While I do think that HFT presents a problem, it's important to separate that from more general problems that aren't necessarily related:
The fact that there is a lot of 'gambling' in the modern stock market is not to do with the existence of the market itself, but the existence of torrents of cheap money flowing across the economy. At any given time, there is going to be a discrepancy between the amount of stock investors want to buy and the amount of stock available. The role of the speculator is to come in and alleviate this discrepancy by holding stocks for shorter periods of time. Essentially, they take on some of the risk that would have been borne by investors and issuers of stock, and they get paid for it if they do their jobs well. This happens not only in the stock market, but all markets, and has happened since man invented markets. There's nothing inherently wrong with it.
Your real beef should be with the fact that conventional economic wisdom favours artificially cheap debt and money printing as its method to drive economic growth. Even if you got your way and administered the punitive taxes you called for upthread, you wouldn't end the casino. It would just move to a different venue, because the cheap money would still be flowing.
There is nothing wrong with being faster and more equipped, the appeal to fairness is misplaced in my opinion. You can go back to the famous example of Rothschild getting information about how the Battle of Waterloo was going before everyone else and profiting from that. Ever since the advancement of telecommunications, there have always been market participants who get information, and even prices before the rest. Seemingly HFT is just the latest example of it, and it would be if all it was doing is just 'trading faster.'
The real issue with HFT is the quote stuffing. For example if you want to buy a stock at $25 and you put an order in the market, HFT can 'see' your order, and get in front of it by placing huge orders at 25.01. This is going to lift the price, but before the order gets completed the HFT cancels its huge buy order. It can push the price up to say 25.02 in this manner, at which point it actually sells it to you at 25.02. But because there were no real orders (just fake orders that the HFT kept cancelling right before they were filled), the price of the stock drops back to $25 and the HFT makes a quick 2 cents. It's bullshit, unproductive behavior that doesn't add anything to the market. The idea that it adds liquidity is nonsense, because there is nothing behind all of those quick orders the HFTs put in. At least in the past, speculators with deep pockets actually had to put their money on the line as part of their 'manipulations,' meaning you could argue that it was a real market at least. Today, with HFT supposedly doing 70% of trading, and the volume in stock trading dropping like a stone, it's potentially just a bunch of algos trading with each other in the modern stock market.
Quote: (04-02-2014 05:34 PM)scorpion Wrote:
Who gives a fuck if you cripple the markets? The purpose of a stock exchange is not to facilitate gambling and speculation, it's to allow investors to purchase shares of companies. If you aren't willing to hold onto your shares for at least a year then you aren't investing, you're gambling. We need to get back to an idea of actually owning shares of a company instead of just trading them like fucking baseball cards. If you own a share, you OWN it. You are a partial owner of that company entitled to a fractional share of its profits. If you don't want to become a fractional owner of the company over a long term time horizon, don't buy the stock. There is absolutely no productive reason for stocks to be changing hands as much as they do now, especially with HFT where positions can be held for fractions of a second. It's completely ridiculous and has nothing to do with actually creating wealth.
To be frank, we would be a lot better off if the modern day stock market was crippled. It has long since lost sight of its original purpose and has become nothing more than a gigantic casino and money skimming operation.
The fact that there is a lot of 'gambling' in the modern stock market is not to do with the existence of the market itself, but the existence of torrents of cheap money flowing across the economy. At any given time, there is going to be a discrepancy between the amount of stock investors want to buy and the amount of stock available. The role of the speculator is to come in and alleviate this discrepancy by holding stocks for shorter periods of time. Essentially, they take on some of the risk that would have been borne by investors and issuers of stock, and they get paid for it if they do their jobs well. This happens not only in the stock market, but all markets, and has happened since man invented markets. There's nothing inherently wrong with it.
Your real beef should be with the fact that conventional economic wisdom favours artificially cheap debt and money printing as its method to drive economic growth. Even if you got your way and administered the punitive taxes you called for upthread, you wouldn't end the casino. It would just move to a different venue, because the cheap money would still be flowing.
Quote: (04-04-2014 12:08 PM)Samseau Wrote:
The people defending HFT are acting stupid. If I just called you stupid, sorry. But you are.
Something can only be considered fair if everyone has equal access to it. Can anyone setup an HFT algo on wall st? No, you cannot. Only people with access to HFT are the super rich who can buy the licenses and rights to use it. And the fact that HFT never loses means HFT isn't a gamble or risk, like most businesses or stock trading are.
On eTrade or Scottstrade, the amount of times you can buy and sell a position within a day is 3 or 4 times. Yet HFT can buy or sell a position 4000 times per second, yet us "common folk" can only buy or sell a position 3 or 4 times per day. If this doesn't offend your moral sensibilities, then you are probably a maniac who doesn't have any moral sensibilities.
There is nothing wrong with being faster and more equipped, the appeal to fairness is misplaced in my opinion. You can go back to the famous example of Rothschild getting information about how the Battle of Waterloo was going before everyone else and profiting from that. Ever since the advancement of telecommunications, there have always been market participants who get information, and even prices before the rest. Seemingly HFT is just the latest example of it, and it would be if all it was doing is just 'trading faster.'
The real issue with HFT is the quote stuffing. For example if you want to buy a stock at $25 and you put an order in the market, HFT can 'see' your order, and get in front of it by placing huge orders at 25.01. This is going to lift the price, but before the order gets completed the HFT cancels its huge buy order. It can push the price up to say 25.02 in this manner, at which point it actually sells it to you at 25.02. But because there were no real orders (just fake orders that the HFT kept cancelling right before they were filled), the price of the stock drops back to $25 and the HFT makes a quick 2 cents. It's bullshit, unproductive behavior that doesn't add anything to the market. The idea that it adds liquidity is nonsense, because there is nothing behind all of those quick orders the HFTs put in. At least in the past, speculators with deep pockets actually had to put their money on the line as part of their 'manipulations,' meaning you could argue that it was a real market at least. Today, with HFT supposedly doing 70% of trading, and the volume in stock trading dropping like a stone, it's potentially just a bunch of algos trading with each other in the modern stock market.
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