[BIGINJAPAN]

(04-09-2014 03:36 AM)ElBorrachoInfamoso Wrote:  

(04-08-2014 02:33 PM)samsamsam Wrote:  

BIGINJAPAN makes a great point the HFT guys never put their capital at risk, if anything, they are betting on a sure thing because they see the orders coming. I don't blame people for wanting a sure thing, but does it seem right? Hmmm not so much.

HFTs put their capital at risk when they invest in the infrastructure needed to make HFT possible. If a particular HFT were the only HFT around, they would never lose money. They only lose when other HFTs do a better job and push them out of the market.

I don't see how this is fundamentally different from other businesses.

If you move to a town with no cafe and you build the only one in town then you are putting your capital at risk. As the only cafe you are unlikely to lose money. But if Starbucks moves in and does a better job then you could get pushed out of the market.

This is how every business works in a relatively free market. As long as the business provides value to its customers, it will always be profitable assuming it has a monopoly. Competition introduces the possibility of failure.

I don't think HFT haters really care so much about that. If so, then they clearly have a weak understanding of markets and aren't worth listening to.


These, I think, are the main points of the non-idiotic HFT haters
1. HFT only exists because of flawed market design.
2. A market design that optimizes value for all traders would not allow the possibility of HFT.

Basically, HFTs can only intermediate because exchanges are designed in a particular way. Exchanges can and should be designed in such a way that optimizes value for the people who actually take positions in the traded assets - both long and short positions. Such a design would preclude the possibility of HFT.

I think your problem is you are a math genius and you see how HFT works and think it's neat. You think you are smarter and therefore the rest of the regular folks are too dumb to understand the mechanics of how HFT works. You are only looking at the math and the programming. You don't take into consideration how the NBBO works and price discovery. Not to mention the law. HFT is illegal and the useless SEC chooses to do nothing about it. High Frequency Trading is not a case of them being a head of the regulators and there being no law in place. NBBO is what is supposed to protect people but exchanges are being paid off to give HFT's an advantage.

Why do you think dark pools exist ? Why do you think most hedgefunds, Banks and pension funds trade in dark pools ?

I think i need to re-read your background as it sounds like you are an academic without a lot of real world experience in trading.