[ElBorrachoInfamoso]

(04-09-2014 10:24 AM)Samseau Wrote:  

But that's just not true. Thousands of new business ideas are tried each year and fail. What the public will find valuable can be very fickle.

HFT also doesn't provide anything that normal trading does not; it merely does it faster in order to game the system. It's really no different than putting a toll on a highway.

That is why I qualified my statement and specified businesses that provide value. It's clear that if you have the monopoly on a worthless product then you still won't make money.

HFT provides faster trades. If you believe some of the research, it also provides narrower bid-ask spreads. Maybe HFT is a net negative value to society but the way exchanges are set up now, it does provide some value.

(04-09-2014 10:49 AM)Sugar Wrote:  

That's a poor analogy. If I have my little cafe and a Starbucks opens, there's no conflict of interest. I serve my customers and they serve theirs and customers are free to go where they want.

HFT, due to the ridiculous advantage firms have over the retail investor is more like if the manager of Starbucks ran over to my cafe and started feeding my customers while they were waiting in line. They aren't likely to be very hungry when they get to the register.

The analogy I intended:
Little Cafe is to Starbucks as Little HFT is to Big HFT

The analogy you inferred:
Little Cafe is to Starbucks as Retail investor (or maybe traditional broker) is to HFT

If it were legal for someone to come and sell coffee or food in your cafe and they offered better prices, you probably would go out of the business. I don't see how that is bad for the customers though.

(04-09-2014 06:58 PM)BIGINJAPAN Wrote:  

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.

I am sure that most regular folks are too dumb to understand HFT. I can accept that regular traders might be better off with different exchange rules, but I haven't seen a convincing argument yet.

How is HFT illegal? I don't doubt that some strategies pursued by some HFTs are illegal, but HFT in general is not illegal. Being a better intermediary is not illegal.

I do not work in finance beyond some pro-bono consulting I do for a startup in the weather derivatives space. The bulk of my real world work experience is in the pharma/biotech space including R&D, operations and commercial. I abandoned academia when I figured out I'd rather kill myself than be a 30-year-old post-doc. Best decision I ever made. Despite my years in research, I have been hustling ever since I ran my own business as a teenager.