Comment by amiga_500 | Hacker News Reader

Comment by amiga_500 | Hacker News Reader

Parent Full thread

I'm certain HFT vols are up in the volatility. Not sure that proves or disproves anything.

HFT is hugely expensive to maintain. Staffing and equipment costs are massive.

HFT choose not to trade on exchanges with delays because they want to exploit latency advantages. That's why govt should regulate this on all exchanges to just wipe it out.

Consolidation is not good because it will collapse into a monopoly. Which will require regulation also, because markets do not "work" on their own.

I'll check back later, going for a walk outside now.

----

Here is my reply, despite not replying for 40 minutes, I've put something about capitalism on HN which immediately gets you a fake "you're submitting too fast".

Cannot post any more after that because HN doesn't like discussion unless it's about a tiny window that they agree with. Perhaps someone flagged my comment - if so they make this board a far more boring place to be.

---

HFT != electronic trading. Many firms are automating front-to-back, that is unequivocally a good thing. HFT is latency arb.

> I'm certain HFT vols are up in the volatility. Not sure that proves or disproves anything.

You said that HFTs jump out when things get volatile. But then I show you evidence that they trade more in high volatility. Do you not see the contradiction?

> HFT is hugely expensive to maintain. Staffing and equipment costs are massive.

HFT firm equipment costs are a few racks of high end servers and some expensive networking equipment, and a few dozen to few hundred highly paid engineers. Before HFT there were literally _thousands_ of human traders working at different banks doing the same work by hand. Sure in an absolute sense HFT is expensive, but relative to the alternative it is cheap.

> HFT choose not to trade on exchanges with delays because they want to exploit latency advantages. That's why govt should regulate this on all exchanges to just wipe it out.

If HFT is so bad, then the non-HFT market participants should choose to trade at the delay exchanges that make it harder for HFTs. But they choose not to, generally, because the liquidity - and thus trading costs are higher than trading at the non-delay exchanges.

> Consolidation is not good because it will collapse into a monopoly. Which will require regulation also, because markets do not "work" on their own.

First you say that HFT is bad because costs are high, but now you say that falling costs are bad because it will lead to monopoly - do you see the contradiction? For what its worth, Although there are fewer firms there is still a lot of competition among the remaining firms.

> You said that HFTs jump out when things get volatile. But then I show you evidence that they trade more in high volatility. Do you not see the contradiction?

We should distinguish between volatility at different timescales. An HFT might well be very active over a volatile month, but may still turn off over a very volatile second. I've always assumed that the "HFTs jump out during volatility" complaint was about the latter; it means that when some shocking news hits the market, the HFT firms providing most of the liquidity pull it, and so the manually-entered market orders wanging around end up moving the market further, exacerbating the volatility. Maybe that's not what people are actually complaining about, though.

> HFT firm equipment costs are a few racks of high end servers and some expensive networking equipment

And FPGAs. FPGA development is really not cheap.

Exactly, that was my point and I thought that would be understood by someone in the domain. Same for HFT vs "electronic" in general, again someone in the domain would get that distinction immediately.

HFT = electronic trading, or at least the bulk of it. The human traders that existed before HFT firms & HFT desks at banks were largely doing the same thing that HFT firms do now - making markets on a wide range of securities, but less efficiently.

Latency-arb is a small part of HFT, if you consider strategies that provide liquidity to be "good HFT" and strategies that take liquidity (via latency arb or other arbs) to be "bad HFT" then those strategies are largely executed by the same market participants.

Reply on news.ycombinator.com