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Comment by habnds | Hacker News Reader

people aren't mad only because tons of money is made on hft. It's also because money is _wasterd_ on hft. That's $100 million dollars spent on something that has 0 use to society. It's just rich people playing weird games.

Think about the social benefits of $100 million invested in nyc transit infrastructure.

The economy's incentive structure is broken and this is a prime example.

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Those 100m are not destroyed by burning them in an HFT furnace but rather used to pay developers, hardware, factory workers etc. Sure, it's not going directly into infrastructure but it is not lost.

In fact, it's quite possible that if it wasn't invested into HFT it would be held as cash by the company or paid out as a dividend (which is fine as well).

Your definition of 'waste' is awfully narrow. I'm not sure anything but destruction of the cash is waste in that view - except that its not even then a total waste because you are helping the money burning industry and furnace industry to thrive.

That is false. The 100m could have been spent on something which increases the productivity of people. It would still go to devs, factories, etc but at the end there is something from which society benefits.

So paying hardware manufacturers and programmers for their work doesn't benefit society? It is not like firing these people would see more cancer research or other stuff you might regard as more beneficial for society.

It does, but it doesn't create anything which can be leveraged to improve things further. Might as well just give the people the money directly, with no expectations of deliverables.

It's important to make money but,how much you're paid for your work is an exceptionally bad way to measure that work's value in our society.

Tim O'Reilly said "Create more value than you capture." I would argue that hft is the definition of people capturing value that they didn't create.

Firstly, this article has nothing to do with HFT. Goldman is executing on behalf of clients who are not HFT

Secondly, your statement makes an implicit assumption that there is no value in providing liquidity to capital markets. This assumption is false. Think of your local grocery store. Sure, you could drive down to the distribution center and buy stuff there. But instead you go to the store where it’s conveniently laid out for you. Same with HFT. If it didn’t exist, you would still be able to buy and sell but markets would be a lot less liquid and buying and selling less convenient.

An article titled "GS spending millions to shave millisecconds off stock trades" has nothing to do with HFT?

It isn't at all clear to me buying and selling at an auction even only once a day, let alone once a minute or second would make financial market end user worse off.

Grocery logistics is a terrible analogy for financial markets.

The "F" in in "HFT" stands for "Frequency". This is a separate concept from latency. GS are spending money so they can execute their clients' orders on the market faster, to reduce the risk of the price shifting between order and execution.

> It isn't at all clear to me buying and selling at an auction even only once a day, let alone once a minute or second would make financial market end user worse off.

Go look at the history. Back before the 80s, trading was done by hand, sub-second anything was impossible. Guess what! Spreads were enormous, and the cost of doing business was huge. As a financial market end user (I have a pension), I want the smallest spreads possible.

GS is spending the money on this project to reduce high frequency traders ability to capture some of the value of their trades on behalf of clients. Why do you think the price moves away from them? It isn't random. It has everything to do with hft, which has everything to do with market structure.

I'm highly familiar with the history, no one is advocating for a return to open outcry.

Your pension is almost certainly a GS client and footing the bill for this project through execution costs. A periodic auction model would make latency much less of a problem and society's time and energy could be put into solving real problems.

This makes the assumption that time in and of itself has no relevance. Sure the money is reused, but ultimately what is valuable is labour output, and usually that has time relevance. Further, if we consider the activity as steady state, that now means a % of the labour force is semi-permanently unable to be used for something else.

Actually he probably meant that 100 million are being used to redirect efforts and resources destructively. Your argument can be used just as well to defend an "investment" of 100m into efforts to dig up aluminium, turn it into dust and throw it into oceans.

Broken window fallacy. The work those people are doing could be used for something else, so if they are doing something useless, it is a waste.

If having people work on something useless was beneficial, you could just pay them to dig holes in the ground and fill them up again.

Burning money is not that bad, even burning 99% of all the money in the world.

...what?

Is this the finance edition of broken windows fallacy?

HFT has more benefit than huge villas and cars and private jets. It can bring benefit to software and hardware. I'm okay.

What sort of benefits has it brought to software and hardware?

edit: honest question :)

Faster networks. Arista exists because hft was a big target market and now everyone using networks with Arista switches in them has benefited.

SolarFlare as well. HFT shops have been early adopter of kernel bypass setups which now is becoming more common place.

On a related note, the architecture of something like ScyllaDB is very similar to some of the HFT systems I have seen.

Faster networks would come for other more useful endeavors too, like high quality video conferencing/telepresence stuff. People say how important it is to be working in the same place because conferencing is "just not the same", not realizing it's mostly a technical problem, shitty ISPs, slow routes with high jitter or loss, and insufficient mics, speakers, and software.

But nobody is willing to put up the money to fund the research required to improve those speeds like HFT customers. A million dollars per switch is not a problem for them.

I don't know, I didn't use past tense. I imagine that investment into technology is going to bring more benefit than pointless consumption. Also - what about effective markets, that's not a benefit?

right, you used present tense. You meant hft "could possible have" more benefit? HFT is much more the product of the current regulatory structure than a feature of efficient markets.

Instead of reading Flash Boys, which is good but not really very academic, I'd recommend "The problem of HFT" by Haim Bodek. It explains how he set out to build a sohpisticated trading shop with modern technology and realized all of his competitiors were just gaming the market structure and being handed advantages by exchanges desparate for trading volume.

HFT, being technology, has more benefit than pointless consumption, by definition - at the very least someone is creating something new and that is good for the economy. What are the actual benefits of this project in the market is unknown, especially because it does not exist yet.

Who’s mad about HFT? 100m out of a what 40tn dollar world GDP?

I get it, just seems... unlikely. Who cares?

Maybe mad is a strong word, but, it isn't just $100m, That's one investment by one company. It's billions of dollars across the world to gain arbitrary milliseconds.

Restructuring financial markets, to use periodic auctions for example or by adding speed bumps rather than continuous trading would probably do away with an entire wasteful industry and benefit the actually relevant parties in the financial system, people who have money, and people who need money, at the cost of the unnecessary middlemen.

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