterprise must, by your logic, be profitable?

Look - I am neither a supporter or detractor of HFTs. I see their existence as having both pros and cons. I am happy to change my mind if there's new information suggesting to me that they have unfair advantage. But so far none of your argument hold up logically (let alone factually).

 

[Trembling Hand]

One of the other things that makes Alan Kohler such Muppet is that there is no evidence that those servers are actually being used for HFT.

They are more than likely for hire execution bots doing the work of the same super funds that Kohler is claiming to be robbed.

Then of course they are also even more likely to be Arb bots that have locked the market up intraday since 2008. I'd like to know how Joe Sixpax has anything to be concerned about a bot selling futs and buying equal amount of stocks and holding till expiry.

Then of course beyond that they are even more likely to be Oppy MM bots. And they have every right to be there with the best execution available.

Utter crap article.

Care to comment on those points SCM?

 

[Starcraftmazter]

So the moment that a company makes money from their highly paid economist they change from having no unfair advantage to having an unfair advantage. At the same time, if HFTs stop being profitable it is no longer unfair.

I doubt any company is going to have an advantage by employing any economist. I really highly doubt that - at least so far as the stock market is concerned.

I, you, or anyone else can learn everything that exists in economics, and we can then use our knowledge to analyse and make predictions on the future - in the same way any economist employed by any company can. There is absolutely no inherent advantage which they have over anyone.

On the other hand I cannot fathom what apart from HFTing can possibly give one such a great advantage. No matter how smart you are, you can not do what they do because you do not have such low latency access to the ASX.

And just like you might argue that the top economists hired by the top companies may have more experience and skill than me or you or others, you can say that the top HFTing companies may have smarter algorithms than you or I or others may develop - but that is irrelevant to the point of being able to have the same opportunity to try and make a profit in the same way.

When does existence imply profitability?

When that which exists makes profit and thereby continues existing and perhaps even expanding. HFTing companies would not pay the highest salaries and employ ever more people if they were not extremely profitable.

Look - I am neither a supporter or detractor of HFTs. I see their existence as having both pros and cons. I am happy to change my mind if there's new information suggesting to me that they have unfair advantage. But so far none of your argument hold up logically (let alone factually).

Maybe that's just because you're not looking at it from the broader perspective. Imagine that you could create HFTing algorithms just like them, which could make money - and yet, you could not deploy them because of a lack of capital. Now you see all these companies making money doing exactly the same as what you can do - but you do not have this opportunity, simply because you don't have enough money. Would you still think that's fair?

Is our economic system not meant to be based on the concept of equal opportunity? Just like it's unfair (and illegal) to trade based on knowing insider information before others, isn't it unfair to trade based on knowing the market action before others?

 

[notting]

Interesting contribution.

Cracking me up.

Nothing here except a very poor journo's beat up.

Certainly not a rag I'd be subscribing to!

 

[Trembling Hand]

Imagine that you could create HFTing algorithms just like them, which could make money - and yet, you could not deploy them because of a lack of capital. Now you see all these companies making money doing exactly the same as what you can do - but you do not have this opportunity, simply because you don't have enough money. Would you still think that's fair?

LOL spoken like a true small thinker. Who do you think these dudes are? Hedge funds with an idea who then go out and raise capital from investors. Anyone can do.

 

[Starcraftmazter]

LOL spoken like a true small thinker.

As opposed to you; a person clearly unconcerned with right and wrong - fair and unfair. Why even bother wasting my time with your immorality?

 

[skc]

I doubt any company is going to have an advantage by employing any economist. I really highly doubt that - at least so far as the stock market is concerned.

I, you, or anyone else can learn everything that exists in economics, and we can then use our knowledge to analyse and make predictions on the future - in the same way any economist employed by any company can. There is absolutely no inherent advantage which they have over anyone.

Economist is merely offered as a logical analogy, not for actual discussion. I am not saying anything about the usefulness of economist or otherwise. Substitute the word economist with "Some Resource" and try to understand the logic.

When that which exists makes profit and thereby continues existing and perhaps even expanding. HFTing companies would not pay the highest salaries and employ ever more people if they were not extremely profitable.

Any reference to your assertions?

Maybe that's just because you're not looking at it from the broader perspective. Imagine that you could create HFTing algorithms just like them, which could make money - and yet, you could not deploy them because of a lack of capital. Now you see all these companies making money doing exactly the same as what you can do - but you do not have this opportunity, simply because you don't have enough money. Would you still think that's fair?

Very compelling argument. I see what you mean now. It is unfair because they have more money and resource than the average person. I support the notion that no institution with above average money and resource should be allowed to trade. Afterall, we must have a open and fair market based on everyone having the same money and resource.

It's too difficult debating with fools.

You are so right. How do I not see that. *sigh

 

[Trembling Hand]

As opposed to you; a person clearly unconcerned with right and wrong - fair and unfair. Why even bother wasting my time with your immorality?

You haven't addressed the point about you silly CBA example.

You haven't shown how they rob anyone,

You haven't shown that they are HFT bots,

You havn't commented about them more likely to be oppy bots,

or execution bots,

or arb bots,

Now you haven't addressed the point that anyone can actually do this if they are smart enough. Its not unfair access. You come up with the profitable algo I'll show you how to have the same access. I'll show you how you can fund it with very little money from yourself. This is your whole point isn't it? That its only available to some?. But you are wrong. You don't know what the hell ya talking about

 

[Starcraftmazter]

Economist is merely offered as a logical analogy, not for actual discussion. I am not saying anything about the usefulness of economist or otherwise. Substitute the word economist with "Some Resource" and try to understand the logic.

I understand your logic perfectly fine - what I contest is the possibility that any resource will be as significant as having by far the lowest latency access to the ASX. In particular, that a property qualified and experienced individual - or group of individuals cannot replicate such a resource if they wanted to let's say start their own trading/investment company.

Any reference to your assertions?

Well you can have a look at job offers on Seek and such. I know because while I was at uni, I was looking at a HFTing company as a possibility of employment. I applied, and down the track I was given a tour of their building. They were saying that they are moving to a new building and employing over 100 new engineers as they are expanding their operation. They also operate in multiple countries. And they did not make the salary secret, the highest for my profession for someone straight out of uni - 75k in 2009, plus 20% super and private health cover. Their offices were pretty good too, they had arcade games, pool and everything.

Afterall, we must have a open and fair market based on everyone having the same money and resource.

We must have a free market whereby people are not deprived of opportunities to make money in such ways as others do merely because those have more capital.

You haven't addressed the point about you silly CBA example.

What point?

You haven't shown how they rob anyone,

Some people are blind. I'm beginning to see that the majority of the patrons of this forum simply cannot see right from wrong, or they do not care.

You haven't shown that they are HFT bots,

Who?

You havn't commented about them more likely to be oppy bots,

or execution bots,

or arb bots,

It's irrelevant what other companies rent server space from the ASX for what other reasons, because that is outside of the current topic.

Now you haven't addressed the point that anyone can actually do this if they are smart enough. Its not unfair access. You come up with the profitable algo I'll show you how to have the same access. I'll show you how you can fund it with very little money from yourself. This is your whole point isn't it? That its only available to some?. But you are wrong. You don't know what the hell ya talking about

I can't possibly make such an algorithm without thorough testing - which implies I require the access before I have the algorithm. Would you be interested in purchasing the colocation at the ASX building for me for a few years while I develop my algorithm? I'll split profits with you 50/50 :dunno:

 

[Trembling Hand]

I can't possibly make such an algorithm without thorough testing - which implies I require the access before I have the algorithm. Would you be interested in purchasing the colocation at the ASX building for me for a few years while I develop my algorithm? I'll split profits with you 50/50 :dunno:

Utter nonsense. You again have shown you do not know what you are talking about. Anyone can test with data that cost about $40 month.

And again you dodge all questions. :bunny:

The more you talk the more I KNOW you cannot trade to save yourself. That you haven't a friggin clue about markets.

 

[Starcraftmazter]

Utter nonsense. You again have shown you do not know what you are talking about. Anyone can test with data that cost about $40 month.

Are you serious? How is data for $40 a month going to replicate the conditions of thousands of buy and sell orders - many of which do not even get executed, coming in microsecond timings? Do you even think before you type? Do you know what HFTing does?

And again you dodge all questions. :bunny:

More like you dodge my answers.

The more you talk the more I KNOW you cannot trade to save yourself. That you haven't a friggin clue about markets.

Of course, when all else fails and you are proven wrong, then resort to personal insults. Losers don't know any better

 

[Trembling Hand]

Are you serious? How is data for $40 a month going to replicate the conditions of thousands of buy and sell orders - many of which do not even get executed, coming in microsecond timings?

LOL deadly serious.

Do I know what HFTing does?

Just OMFG. I pretty sure I'm as close as it gets to a human HFTer. And I'm also pretty sure you are clueless. thats not a baseless insult. I'm will to prove I can trade and I'm willing to pay to see what we all suspect. You cannot trade.

I know more about HFT by about 100000 times more than you without a doubt. But back to you. I can set you up with unlimited funds and the data to test.

You willing to take up the challenge or you just all talk?