Comments on: The problem with high frequency trading A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 By: donna cerca uomo Roma Sun, 12 Oct 2014 20:58:51 +0000 You could certainly see your enthusiasm in the paintings you write. The sector hopes for even more passionate writers like you who aren’t afraid to mention how they believe. Always go after your heart. “We may pass violets looking for roses. We may pass contentment looking for victory.” by Bern Williams.

By: Sun, 28 Sep 2014 15:31:39 +0000 Great website you have here but I was curious if you knew of any message boards that cover the same topics discussed in this article? I’d really love to be a part of online community where I can get feedback from other knowledgeable individuals that share the same interest. If you have any suggestions, please let me know. Thanks a lot!

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By: AllenZ Thu, 14 Mar 2013 03:31:42 +0000 Well done, Felix. I thoroughly enjoyed it.

The EFZ example can be explained as algo-bot warming up with test orders, this is quite common in pre-trading hours, especially when a new algo is just deployed into production. “Flex the muscle” and get ready to go.

It’s common practice for brokerage houses to submit test orders in the morning to make sure all systems are ready. Of course, they don’t usually submit that many orders.

Many bots also need calibration in a live setting with many “test” orders to adjust latencies, optimize trading paths, etc. first before market opens. So…
is that wrong?

By: EllieKim Tue, 12 Mar 2013 15:12:00 +0000 This and other topics that are relevant for speed traders and institutional investors will be discussed at High-Frequency Trading Leaders Forum 2013 London, next Thursday March 21.

By: sceeto Thu, 22 Nov 2012 04:18:05 +0000 Have a look at the way the bots were in action last week during the US Presidential election courtesy of Carl Weiss from sceeto
High Frequency Trading and these type of algos as a matter of fact are responsible these days for more than 70 to 80% of all the daily US volume. Surprised that people find this news , as hfts have been quote stuffing, i.e placing massive buy sell orders within milliseconds for a long time now. If anyone is interested sceeto is one of the first small companies that anywhere in the world that tracks the hft’s in real time. Have a look for yourself ,Carl Weiss has done numerous videos on these algos.
The chief software developer of sceeto he has for a decade tested to come up with software designed a system to sniff these out and try to at least agin level the playing field a bit for the ordinary investor.

By: Lakshmikumar Wed, 10 Oct 2012 07:04:14 +0000 Do we really need to be confused with all this detail? Let us get to basics. Any useful economic activity will require a minimum of a few hours or a maximum of about ten years. The financial markets are needed to provide the capital required for such activity. Barter is not a substitute for a market because a buyer and a seller for a specific item may not meet too often. (The coincidence of wants). So a financial market is needed since a person needing capital may not get to meet a person with the capital. The financial market is expected to do this efficiently, minimizing the cost of the capital. So the banks, institutional investors and now the computers must compete with this goal. Unless they invest for the time frame of economic activity as mentioned above, a few days for an artisan, a few months for a garage operator, a few years for a builder of a nuclear power station, they are only gambling. Today most of the activity in the financial market is simply gambling. A nation of gamblers is an absurdity. Remembering the old Christian objection to usury, we need to restrict gambling

By: m_m Tue, 09 Oct 2012 10:24:39 +0000 I’m a little late to this, but hoping Felix reads this comment: EFZ is a particularly egregious example for a ticker that will see many orderbook updates with few trades. EFZ is the Proshares Short MSCI EAFE (Europe, Australasia and Far East) ETF. It is a small ETF, with a capitalization of only 150M, and has very few trades (50K-100K shares/day). Yet it has one Lead Market Maker, and perhaps a few other liquidity providers, signed up to provide tight two-sided quotes at all times.

Also, unlike stocks, the prices of an ETF such as EFZ depend on a lot of readily observable and rapidly updated real-world inputs: the prices of stocks, indices and futures in many other liquid markets (Western Europe, Japan, Australia, …), prices of liquid US-listed ETFs on the same or similar indices (EFA, VEA, …), FX rates, and so on. So, even if there are no trades in EFZ, there are plenty of other inputs to make the liquidity providers update their quotes to keep prices in line with where they should be.

Finally, this particular ETF is too illiquid to attract any interest from the HFTs of this world. You can still complain about all the quote traffic, but those complaints will have to target automation, the wide and rapid availability of information, and the increasing linkages in the global financial system, not HFT.

By: y2kurtus Tue, 09 Oct 2012 01:53:20 +0000 Hey Nihoncassandra how did I get labeled a HFT apologist?

Didn’t I claim that they mostly exist to discover large legitimate trades as they happen and try and outrun the “real investors” sniping them out of pennies again and again and again?

I would support a 10 cent per share tax on any canceled order.

I would support basically opening and closing the stock market at one second intervals. Lets trade at one price every second of the day and not more. What do we gain breaking the day down into hundredths of a second? Nothing that I can see.

HFT is a cold war everyone spends money and no one is any better off for it. Zero social utility.

And if KidDynomite is reading this thread I would bet my teeth that we would still have .01 increments and plenty of real liquidity to take care of all the real participants who you know want to buy stock to become an investor in a company.

By: TFF Mon, 08 Oct 2012 23:51:49 +0000 “If those “small investors” buy mutual funds, they indirectly get worse execution because the mutual funds get picked off by the algobots.”

Mutual funds get their cake eaten three ways from Wednesday. They might have made sense back in the 80s and 90s (direct investing was much more difficult and costlier then), but today you have just two sensible choices:

(1) Pick your own.

(2) Index.