HFT backflip complete!

[sinner]

For years I have argued on ASF about HFT.

The issue I have faced is very similar to the issue on gold with this forum:

Namely that you can't convince people who watch Max Keiser or Alex Jones that HFT is not an Illuminati conspiracy.

But also that you can't convince traders and investors that HFT - by and large - is completely detrimental to market microstructure, that HFT is in fact value destructive to free capital markets, and so on.

So just like on the gold issue, I gave up, I don't bother talking to you narrow minded people about this topic.

But I came here today, just to remind you of the issue that ZeroHedge has been faithfully reporting on since 2009 and being dismissed as a conspiracy nutter website since then.

From just last year - 21 May 2013:
https://www.businessspectator.com.a...itch-tougher-high-frequency-trading-rules-asx

In March, ASIC described public concerns over HFT as overstated, saying a taskforce charged with investigating the method "did not find systematic manipulation or abuse of markets by high frequency traders".

From this month, after the release of "Flash Boys" book - 7 April 2014:
https://www.businessspectator.com.au/news/2014/4/7/markets/asic-targets-high-frequency-trading

Australian Securities and Investments Commission chair Greg Medcraft said the controversial practice -- which jumped back onto the international agenda last week after explosive claims markets were “rigged” in favour of high-speed traders -- was threatening to drive away investors.

“If people can’t have trust and confidence in the market, then you don’t have a market,” Mr Medcraft told the AFR. “The strength of the market is reflected in how many retail investors you have. If you discourage real buyers, then markets become trading for trading’s sake, rather than serving the real economy.”

A controversial plan to introduce a half second pause on trades is now believed to be back on the agenda after ASIC dropped the proposal last year.

So what is it about this book "Flash Boys" that has triggered a completely bold-faced backflip by the industry, with similar statements from the SEC and DoJ in the US, new exchanges popping up to combat the evils of HFT and so on?

This reminds me so much of the Snowden issue, where geeks who had been paying attention noted that concrete evidence of nationwide wiretapping was taking place in 2006 (google Room 641A, or even earlier google William Binney) but anybody who talked about was dismissed as a conspiracy nut case...until Snowden, and suddenly everyones on the bandwagon.

Wonder how long it'll take for all those on this forum who dismissed concerns I repeatedly raised for five years to catch up to reality on this one....

 

[sinner]

Let us not forget, that the job of the stock market is nominally to aggregate capital for efficient allocation.

Let us not forget that essentially 9% of the productivity of Australia goes into the stockmarket - thanks to super mandatory minimum contributions - via asset managers that invest regardless of whether a particular business does good or bad, whether it is undervalued or overvalued, whether it's even profitable or not.

So issues like this, even if you don't think they affect you, actually effect everyone. *EVERYONE* loses when HFT destroys value in the economy. *EVERYONE* loses when HFT manages to keep stocks that should have left the index afloat.

 

[pixel]

Hi Sinner,

I agree with the general tenor of your observations; but less so with your interpretation of ASF members' silence on the issue. In many cases - myself included - the reason would've been more one of resignation rather than denial. As in "HFT is a fact of life. No use whinging about it. Get used to it and make the most of it."

I found a broker - even an onliner - that allows me to place any number of orders for one daily contract note and brokerage. While that's not totally on a par with the Big Boyz, neither is the size of my trading account. At least I can place tiny orders - even centre point ones - to get close to, if not better than, vwap.

Sure, some old-style investors hate me for this and call me a "bluddy daytrader". But IMHO it's better to play the game by current rules, rather than wish for horse-and-buggy of the Good Ole Dayz to come back.

If some new rules are going to be introduced - so what! The Big Boyz will find a way around to keep fleecing the sheeple. Adjust and prosper!

 

[sinner]

I am talking macroeconomics here pixel, the selfish or individualist response has really nothing to do with it, HFT sucks value from the stockmarket, therefore the economy, which affects you indirectly in many more ways than you could possibly ever adjust to overcome on an individual basis.

If the microstructure of markets are broken, the pricing mechanism for capital assets is broken, which means information that the price imparts to the market is that much more noise and that much less signal. Some of the largest companies in Australia are listed, with investors spanning literally the entire economy through Superannuation, employing whole chunks of the population, contributing funds to lobbyists who affect Government policy, and so on...

Aside from the Illuminati conspiracy set, it's also exactly this misunderstanding from traders and investors that I address.

In complex systems consequences are almost always unintended, largely "unexpected" and failure modes therefore spread across the entire system instead of only affecting the perpetrators of any given action to which meaningful consequences can be ascribed.

 

[macca]

Every cent stolen from the market by these leeches should be in the pocket of true investors.

Let's say they take a billion a year from the market, that billion actually belongs to a pension/super fund or a company looking to employ people somewhere.

HFT should be banned and taxed out of existence immediately throughout the world. The fact that it is not just highlights the problem with privately owned exchanges.

It is one of the reasons I have moved most of our funds away from the market

 

[kid hustlr]

HFT is a broad topic.

sinner needs to define what he's talking about for the thread to have any substance imo

 

[CanOz]

HFTs Lose: IEX Granted Exchange Status As SEC Says The Speed Race Is Over

This is catastrophic for HFTs for whom microseconds mean all the difference between profit and loss.

Not all HFT's are predatory, but it will be interesting to see what happens to the ones that are left. Will investors return and flood IEX's new exchange?

BTW, its good to see Canadian, Brad Katsuyama standing up for the investor and transparency. Now watch the Rebloodlicans get in, cut back the SEC and overturn the law.