P2P Forum

General Category => Investing - General (not P2P) => Topic started by: thezfunk on March 30, 2014, 11:00:00 PM

Title: HFT skimming the market
Post by: thezfunk on March 30, 2014, 11:00:00 PM
http://www.businessinsider.com/michael-lewis-the-stock-market-is-rigged-2014-3

I have long felt that playing in the stock market was no different than gambling in the casino.  Information like this only reinforces that belief.  I am not surprised by what Michael Lewis is saying, just disgusted.  I have a growing desire for a tax on transactions. 

http://www.reuters.com/article/2014/03/31/us-markets-hft-flashboys-idUSBREA2U03D20140331
Title: HFT skimming the market
Post by: bobeubanks on March 31, 2014, 11:00:00 PM
Day traders at least add liquidity to the market. These guys don't even do that.
Title: HFT skimming the market
Post by: Fred93 on March 31, 2014, 11:00:00 PM
Tax on transactions is the wrong answer.  That would simply add friction to our markets.  The harm done by HFT is that it increases the cost of investing, in other words adds friction.  You wanna just do more, in the name of government? 

The HFT boys do a lot of damage without transactions!  They enter and then withdraw massive numbers of orders, for example, which never become transactions, and therefore would not be taxed.

What is required is to slow them down.
Title: HFT skimming the market
Post by: TravelingPennies on April 02, 2014, 11:00:00 PM
Here is the full 60 mins interview.

Total confirmation of what I already suspected.

http://youtu.be/8RFLIj4a2kw

Simply, wow.
Title: HFT skimming the market
Post by: TravelingPennies on April 02, 2014, 11:00:00 PM
The book is worth reading. 

Flash Boys by Michael Lewis
http://www.amazon.com/gp/product/0393244660/ref=as_li_qf_sp_asin_il_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=0393244660&linkCode=as2&tag=nothankyou
Title: HFT skimming the market
Post by: Rob L on April 02, 2014, 11:00:00 PM
from: Fred93 on April 03, 2014, 04:07:06 PM
Title: HFT skimming the market
Post by: james on April 03, 2014, 11:00:00 PM
A small tax or delay might help.  A free market is one where everyone has free, meaning equal. access.  That is clearly not the case. 

The role of money in markets is expanding so that one persons dollar is not the same as another persons dollar.  I am not a "qualified investor", I do not have access to HFT, etc.  The role of money in poly ticks is also swinging in that direction.  I'm not sure if the system can be fixed from the inside but there is increasing push back from many of us. 

 

Title: HFT skimming the market
Post by: Fred on April 03, 2014, 11:00:00 PM
This  front-running -- by the HFT intermediaries -- applies only for market orders.  It should not really be an issue if people put their orders as limit orders : http://www.sec.gov/answers/limit.htm.
Title: HFT skimming the market
Post by: TravelingPennies on April 03, 2014, 11:00:00 PM
Its a bit more complex, as there are multiple schemes, and some of them do affect limit orders.

When you see an ask at 30.00 and you put in a bid at 30.00, and you see that instead of an instant transaction, the ask moves away from you, that can be the effect of a HFT guy screwing with you.  In fact, this scenario is the one that the Flash Boys book begins with.
Title: HFT skimming the market
Post by: GS on April 03, 2014, 11:00:00 PM
While I agree with the initial post that HFT is basically skimming, front running, and market manipulation, I have to disagree with the original poster when he says the stock market is like a casino.  Long term, the course of the market is set by investors, not day traders and HFTs.  Sure, they can manipulate the market a bit day to day, and even apparently cause a "flash crash", but if you are in the market long term, and an actual investor, as the stock market was intended to be used, the HTFs will have little affect on your returns.  If you buy and sell once or twice a quarter, like I do, they may get me for a couple cents a year, but they are not having any real affect on my investment returns.  I'm paying way more in ETF fees that HFTs are getting from me.

As for slowing them down, I heard someone propose a rule that you have to hold any stock you purchase for some set amount of time, like an hour, or a day.  It's not a radical idea.  The IRS actually has a "free ride" rule, where if I sell, then buy a different stock the same day, with the same cash, then I have to hold that stock past the settlement period ... about 3 days ... before I can sell it again.  That rule does not apply to margin accounts, so HFTs avoid that rule by setting their accounts up as margin accounts (even if they don't use margin).  So, make the "free ride" rule apply to margin accounts, problem solved....
Title: HFT skimming the market
Post by: TravelingPennies on April 03, 2014, 11:00:00 PM
from: Fred93 on April 04, 2014, 03:23:28 AM
Title: HFT skimming the market
Post by: TravelingPennies on April 03, 2014, 11:00:00 PM
from: GS on April 04, 2014, 10:01:37 PM
Title: HFT skimming the market
Post by: TravelingPennies on April 03, 2014, 11:00:00 PM
from: GS on April 04, 2014, 10:01:37 PM
Title: HFT skimming the market
Post by: TravelingPennies on April 04, 2014, 11:00:00 PM
Here is BATS CEO O'Brien attacking Brad Katsuyama and O'Brien putting his foot in his mouth.

http://www.zerohedge.com/news/2014-04-01/bats-ceo-shame-you-letting-everyone-it


And here is BATS having to publicly acknowledge O'Brien was wrong.

http://www.zerohedge.com/news/2014-04-03/bats-admits-ceo-lied-about-hft-cnbc

O'Brien either doesn't understand what Katsuyama is saying or he is willfully arguing a different point to shift focus from the actual point that Katsuyama is trying to make.
Title: HFT skimming the market
Post by: TravelingPennies on April 04, 2014, 11:00:00 PM
from: thezfunk on April 05, 2014, 12:41:08 AM
Title: HFT skimming the market
Post by: rlv99 on April 30, 2014, 11:00:00 PM
Quote"> from: Fred on April 04, 2014, 10:20:26 PM
Title: HFT skimming the market
Post by: Half Right on April 30, 2014, 11:00:00 PM
I direct identical limit orders through both IEX and Interactive Brokers BEST algorithm and I noticed yesterday I get fills earlier through BEST than IEX. Apparently not enough volume is being directed through IEX yet, but hopefully soon enough the volume will be there
Title: HFT skimming the market
Post by: Fred93 on April 30, 2014, 11:00:00 PM
from: rlv99 on May 01, 2014, 12:31:07 PM
Title: HFT skimming the market
Post by: Fred on April 30, 2014, 11:00:00 PM
from: rlv99 on May 01, 2014, 12:31:07 PM
Title: HFT skimming the market
Post by: thezfunk on April 30, 2014, 11:00:00 PM
from: Fred on May 01, 2014, 04:50:48 PM
Title: HFT skimming the market
Post by: TravelingPennies on April 30, 2014, 11:00:00 PM
from: thezfunk on May 01, 2014, 05:18:52 PM
Title: HFT skimming the market
Post by: TravelingPennies on April 30, 2014, 11:00:00 PM
from: thezfunk on May 01, 2014, 05:18:52 PM
Title: HFT skimming the market
Post by: Rob L on April 30, 2014, 11:00:00 PM
Fred seems to be doing the heavy lifting here so let me attempt to add some support.
Yes, it is correct that stocks don't sit. But sometimes they move more quickly than others.  When they do the bid/ask widens, HFT or not.
It isn't a very good idea to attempt to buy or sell when things are moving quickly. This is where market makers. et.al. make the money to buy their yachts.
So, place a limit order at the price you want when things are quiet. Put it under the market at the bid if you like. Put it at the ask or more.  If it gets away; so be it. If you are filled, be happy.
Chasing the HFT'ers around is a fools errand. Pick your entry (and exit) price and be done with it. If you use a market order you are guaranteed to get a bad fill. Has always been so.
If you think you can "day trade" stocks be my guest. It would be simpler to mail a check to the pro's on the other side of your trades.
Title: HFT skimming the market
Post by: TravelingPennies on May 01, 2014, 11:00:00 PM
from: Fred93 on May 01, 2014, 03:05:12 PM
Title: HFT skimming the market
Post by: Emmanuel on May 01, 2014, 11:00:00 PM
Quote"> from: GS on April 04, 2014, 10:01:37 PM
Title: HFT skimming the market
Post by: TravelingPennies on May 01, 2014, 11:00:00 PM
from: Emmanuel on May 02, 2014, 04:55:32 PM
Title: HFT skimming the market
Post by: TravelingPennies on May 01, 2014, 11:00:00 PM
from: Fred93 on May 02, 2014, 05:12:07 PM
Title: HFT skimming the market
Post by: TravelingPennies on May 01, 2014, 11:00:00 PM
from: Emmanuel on May 02, 2014, 07:31:35 PM
Title: HFT skimming the market
Post by: core on May 01, 2014, 11:00:00 PM
If you're going to leave a limit order sitting out there for "a few hours" you might as well hang a sign on your back that says "Lean On Me".  You are the kind of person I like to trade with.  Whether it's stock, sports in-running betting, Folio, you-name-it, the best trading money to be made is from those who place orders and leave em there.  Free insurance even if the market doesn't move, free cash when it does.

from: Fred93 on May 02, 2014, 10:37:00 PM
Title: HFT skimming the market
Post by: rawraw on May 02, 2014, 11:00:00 PM
from: Emmanuel on May 02, 2014, 04:55:32 PM
Title: HFT skimming the market
Post by: Bohb Daishi on May 05, 2014, 11:00:00 PM
Quote"> from: Fred93 on May 02, 2014, 10:37:00 PM