High frequency trading

No expert can agree if it's good or bad. Regulation is in the works, mostly in the form of extra taxes. But momentum ignition is highly overrated. Knight Capital lost 461 million on HFT.

Just googled it, because HFT only seems to come up when a distraction is needed. Sure enough in the past week there's been a ton of articles.

What should really concern investors?

5% down mortgages.

A company that has NEVER turned a profit in a single quarter in 7 years is now IPO'ing for 18 billion.

A car company market cap at 24billion that has only sold 13,000 cars.

Seems like a no brainer, doesn't it? But to me personally its just a small fish in the pond compared to all the other glaring issues Markets around the world face. I have no doubts there are millionaires out there from pumping cancelled trades using supercomputers, but it just seems to be a minor issue compared to genuine loopholes, misrepresentation, pump and dump, and god forbid actual illegal manipulations no one can seem to enforce or regulate on a daily basis. And its so complicated the average traders head explodes trying to comprehend it. I'm definitely curious what other folks around here think about it, but I don't think anyone has ever or will ever give up on the market over HFT until we see billionaires or widespread use. It has as much risk as anything else, its in no way a sure thing.

great video. Thanks for posting.

Brando_sl said:

5% down mortgages with full income verification and insurance for default? Yep, highly suspect.........

Click to expand...

Of course it's highly suspect. During the last banking collapse we were reassured that all due diligence was being done. It wasn't. Only a complete and utter fucking moron would trust that it's been done now. That a person can't afford more than a 5% down on a mortgage is usually pretty suspect in and of itself. But lets get back on topic rather than cherry pick a comment with an incredibly well thought out series of "........."

Celestein_sl said:

I don't even consider that to be a problem in and of itself. The problem is the financial community gives absolutely nothing back, they don't publish their methods, advance the sciences, they even openly use a lot of GPL code and refuse to honor the license by sharing back source.

They take the brightest minds, offer them huge dollars, to solve legitimately hard problems, and then keep that information secret, even if they never use it.

Click to expand...

This. It's been a big issue, even the favorite show of my wife (The Good Wife) used it recently. I had no idea how highly sought out and secretive these mathematicians are.

I don't think there's anything wrong with HFT. It's just like any other trading, investing or risk taking. There are winners and losers. Algorithms work and then stop working just like any other endeavour. They aren't the 'free money' that people seem to want to believe.
Unless of course, like in this video, you have political connections and get given advantages that equate to free money. Then there's obviously a problem, but that's a problem with corruption and that exists everywhere. It makes the corruption easier with esoteric subjects like HFT. But the problem isn't HFT, its the corruption.

I believe that HFT has decreased costs to the 'investors/sheeple/low hanging fruit/etc. Two decades ago, the costs/fees/rippoffs of trading were far higher. It just looks bad now, because it's centralized around fewer people. For example, now it's the few HFT firms, where it used to be floor brokers/floor traders/clerks/bankers/stockbrokers/etc.

I think it makes it cheaper to buy and sell stocks for everyone else (when done without corruption). And it makes the stocks valued more accurately faster. Same with derivatives too!

A lot of HFT isn't very advanced. They're mostly just market makers, not super smart AI.

It's stuff like. Joe's Pension Fund always buys a basket of stocks on Wednesday at 930am. So when we see him start buying, we'll sell him a basket of stocks and then hedge it elsewhere. We make money because Joe buys enough stock at market price to bump up the price tiny amount. The HFT just needs to be fast to beat the other HFT funds to Joes trade. Or it need to be corrupt with political connections like in the video.

If the HFT wasn't there, Joe would have to pay more for his stock assuming Joe isn't advanced enough to buy across many different asset classes at the same time like the HFT fund is. The HFT fund keeps the stock price stabalized.

Well yeah I'm sure that happens, you've probably heard of it called frontrunning, but it's illegal and not where the big money is. Except in forex. Frontrunning is legal in FX and happens all the time. One of the reasons why trading FX is so hard (unless you are a bank and can frontrun your clients). All those FX online trading sites are probably the biggest scam in retail trading.

Tuco_sl said:

The reason I'm against HFT isn't because I think it's free/easy money but because as a layman I don't see the value in it for society. Maybe it's naive but I see the investment market as a way to move capital to good(profitable) causes. There's a ton of aspects that pervert this(derivatives market, a bunch of shit I don't understand) but HFT seems so purely detrimental to society.

Click to expand...

I totally agree. Maybe it was misleading, but that's what my previous rambling post was about when I typed that it seems like a no brainer. While I will argue that it's not a big deal, it's also shit we don't need.

So many other things are too, and they just don't deal with it. I talked about Amarin in another thread. That fucking CEO got a letter from the FDA, and put it in his drawer and lied to investors. He also sold about $8m of his own stock. Sure, there are now lawsuits, but only the lawyers will get paid. And this guy is still the CEO...and he will live well off of what can only be called insider trading.