Taxes!

[SK in CV]

[quote=pri_dk]This is an oversimplification. True, trading shares that have already been issued do not directly provide additional capital. What it does provide is liquidity – something that is essential in capital markets.

If there were not an active market for a security, investors would be reluctant to buy it because they would be concerned that they may have trouble selling it later. IPOs and other offerings would be much more difficult, and happen far less often.

A big reason that publicly-traded companies can issue stock/bonds/whatever to raise capital is that the buyers of these securities are confident that they are purchasing a liquid investment. The existence of active markets is what gives them this confidence.

So the vast majority of trading does not directly raise capital, but it does very much “have an effect on whether Ford expands their workforce or opens a new plant.” The liquidity of Ford’s stock makes it possible for Ford to issue more.

Securities markets do not exist simply to provide a venue for gambling. This is a popular myth, but completely incorrect.

One of the biggest reasons that the US is the most prosperous economy in history is that we have the most established and, in fact, transparent markets that have ever existed. These markets give companies the ability to easily raise capital, expand their business, and (this one’s for you CAR!) hire more employees.[/quote]

Agree with all of this. And should not have ignored in my comment. But my point was (which I also confess, I totally ignored in my comment) that lowering taxes (or raising them) on those with the highest income has virtually no effect on expansion of capital or creation of jobs. There is no shortage of capital for those purposes. The relatively highly efficient markets ensure that.

[Anonymous]

[quote=CA renter]Please clarify which comments you’re referring to, and your argue your position. Making personal attacks (false ones, at that) will not make your point, nor win a debate.[/quote]

Gee, how about the post right above this one?

[quote]Sorry, but they do not “earn” their money. Skimming a portion off of legitimate transactions is NOT productive, nor is it beneficial to society.[/quote]

HF traders don’t “skim” anything. They buy and sell just like ordinary investors. You use the word “skimming” but clearly don’t have any understanding of what you mean by it (it just sounds like a bad thing.)

There is no distinction between the buys and sells that HF traders do and the “legitimate” ones. The notion that HF transactions are somehow different is something you simply invented to support your biased viewpoint.

HF traders pay transaction fees and execute trades just like ordinary investors. The reason they can trade at “high frequency” is that they bid at higher prices and offer at lower prices than everyone else, which benefits the counterparties in the transaction.

HF traders don’t take, they actually give to the markets, by improving prices for other participants.

If Joe investor decides to by an ETF today for his kid’s college savings, it is very likely that the counterparty will be an HF trader. The HF traders get the trade by giving Joe investor a LOWER price than other participants when he buys and a HIGHER price when he sells. Joe investor is better off because of the HF trader.

If the market consisted of only ordinary investors, it would be much harder for ordinary investors to “buy low, sell high.”

It’s that simple. There is no way to trade at high frequency except to provide better pricing. If you don’t have the highest bid or the lowest offer, your order doesn’t fill. Period.

It’s not common for people to know how this works, but it’s actually fairly simple. Take the time to actually learn about how it works, and consider it in an objective way, and you may actually realize that’s it is not so evil after all.

The gist of many of your comments is this: “I don’t have to understand it, I just know it’s bad.” These really don’t add any value to the discussion.

[Anonymous]

[quote=CA renter]Please clarify which comments you’re referring to, and your argue your position. Making personal attacks (false ones, at that) will not make your point, nor win a debate.[/quote]

Gee, how about the post right above this one?

[quote]Sorry, but they do not “earn” their money. Skimming a portion off of legitimate transactions is NOT productive, nor is it beneficial to society.[/quote]

HF traders don’t “skim” anything. They buy and sell just like ordinary investors. You use the word “skimming” but clearly don’t have any understanding of what you mean by it (it just sounds like a bad thing.)

There is no distinction between the buys and sells that HF traders do and the “legitimate” ones. The notion that HF transactions are somehow different is something you simply invented to support your biased viewpoint.

HF traders pay transaction fees and execute trades just like ordinary investors. The reason they can trade at “high frequency” is that they bid at higher prices and offer at lower prices than everyone else, which benefits the counterparties in the transaction.

HF traders don’t take, they actually give to the markets, by improving prices for other participants.

If Joe investor decides to by an ETF today for his kid’s college savings, it is very likely that the counterparty will be an HF trader. The HF traders get the trade by giving Joe investor a LOWER price than other participants when he buys and a HIGHER price when he sells. Joe investor is better off because of the HF trader.

If the market consisted of only ordinary investors, it would be much harder for ordinary investors to “buy low, sell high.”

It’s that simple. There is no way to trade at high frequency except to provide better pricing. If you don’t have the highest bid or the lowest offer, your order doesn’t fill. Period.

It’s not common for people to know how this works, but it’s actually fairly simple. Take the time to actually learn about how it works, and consider it in an objective way, and you may actually realize that’s it is not so evil after all.

The gist of many of your comments is this: “I don’t have to understand it, I just know it’s bad.” These really don’t add any value to the discussion.

[Anonymous]

[quote=CA renter]Please clarify which comments you’re referring to, and your argue your position. Making personal attacks (false ones, at that) will not make your point, nor win a debate.[/quote]

Gee, how about the post right above this one?

[quote]Sorry, but they do not “earn” their money. Skimming a portion off of legitimate transactions is NOT productive, nor is it beneficial to society.[/quote]

HF traders don’t “skim” anything. They buy and sell just like ordinary investors. You use the word “skimming” but clearly don’t have any understanding of what you mean by it (it just sounds like a bad thing.)

There is no distinction between the buys and sells that HF traders do and the “legitimate” ones. The notion that HF transactions are somehow different is something you simply invented to support your biased viewpoint.

HF traders pay transaction fees and execute trades just like ordinary investors. The reason they can trade at “high frequency” is that they bid at higher prices and offer at lower prices than everyone else, which benefits the counterparties in the transaction.

HF traders don’t take, they actually give to the markets, by improving prices for other participants.

If Joe investor decides to by an ETF today for his kid’s college savings, it is very likely that the counterparty will be an HF trader. The HF traders get the trade by giving Joe investor a LOWER price than other participants when he buys and a HIGHER price when he sells. Joe investor is better off because of the HF trader.

If the market consisted of only ordinary investors, it would be much harder for ordinary investors to “buy low, sell high.”

It’s that simple. There is no way to trade at high frequency except to provide better pricing. If you don’t have the highest bid or the lowest offer, your order doesn’t fill. Period.

It’s not common for people to know how this works, but it’s actually fairly simple. Take the time to actually learn about how it works, and consider it in an objective way, and you may actually realize that’s it is not so evil after all.

The gist of many of your comments is this: “I don’t have to understand it, I just know it’s bad.” These really don’t add any value to the discussion.

[Anonymous]

[quote=CA renter]Please clarify which comments you’re referring to, and your argue your position. Making personal attacks (false ones, at that) will not make your point, nor win a debate.[/quote]

Gee, how about the post right above this one?

[quote]Sorry, but they do not “earn” their money. Skimming a portion off of legitimate transactions is NOT productive, nor is it beneficial to society.[/quote]

HF traders don’t “skim” anything. They buy and sell just like ordinary investors. You use the word “skimming” but clearly don’t have any understanding of what you mean by it (it just sounds like a bad thing.)

There is no distinction between the buys and sells that HF traders do and the “legitimate” ones. The notion that HF transactions are somehow different is something you simply invented to support your biased viewpoint.

HF traders pay transaction fees and execute trades just like ordinary investors. The reason they can trade at “high frequency” is that they bid at higher prices and offer at lower prices than everyone else, which benefits the counterparties in the transaction.

HF traders don’t take, they actually give to the markets, by improving prices for other participants.

If Joe investor decides to by an ETF today for his kid’s college savings, it is very likely that the counterparty will be an HF trader. The HF traders get the trade by giving Joe investor a LOWER price than other participants when he buys and a HIGHER price when he sells. Joe investor is better off because of the HF trader.

If the market consisted of only ordinary investors, it would be much harder for ordinary investors to “buy low, sell high.”

It’s that simple. There is no way to trade at high frequency except to provide better pricing. If you don’t have the highest bid or the lowest offer, your order doesn’t fill. Period.

It’s not common for people to know how this works, but it’s actually fairly simple. Take the time to actually learn about how it works, and consider it in an objective way, and you may actually realize that’s it is not so evil after all.

The gist of many of your comments is this: “I don’t have to understand it, I just know it’s bad.” These really don’t add any value to the discussion.

[Anonymous]

[quote=CA renter]Please clarify which comments you’re referring to, and your argue your position. Making personal attacks (false ones, at that) will not make your point, nor win a debate.[/quote]

Gee, how about the post right above this one?

[quote]Sorry, but they do not “earn” their money. Skimming a portion off of legitimate transactions is NOT productive, nor is it beneficial to society.[/quote]

HF traders don’t “skim” anything. They buy and sell just like ordinary investors. You use the word “skimming” but clearly don’t have any understanding of what you mean by it (it just sounds like a bad thing.)

There is no distinction between the buys and sells that HF traders do and the “legitimate” ones. The notion that HF transactions are somehow different is something you simply invented to support your biased viewpoint.

HF traders pay transaction fees and execute trades just like ordinary investors. The reason they can trade at “high frequency” is that they bid at higher prices and offer at lower prices than everyone else, which benefits the counterparties in the transaction.

HF traders don’t take, they actually give to the markets, by improving prices for other participants.

If Joe investor decides to by an ETF today for his kid’s college savings, it is very likely that the counterparty will be an HF trader. The HF traders get the trade by giving Joe investor a LOWER price than other participants when he buys and a HIGHER price when he sells. Joe investor is better off because of the HF trader.

If the market consisted of only ordinary investors, it would be much harder for ordinary investors to “buy low, sell high.”

It’s that simple. There is no way to trade at high frequency except to provide better pricing. If you don’t have the highest bid or the lowest offer, your order doesn’t fill. Period.

It’s not common for people to know how this works, but it’s actually fairly simple. Take the time to actually learn about how it works, and consider it in an objective way, and you may actually realize that’s it is not so evil after all.

The gist of many of your comments is this: “I don’t have to understand it, I just know it’s bad.” These really don’t add any value to the discussion.

[CA renter]

[quote=pri_dk][quote=CA renter]Please clarify which comments you’re referring to, and your argue your position. Making personal attacks (false ones, at that) will not make your point, nor win a debate.[/quote]

Gee, how about the post right above this one?

[quote]Sorry, but they do not “earn” their money. Skimming a portion off of legitimate transactions is NOT productive, nor is it beneficial to society.[/quote]

HF traders don’t “skim” anything. They buy and sell just like ordinary investors. You use the word “skimming” but clearly don’t have any understanding of what you mean by it (it just sounds like a bad thing.)

There is no distinction between the buys and sells that HF traders do and the “legitimate” ones. The notion that HF transactions are somehow different is something you simply invented to support your biased viewpoint.

HF traders pay transaction fees and execute trades just like ordinary investors. The reason they can trade at “high frequency” is that they bid at higher prices and offer at lower prices than everyone else, which benefits the counterparties in the transaction.

HF traders don’t take, they actually give to the markets, by improving prices for other participants.

If Joe investor decides to by an ETF today for his kid’s college savings, it is very likely that the counterparty will be an HF trader. The HF traders get the trade by giving Joe investor a LOWER price than other participants when he buys and a HIGHER price when he sells. Joe investor is better off because of the HF trader.

If the market consisted of only ordinary investors, it would be much harder for ordinary investors to “buy low, sell high.”

It’s that simple. There is no way to trade at high frequency except to provide better pricing. If you don’t have the highest bid or the lowest offer, your order doesn’t fill. Period.

It’s not common for people to know how this works, but it’s actually fairly simple. Take the time to actually learn about how it works, and consider it in an objective way, and you may actually realize that’s it is not so evil after all.

The gist of many of your comments is this: “I don’t have to understand it, I just know it’s bad.” These really don’t add any value to the discussion.[/quote]

Right, I don’t understand it. Isn’t that what all the “experts” said about those of us who were trying to warn about the credit/housing bubble many years ago? Wasn’t that what was said about those of us who called the internet bubble in the late 90s? I was well aware of these bubbles before they burst. Sorry, but your proclamations about my ignorance don’t stand up to the facts.

January 12, 2011
Attacking High-Frequency Trading Networks
Turns out you can make money by manipulating the network latency.

cPacket has developed a proof of concept showing that these side-channel attacks can be used to create tiny delays in the transmission of market data and trades. By manipulating specific trading activities by several microseconds, an attacker could gain unfair trading advantage. And because the operation occurs outside the range of monitoring technology, it would remain invisible. “We believe that such techniques pose a substantial risk of creating unfair trading, if used by the wrong people,” Kay says.
It’s hard to know how real this threat is. Certainly micro-traders pay attention to latency, and sometimes even place their computers physically close to exchanges so they can reduce latency. And while it would be illegal to deliberately manipulate someone else’s trades, it is probably okay to place a gazillion trades at the same time which — as a side effect — increases latency for everyone else. My guess is that this isn’t a movie-plot threat, and that traders are trying lots of things along this line to give them a small advantage over everyone else.

Attacking High-Frequency Trading Networks

………..

The Cons of HFT

Regulators and lawmakers who are against HFT blame it for the flash crash of 2010 when the market dropped nearly 1,000 points in a matter of minutes. The thinking is that a flash crash of this magnitude could be enough to completely disrupt the global economy in a worst-case scenario. Furthermore, opponents of HFT actually say that HFT is insider trading, and this is perhaps the most important moral objection to HFT.

http://highfrequencytradingreview.com/high-frequency-trading-at-the-crossroads-of-debate/
……………

In 2005, high frequency trading account for only 15% of daily equity volume. Today, it is estimated that around 60% of trading volume is now high frequency trading.

http://highfrequencytradingreview.com/high-frequency-trading-at-the-crossroads-of-debate/
———————–

My contention is that trading that comprises 60-70% of trading volume, **especially when it is entirely unregulated and unmonitored** is a definite threat to those organic buyers and sellers who are trying to base their decisions on fundamentals.

HF traders do not “bid at higher prices” and “sell at lower prices” over the long run. If they did that, they would be insolvent. They increase trading volume at a particular moment in time, but they always aim to sell for a higher price, and buy for a lower price, than what the organic market would dictate. Their profits come from other buyers and sellers who are either overpaying as buyers, or getting less as sellers, for a security. If you don’t believe this, exactly where do you think their profits come from?

[CA renter]

[quote=pri_dk][quote=CA renter]Please clarify which comments you’re referring to, and your argue your position. Making personal attacks (false ones, at that) will not make your point, nor win a debate.[/quote]

Gee, how about the post right above this one?

[quote]Sorry, but they do not “earn” their money. Skimming a portion off of legitimate transactions is NOT productive, nor is it beneficial to society.[/quote]

HF traders don’t “skim” anything. They buy and sell just like ordinary investors. You use the word “skimming” but clearly don’t have any understanding of what you mean by it (it just sounds like a bad thing.)

There is no distinction between the buys and sells that HF traders do and the “legitimate” ones. The notion that HF transactions are somehow different is something you simply invented to support your biased viewpoint.

HF traders pay transaction fees and execute trades just like ordinary investors. The reason they can trade at “high frequency” is that they bid at higher prices and offer at lower prices than everyone else, which benefits the counterparties in the transaction.

HF traders don’t take, they actually give to the markets, by improving prices for other participants.

If Joe investor decides to by an ETF today for his kid’s college savings, it is very likely that the counterparty will be an HF trader. The HF traders get the trade by giving Joe investor a LOWER price than other participants when he buys and a HIGHER price when he sells. Joe investor is better off because of the HF trader.

If the market consisted of only ordinary investors, it would be much harder for ordinary investors to “buy low, sell high.”

It’s that simple. There is no way to trade at high frequency except to provide better pricing. If you don’t have the highest bid or the lowest offer, your order doesn’t fill. Period.

It’s not common for people to know how this works, but it’s actually fairly simple. Take the time to actually learn about how it works, and consider it in an objective way, and you may actually realize that’s it is not so evil after all.

The gist of many of your comments is this: “I don’t have to understand it, I just know it’s bad.” These really don’t add any value to the discussion.[/quote]

Right, I don’t understand it. Isn’t that what all the “experts” said about those of us who were trying to warn about the credit/housing bubble many years ago? Wasn’t that what was said about those of us who called the internet bubble in the late 90s? I was well aware of these bubbles before they burst. Sorry, but your proclamations about my ignorance don’t stand up to the facts.

January 12, 2011
Attacking High-Frequency Trading Networks
Turns out you can make money by manipulating the network latency.

cPacket has developed a proof of concept showing that these side-channel attacks can be used to create tiny delays in the transmission of market data and trades. By manipulating specific trading activities by several microseconds, an attacker could gain unfair trading advantage. And because the operation occurs outside the range of monitoring technology, it would remain invisible. “We believe that such techniques pose a substantial risk of creating unfair trading, if used by the wrong people,” Kay says.
It’s hard to know how real this threat is. Certainly micro-traders pay attention to latency, and sometimes even place their computers physically close to exchanges so they can reduce latency. And while it would be illegal to deliberately manipulate someone else’s trades, it is probably okay to place a gazillion trades at the same time which — as a side effect — increases latency for everyone else. My guess is that this isn’t a movie-plot threat, and that traders are trying lots of things along this line to give them a small advantage over everyone else.

Attacking High-Frequency Trading Networks

………..

The Cons of HFT

Regulators and lawmakers who are against HFT blame it for the flash crash of 2010 when the market dropped nearly 1,000 points in a matter of minutes. The thinking is that a flash crash of this magnitude could be enough to completely disrupt the global economy in a worst-case scenario. Furthermore, opponents of HFT actually say that HFT is insider trading, and this is perhaps the most important moral objection to HFT.

http://highfrequencytradingreview.com/high-frequency-trading-at-the-crossroads-of-debate/
……………

In 2005, high frequency trading account for only 15% of daily equity volume. Today, it is estimated that around 60% of trading volume is now high frequency trading.

http://highfrequencytradingreview.com/high-frequency-trading-at-the-crossroads-of-debate/
———————–

My contention is that trading that comprises 60-70% of trading volume, **especially when it is entirely unregulated and unmonitored** is a definite threat to those organic buyers and sellers who are trying to base their decisions on fundamentals.

HF traders do not “bid at higher prices” and “sell at lower prices” over the long run. If they did that, they would be insolvent. They increase trading volume at a particular moment in time, but they always aim to sell for a higher price, and buy for a lower price, than what the organic market would dictate. Their profits come from other buyers and sellers who are either overpaying as buyers, or getting less as sellers, for a security. If you don’t believe this, exactly where do you think their profits come from?

[CA renter]

[quote=pri_dk][quote=CA renter]Please clarify which comments you’re referring to, and your argue your position. Making personal attacks (false ones, at that) will not make your point, nor win a debate.[/quote]

Gee, how about the post right above this one?

[quote]Sorry, but they do not “earn” their money. Skimming a portion off of legitimate transactions is NOT productive, nor is it beneficial to society.[/quote]

HF traders don’t “skim” anything. They buy and sell just like ordinary investors. You use the word “skimming” but clearly don’t have any understanding of what you mean by it (it just sounds like a bad thing.)

There is no distinction between the buys and sells that HF traders do and the “legitimate” ones. The notion that HF transactions are somehow different is something you simply invented to support your biased viewpoint.

HF traders pay transaction fees and execute trades just like ordinary investors. The reason they can trade at “high frequency” is that they bid at higher prices and offer at lower prices than everyone else, which benefits the counterparties in the transaction.

HF traders don’t take, they actually give to the markets, by improving prices for other participants.

If Joe investor decides to by an ETF today for his kid’s college savings, it is very likely that the counterparty will be an HF trader. The HF traders get the trade by giving Joe investor a LOWER price than other participants when he buys and a HIGHER price when he sells. Joe investor is better off because of the HF trader.

If the market consisted of only ordinary investors, it would be much harder for ordinary investors to “buy low, sell high.”

It’s that simple. There is no way to trade at high frequency except to provide better pricing. If you don’t have the highest bid or the lowest offer, your order doesn’t fill. Period.

It’s not common for people to know how this works, but it’s actually fairly simple. Take the time to actually learn about how it works, and consider it in an objective way, and you may actually realize that’s it is not so evil after all.

The gist of many of your comments is this: “I don’t have to understand it, I just know it’s bad.” These really don’t add any value to the discussion.[/quote]

Right, I don’t understand it. Isn’t that what all the “experts” said about those of us who were trying to warn about the credit/housing bubble many years ago? Wasn’t that what was said about those of us who called the internet bubble in the late 90s? I was well aware of these bubbles before they burst. Sorry, but your proclamations about my ignorance don’t stand up to the facts.

January 12, 2011
Attacking High-Frequency Trading Networks
Turns out you can make money by manipulating the network latency.

cPacket has developed a proof of concept showing that these side-channel attacks can be used to create tiny delays in the transmission of market data and trades. By manipulating specific trading activities by several microseconds, an attacker could gain unfair trading advantage. And because the operation occurs outside the range of monitoring technology, it would remain invisible. “We believe that such techniques pose a substantial risk of creating unfair trading, if used by the wrong people,” Kay says.
It’s hard to know how real this threat is. Certainly micro-traders pay attention to latency, and sometimes even place their computers physically close to exchanges so they can reduce latency. And while it would be illegal to deliberately manipulate someone else’s trades, it is probably okay to place a gazillion trades at the same time which — as a side effect — increases latency for everyone else. My guess is that this isn’t a movie-plot threat, and that traders are trying lots of things along this line to give them a small advantage over everyone else.

Attacking High-Frequency Trading Networks

………..

The Cons of HFT

Regulators and lawmakers who are against HFT blame it for the flash crash of 2010 when the market dropped nearly 1,000 points in a matter of minutes. The thinking is that a flash crash of this magnitude could be enough to completely disrupt the global economy in a worst-case scenario. Furthermore, opponents of HFT actually say that HFT is insider trading, and this is perhaps the most important moral objection to HFT.

http://highfrequencytradingreview.com/high-frequency-trading-at-the-crossroads-of-debate/
……………

In 2005, high frequency trading account for only 15% of daily equity volume. Today, it is estimated that around 60% of trading volume is now high frequency trading.

http://highfrequencytradingreview.com/high-frequency-trading-at-the-crossroads-of-debate/
———————–

My contention is that trading that comprises 60-70% of trading volume, **especially when it is entirely unregulated and unmonitored** is a definite threat to those organic buyers and sellers who are trying to base their decisions on fundamentals.

HF traders do not “bid at higher prices” and “sell at lower prices” over the long run. If they did that, they would be insolvent. They increase trading volume at a particular moment in time, but they always aim to sell for a higher price, and buy for a lower price, than what the organic market would dictate. Their profits come from other buyers and sellers who are either overpaying as buyers, or getting less as sellers, for a security. If you don’t believe this, exactly where do you think their profits come from?

[CA renter]

[quote=pri_dk][quote=CA renter]Please clarify which comments you’re referring to, and your argue your position. Making personal attacks (false ones, at that) will not make your point, nor win a debate.[/quote]

Gee, how about the post right above this one?

[quote]Sorry, but they do not “earn” their money. Skimming a portion off of legitimate transactions is NOT productive, nor is it beneficial to society.[/quote]

HF traders don’t “skim” anything. They buy and sell just like ordinary investors. You use the word “skimming” but clearly don’t have any understanding of what you mean by it (it just sounds like a bad thing.)

There is no distinction between the buys and sells that HF traders do and the “legitimate” ones. The notion that HF transactions are somehow different is something you simply invented to support your biased viewpoint.

HF traders pay transaction fees and execute trades just like ordinary investors. The reason they can trade at “high frequency” is that they bid at higher prices and offer at lower prices than everyone else, which benefits the counterparties in the transaction.

HF traders don’t take, they actually give to the markets, by improving prices for other participants.

If Joe investor decides to by an ETF today for his kid’s college savings, it is very likely that the counterparty will be an HF trader. The HF traders get the trade by giving Joe investor a LOWER price than other participants when he buys and a HIGHER price when he sells. Joe investor is better off because of the HF trader.

If the market consisted of only ordinary investors, it would be much harder for ordinary investors to “buy low, sell high.”

It’s that simple. There is no way to trade at high frequency except to provide better pricing. If you don’t have the highest bid or the lowest offer, your order doesn’t fill. Period.

It’s not common for people to know how this works, but it’s actually fairly simple. Take the time to actually learn about how it works, and consider it in an objective way, and you may actually realize that’s it is not so evil after all.

The gist of many of your comments is this: “I don’t have to understand it, I just know it’s bad.” These really don’t add any value to the discussion.[/quote]

Right, I don’t understand it. Isn’t that what all the “experts” said about those of us who were trying to warn about the credit/housing bubble many years ago? Wasn’t that what was said about those of us who called the internet bubble in the late 90s? I was well aware of these bubbles before they burst. Sorry, but your proclamations about my ignorance don’t stand up to the facts.

January 12, 2011
Attacking High-Frequency Trading Networks
Turns out you can make money by manipulating the network latency.

cPacket has developed a proof of concept showing that these side-channel attacks can be used to create tiny delays in the transmission of market data and trades. By manipulating specific trading activities by several microseconds, an attacker could gain unfair trading advantage. And because the operation occurs outside the range of monitoring technology, it would remain invisible. “We believe that such techniques pose a substantial risk of creating unfair trading, if used by the wrong people,” Kay says.
It’s hard to know how real this threat is. Certainly micro-traders pay attention to latency, and sometimes even place their computers physically close to exchanges so they can reduce latency. And while it would be illegal to deliberately manipulate someone else’s trades, it is probably okay to place a gazillion trades at the same time which — as a side effect — increases latency for everyone else. My guess is that this isn’t a movie-plot threat, and that traders are trying lots of things along this line to give them a small advantage over everyone else.

Attacking High-Frequency Trading Networks

………..

The Cons of HFT

Regulators and lawmakers who are against HFT blame it for the flash crash of 2010 when the market dropped nearly 1,000 points in a matter of minutes. The thinking is that a flash crash of this magnitude could be enough to completely disrupt the global economy in a worst-case scenario. Furthermore, opponents of HFT actually say that HFT is insider trading, and this is perhaps the most important moral objection to HFT.

http://highfrequencytradingreview.com/high-frequency-trading-at-the-crossroads-of-debate/
……………

In 2005, high frequency trading account for only 15% of daily equity volume. Today, it is estimated that around 60% of trading volume is now high frequency trading.

http://highfrequencytradingreview.com/high-frequency-trading-at-the-crossroads-of-debate/
———————–

My contention is that trading that comprises 60-70% of trading volume, **especially when it is entirely unregulated and unmonitored** is a definite threat to those organic buyers and sellers who are trying to base their decisions on fundamentals.

HF traders do not “bid at higher prices” and “sell at lower prices” over the long run. If they did that, they would be insolvent. They increase trading volume at a particular moment in time, but they always aim to sell for a higher price, and buy for a lower price, than what the organic market would dictate. Their profits come from other buyers and sellers who are either overpaying as buyers, or getting less as sellers, for a security. If you don’t believe this, exactly where do you think their profits come from?

[CA renter]

[quote=pri_dk][quote=CA renter]Please clarify which comments you’re referring to, and your argue your position. Making personal attacks (false ones, at that) will not make your point, nor win a debate.[/quote]

Gee, how about the post right above this one?

[quote]Sorry, but they do not “earn” their money. Skimming a portion off of legitimate transactions is NOT productive, nor is it beneficial to society.[/quote]

HF traders don’t “skim” anything. They buy and sell just like ordinary investors. You use the word “skimming” but clearly don’t have any understanding of what you mean by it (it just sounds like a bad thing.)

There is no distinction between the buys and sells that HF traders do and the “legitimate” ones. The notion that HF transactions are somehow different is something you simply invented to support your biased viewpoint.

HF traders pay transaction fees and execute trades just like ordinary investors. The reason they can trade at “high frequency” is that they bid at higher prices and offer at lower prices than everyone else, which benefits the counterparties in the transaction.

HF traders don’t take, they actually give to the markets, by improving prices for other participants.

If Joe investor decides to by an ETF today for his kid’s college savings, it is very likely that the counterparty will be an HF trader. The HF traders get the trade by giving Joe investor a LOWER price than other participants when he buys and a HIGHER price when he sells. Joe investor is better off because of the HF trader.

If the market consisted of only ordinary investors, it would be much harder for ordinary investors to “buy low, sell high.”

It’s that simple. There is no way to trade at high frequency except to provide better pricing. If you don’t have the highest bid or the lowest offer, your order doesn’t fill. Period.

It’s not common for people to know how this works, but it’s actually fairly simple. Take the time to actually learn about how it works, and consider it in an objective way, and you may actually realize that’s it is not so evil after all.

The gist of many of your comments is this: “I don’t have to understand it, I just know it’s bad.” These really don’t add any value to the discussion.[/quote]

Right, I don’t understand it. Isn’t that what all the “experts” said about those of us who were trying to warn about the credit/housing bubble many years ago? Wasn’t that what was said about those of us who called the internet bubble in the late 90s? I was well aware of these bubbles before they burst. Sorry, but your proclamations about my ignorance don’t stand up to the facts.

January 12, 2011
Attacking High-Frequency Trading Networks
Turns out you can make money by manipulating the network latency.

cPacket has developed a proof of concept showing that these side-channel attacks can be used to create tiny delays in the transmission of market data and trades. By manipulating specific trading activities by several microseconds, an attacker could gain unfair trading advantage. And because the operation occurs outside the range of monitoring technology, it would remain invisible. “We believe that such techniques pose a substantial risk of creating unfair trading, if used by the wrong people,” Kay says.
It’s hard to know how real this threat is. Certainly micro-traders pay attention to latency, and sometimes even place their computers physically close to exchanges so they can reduce latency. And while it would be illegal to deliberately manipulate someone else’s trades, it is probably okay to place a gazillion trades at the same time which — as a side effect — increases latency for everyone else. My guess is that this isn’t a movie-plot threat, and that traders are trying lots of things along this line to give them a small advantage over everyone else.

Attacking High-Frequency Trading Networks

………..

The Cons of HFT

Regulators and lawmakers who are against HFT blame it for the flash crash of 2010 when the market dropped nearly 1,000 points in a matter of minutes. The thinking is that a flash crash of this magnitude could be enough to completely disrupt the global economy in a worst-case scenario. Furthermore, opponents of HFT actually say that HFT is insider trading, and this is perhaps the most important moral objection to HFT.

http://highfrequencytradingreview.com/high-frequency-trading-at-the-crossroads-of-debate/
……………

In 2005, high frequency trading account for only 15% of daily equity volume. Today, it is estimated that around 60% of trading volume is now high frequency trading.

http://highfrequencytradingreview.com/high-frequency-trading-at-the-crossroads-of-debate/
———————–

My contention is that trading that comprises 60-70% of trading volume, **especially when it is entirely unregulated and unmonitored** is a definite threat to those organic buyers and sellers who are trying to base their decisions on fundamentals.

HF traders do not “bid at higher prices” and “sell at lower prices” over the long run. If they did that, they would be insolvent. They increase trading volume at a particular moment in time, but they always aim to sell for a higher price, and buy for a lower price, than what the organic market would dictate. Their profits come from other buyers and sellers who are either overpaying as buyers, or getting less as sellers, for a security. If you don’t believe this, exactly where do you think their profits come from?

[Anonymous]

[quote]Right, I don’t understand it. Isn’t that what all the “experts” said about those of us who were trying to warn about the credit/housing bubble […][/quote]

Because some things you don’t understand are bad, then all things you don’t understand are bad.

Textbook logic fail.

But whatever, let’s summarize:

Anybody who does something you don’t understand or like does not truly “earn” their money.

Question: Exactly what qualifies you to decide how much people should be compensated for their efforts?

You are an expert on all aspects of financial markets because you called the internet and housing bubbles? Guess what, lots of people knew they were bubbles…that’s why they popped!

If the only qualification for “know it all” status is realizing, at some point, that internet stocks were in bubble, then there are millions of brilliant financial experts out there.

“Organic market?” Which one, Whole Foods or Jimbos?

You just keep making shit up as you go! Perhaps if you invent enough terms you will eventually be right!

I did HF trading for a living for many years.

But you have read a few things about it on the internet, so you clearly know more about how it works it than me. Thanks for explaining.

Ignorance and arrogance, a beautiful combination.

[Anonymous]

[quote]Right, I don’t understand it. Isn’t that what all the “experts” said about those of us who were trying to warn about the credit/housing bubble […][/quote]

Because some things you don’t understand are bad, then all things you don’t understand are bad.

Textbook logic fail.

But whatever, let’s summarize:

Anybody who does something you don’t understand or like does not truly “earn” their money.

Question: Exactly what qualifies you to decide how much people should be compensated for their efforts?

You are an expert on all aspects of financial markets because you called the internet and housing bubbles? Guess what, lots of people knew they were bubbles…that’s why they popped!

If the only qualification for “know it all” status is realizing, at some point, that internet stocks were in bubble, then there are millions of brilliant financial experts out there.

“Organic market?” Which one, Whole Foods or Jimbos?

You just keep making shit up as you go! Perhaps if you invent enough terms you will eventually be right!

I did HF trading for a living for many years.

But you have read a few things about it on the internet, so you clearly know more about how it works it than me. Thanks for explaining.

Ignorance and arrogance, a beautiful combination.

[Anonymous]

[quote]Right, I don’t understand it. Isn’t that what all the “experts” said about those of us who were trying to warn about the credit/housing bubble […][/quote]

Because some things you don’t understand are bad, then all things you don’t understand are bad.

Textbook logic fail.

But whatever, let’s summarize:

Anybody who does something you don’t understand or like does not truly “earn” their money.

Question: Exactly what qualifies you to decide how much people should be compensated for their efforts?

You are an expert on all aspects of financial markets because you called the internet and housing bubbles? Guess what, lots of people knew they were bubbles…that’s why they popped!

If the only qualification for “know it all” status is realizing, at some point, that internet stocks were in bubble, then there are millions of brilliant financial experts out there.

“Organic market?” Which one, Whole Foods or Jimbos?

You just keep making shit up as you go! Perhaps if you invent enough terms you will eventually be right!

I did HF trading for a living for many years.

But you have read a few things about it on the internet, so you clearly know more about how it works it than me. Thanks for explaining.

Ignorance and arrogance, a beautiful combination.

[Anonymous]

[quote]Right, I don’t understand it. Isn’t that what all the “experts” said about those of us who were trying to warn about the credit/housing bubble […][/quote]

Because some things you don’t understand are bad, then all things you don’t understand are bad.

Textbook logic fail.

But whatever, let’s summarize:

Anybody who does something you don’t understand or like does not truly “earn” their money.

Question: Exactly what qualifies you to decide how much people should be compensated for their efforts?

You are an expert on all aspects of financial markets because you called the internet and housing bubbles? Guess what, lots of people knew they were bubbles…that’s why they popped!

If the only qualification for “know it all” status is realizing, at some point, that internet stocks were in bubble, then there are millions of brilliant financial experts out there.

“Organic market?” Which one, Whole Foods or Jimbos?

You just keep making shit up as you go! Perhaps if you invent enough terms you will eventually be right!

I did HF trading for a living for many years.

But you have read a few things about it on the internet, so you clearly know more about how it works it than me. Thanks for explaining.

Ignorance and arrogance, a beautiful combination.

[Author]

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