HFT Nothing To Worry About (at Least In Australia) 152
angry tapir writes "Although software-driven high-frequency trading has got a pretty bad rap (being blamed for the so-called 'Flash Crash' in 2012 for example) Australia's chief financial regulator ASIC says that, in Australia at least, it's not cause for concern. After an in-depth study of HFT in Australian markets, ASIC decided to hold off on previously considered regulatory changes (such as implementing a 'pause' for some small trades)."
Screw The Big Traders (Score:3, Insightful)
HFT (Score:5, Insightful)
HFT isn't a system stability problem as much as it is an access problem. What it does is increase the cost of entry into the market -- those who don't engage in HFT wind up paying for those who do, and so it winds up penalizing people with smaller portfolios and shifting the costs of it onto them. What you need to understand about profit is that it is always at the expense of someone else. And HFT is the sublime example of how to nickle and dime the less fortunate to death. These fractions of a penny here and there add up because it gets compounded by interest rate. Over time, the spread between those who have it and those who don't will grow; As is the trend in any investment-based system.
Re:Screw The Big Traders (Score:2, Insightful)
Re:Sometimes I think *de*regulation is the answer (Score:5, Insightful)
If the official rules stated "HFT is totally *un*regulated --- feel free to run your buggies, most insane, glitchy, and flawed HFT software" --- immediately all the other HFT software systems would be coded to watch for crazy non-justified buying&selling.
I love magical thinking like this. It keeps me employed. In other news, "too big to fail." Businesses don't pay for their mistakes: You do. That's the reason for regulation... it's to assure a baseline level of sanity... so when they screwup, they don't do it so badly that they take the rest of us with them.
Re:Screw The Big Traders (Score:5, Insightful)
"They amass billions by siphoning it away from the majority of people in the market, and in return give us nothing of social value."
How are they "siphoning" anything away from a majority of people?
How are they giving nothing in social value? The money these people make they spend on other business ventures, familial needs, education, healthcare, charity, do you have any evidence at all that this money is going into a black hole of sorts?
I thought not.
So would the guys a few milliseconds behind - that isn't a relevant point. And that's not even what the parent was referring to about "social value". They mean about giving a sense of "worth" to publicly traded companies, which compels them to make sound business decisions. And the "siphoning" refers to a lack of a "level playing field", which is the reason we have laws against monopolies, price-fixing, etc...
Re:Screw The Big Traders (Score:4, Insightful)
There is so much FUD around HFT it is hard for people to think rationally about it. I had wasted the following study on a troll once already earlier this morning and therefore it would be a shame not to repost it: http://online.wsj.com/public/resources/documents/HFT0324.pdf [wsj.com]
Maybe someone may be bothered to actually learn something about HFT before they declare it the spawn of Satan. The upshot: "Based on the vast majority of the empirical work to date, HFT and automated,competing trading venues have substantially improved market liquidity and reduced trading costs for all investors. Share prices are almost surely higher as a result of this reduction in trading costs, benefiting long-term investors. Higher share prices also have favorable implications for firms\ cost of equity capital. " Exactly, and that makes FUD out of the sentiment that HFT is somehow squeezing out mom and pop investors, or siphoning billions out of the market.
In fact, do you know who doesn't like HFT? The investment banking arms of too-big-to-fail banks. Yes, they run HFT operations as well, but they would love to see a return to the days when the roost was ruled by the company with the biggest pile of money instead of the other guy who had better technology. Every time one of these articles shows up I am amazed by the number of supposedly technically minded slashdotters who come out on the side of big banks over the guys who write software for a living, and the trolls who can't be bothered to even understand what HFT is before they attack it.
Re:Screw The Big Traders (Score:5, Insightful)
How are they "siphoning" anything away from a majority of people?
Easy, the value they extract through arbitrage would otherwise be retained by the parties making actual trades.
How are they giving nothing in social value? The money these people make they spend on other business ventures
So do any other sort of theives, what's your point?
Re:Screw The Big Traders (Score:5, Insightful)
The HFTs are paying the stock exchanges a fee to have access to faster trades. The service HFT provides is market making
If that was a valuable service, the stock exchanges would be paying the HFT guys, not the other way around.
Banks borrow money at a lower rate and and lend money at a higher rate creating profit with each transaction. This was seen as immoral at various times in history, but now we know this serves to create liquidity.
It's still immoral, despite creating liquidity. There's absolutely no reason we couldn't create all the liquidity we want with non-profit, publicly owned financial institutions.
The very premise is suspect (Score:4, Insightful)