GG Posted April 8, 2014 Share Posted April 8, 2014 i think i can fathom it: if you think hft's suck, you should look at the past. it sucked worse. beating a 2.4% expense ratio isn't that difficult in theory. in practice it is because the rules are made and have previously been made by others than retail investors. and who are the retail investors? he rightly points out they make up less than 10% of the populace when looking at any meaningful amounts invested (and this is where the difference between that 10% and the .01% becomes even more dramatic). how many of those investors are stock pickers primarily? of that 10%, i'd estimate it's the minority. so the "smart" retail investors are utilizing investment companies like fidelity, t rowe price and vanguard except they too are being taken by the hft's and in some instances the expense ratios.. therefore, choose the lesser of evils and you get ripped off less. how bout devising a system where the retail investor doesn't get ripped off at all? well, that would eliminate billions for the financial industry to rake in just for existing. and since it runs the show and makes the rules, that would be unthinkable. kinda like taking private insurance out of health care. he's right. the way to riches is still the hedge fund. and that speaks volumes about the current and past state of affairs on "the street". as salmon states, as far as intermediaries, "everybody is in on the game". that's true as long as you aren't the retail investors. we are the game. You are the idiots and further proof that the system is backwards and it's the retail investor that needs to pass a test and get a certification in order to trade. It's undeniable that the changes in equity trading have saved retail investors $100's in lower costs, and have expanded more opportunities for retail investors to get into the market, yet you're up in arms over a $1/yr skim by HFTs? Are you serious? Yeah, $2bn/yr is a lot of money in a vacuum, but when you compare that to $200 trillion/yr notional amount traded on the various US exchanges, it puts a different perspective on it. Doesn't it? And who's to say that the $2bn that HFTs "steal" from other institutional investors will actually flow down to retail if HFTs are curbed? I'm sure in another thread, you'll slam the money men from ripping off the little guy, instead of understanding that the outcry from the traditionalists is to curb HFTs with regulations, instead of investing in the platforms on their own. BTW, if you're so upset about losing $1/yr in additional trading costs, where's your righteous indignation when the progressives have no qualms in raising taxes and fees on every day life? Link to comment Share on other sites More sharing options...
Azalin Posted April 8, 2014 Share Posted April 8, 2014 To clarify, Lewis and IEX don't slam all HFTs, just the guys who build direct fiber links to the exchanges and get their market pricing information from the exchange. Their close proximity to the exchange and those fiber connections allow them to execute a trade much faster than an order coming from another trading platform. That's how the scheme got exposed, a trader sees a price at $100.00, puts in a buy order, but before it fills, the price jumps to $100.001, and that was happening regularly. So someone was obviously getting ahead of the trader on every order. That is of course a bit sleazy. But again, there's considerable debate in whether HFT's large order volumes compress the price. For all we know, without HFTs that stock quote would have been $100.02. IEX does bring up a good point that you can have the benefits of HFT without the exchanges providing data, or at least masking the source of the data, and that will slow down the front running. But that could also slow down the HFT activity, and the trading spreads may widen again, I don't know enough beyond` this analysis, but Lewis's point is completely one-sided and doesn't discuss the net cost and impact to both sides of a trading transaction. thanks, I appreciate the info. Link to comment Share on other sites More sharing options...
birdog1960 Posted April 8, 2014 Author Share Posted April 8, 2014 You are the idiots and further proof that the system is backwards and it's the retail investor that needs to pass a test and get a certification in order to trade. It's undeniable that the changes in equity trading have saved retail investors $100's in lower costs, and have expanded more opportunities for retail investors to get into the market, yet you're up in arms over a $1/yr skim by HFTs? Are you serious? Yeah, $2bn/yr is a lot of money in a vacuum, but when you compare that to $200 trillion/yr notional amount traded on the various US exchanges, it puts a different perspective on it. Doesn't it? And who's to say that the $2bn that HFTs "steal" from other institutional investors will actually flow down to retail if HFTs are curbed? I'm sure in another thread, you'll slam the money men from ripping off the little guy, instead of understanding that the outcry from the traditionalists is to curb HFTs with regulations, instead of investing in the platforms on their own. BTW, if you're so upset about losing $1/yr in additional trading costs, where's your righteous indignation when the progressives have no qualms in raising taxes and fees on every day life? from the article you cited: "Wall street insiders and those of us who knew about HFT already, have been generally underwhelmed by this observation because we've known that Wall Street code has always favored a small group of rich and well connected institutions who can afford to pay enormous sums of money to maintain their edge in the market. the advent of HFT just created new entrants into the charmed circle...". So that's it. Implicit in that statement is that a charmed circle must always exist. and HFT's are further tangible evidence. and that's where the uproar comes from. We've all known the dirty little secret as well. It just becomes more clarified evry time some revelation like this raises it's ugly little head. Link to comment Share on other sites More sharing options...
Jauronimo Posted April 8, 2014 Share Posted April 8, 2014 c'mon. bloomberg, forbes, yahoo, finance, nbc,cbs, cnbc, abc, pbs, npr and even fox business news did major stories on this. many (including fox business news) even delved into the deeper implications: http://www.foxbusine...quency-trading/. i have to admit, this is one of the more profound analyses that i've read. From your link: Within seconds, Twitter posts from some of The Street’s most seasoned ambassadors unsurprisingly agreed about the toxic world of High Frequency Trading (“HFT”); but many wondered aloud how this story didn’t break any news. Link to comment Share on other sites More sharing options...
birdog1960 Posted April 8, 2014 Author Share Posted April 8, 2014 From your link: yet, he includes that comment in an article on this very subject. Link to comment Share on other sites More sharing options...
John Adams Posted April 8, 2014 Share Posted April 8, 2014 HFTs don't provide liquidity in any helpful way to the market. Good liquidity is the money that is flowing and keeps the markets powered in bad times. It involves parties putting their capital at risk, something the HFT skimming does not provide. The flash crashes show what HFTs do when things go south--they head for ze hills muchacho. That's why the fact that HFTs are 60% of all market trades these days is such a huge risk. The next time the market tumbles by, say, 400-500 points in a day, there won't be any HFT liquid in the market because the HFTs will all be on the sidelines not making their giant fraction-of-a-second in-out transactions. They will just be "out." Like others have said, it's not illegal that I know of, but man it "feels" wrong. Finding out an order I just put in and then ensuring I get the worst deal because you bought at the low spread and I now bought at the high--when I have no way to control that--is crappy. The benefit seems to be tighter spreads for sure. But as GG pointed out, I don't know what the cost is of HFTs in the market. To me, it's not much. To most of us, it's not much. Cumulatively, allowing this skimming is a lot. And I'm not sure the benefits outweigh the costs. Link to comment Share on other sites More sharing options...
Jauronimo Posted April 8, 2014 Share Posted April 8, 2014 yet, he includes that comment in an article on this very subject. As usual, your takeaways are astounding. 1. I say this story failed to generate the type of buzz you had previously claimed. 2. You post a "profound" article which affirms that the story failed to make waves, in the first paragraph no less. 3. I point this out. 4. You disagree. So which is it? Is the previously profound analysis now full of it or does a handful of articles posted far away from the front page now constitute a major story? Flash Boys can't beat out Kate Middleton meeting a guy in a thong for front page space. Link to comment Share on other sites More sharing options...
birdog1960 Posted April 8, 2014 Author Share Posted April 8, 2014 As usual, your takeaways are astounding. 1. I say this story failed to generate the type of buzz you had previously claimed. 2. You post a "profound" article which affirms that the story failed to make waves, in the first paragraph no less. 3. I point this out. 4. You disagree. So which is it? Is the previously profound analysis now full of it or does a handful of articles posted far away from the front page now constitute a major story? Flash Boys can't beat out Kate Middleton meeting a guy in a thong for front page space. he made many statements in the piece. do i need to agree with every single one to find it very good overall? that point wasn't material to his ultimate conclusiuon: that the street needs to improve its reputation and transparency. if anything, it's inconsistent with it. there's been plenty of press coverage in all the important places as i've pointed out. since only 10% of the population is deeply invested, one wouldn't expect "survivor" like ratings. there are probably very few crossover readers from "Flash Boys" reading headline stories on the "Daily Mirror". does that surprise you? Link to comment Share on other sites More sharing options...
B-Large Posted April 8, 2014 Share Posted April 8, 2014 Meh- its why I put my money in physical real estate- I don't know anyting about HFT, don't really trust the financial system- I do however trust in bricks and mortar in great areas. I guess at some point, stick to what you understand, and trust in the underlying asset you feel comfortable with. Link to comment Share on other sites More sharing options...
DC Tom Posted April 8, 2014 Share Posted April 8, 2014 Meh- its why I put my money in physical real estate- I don't know anyting about HFT, don't really trust the financial system- I do however trust in bricks and mortar in great areas. I guess at some point, stick to what you understand, and trust in the underlying asset you feel comfortable with. Worked so well in 2006. Everything is subject to a bubble. Link to comment Share on other sites More sharing options...
GG Posted April 8, 2014 Share Posted April 8, 2014 he made many statements in the piece. do i need to agree with every single one to find it very good overall? that point wasn't material to his ultimate conclusiuon: that the street needs to improve its reputation and transparency. if anything, it's inconsistent with it. The book review's ultimate conclusion and the main points were certainly not that the street needs to improve its reputation and transparency. That is always a desired goal, but not necessarily attainable because trading is all about accessing information before the other guy. If you truly examine how HFTs get their information, you would also recognize that they're not trading on inside information. But through their investment, they are able to move on the public information much faster than firms that didn't invest in the direct links to the exchanges. Of that 10% retail investor market, how many actually subscribe to live market feeds vs counting on 15-minute delays from Yahoo Finance? Don't you think that's a major disadvantage to the ordinary retail investor? Would you fix that, or recognize that people who spend the capital to improve their information flow and analysis should be able to take advantage of that investment compared to people who don't make that investment? Why don't you go out and see if you can build an airplane as fast and as cheap as Boeing can? And if you can't, why don't you come back and complain about the unfairness that Boeing put you through because they made the investments in their production, but you didn't. Link to comment Share on other sites More sharing options...
birdog1960 Posted April 8, 2014 Author Share Posted April 8, 2014 The book review's ultimate conclusion and the main points were certainly not that the street needs to improve its reputation and transparency. That is always a desired goal, but not necessarily attainable because trading is all about accessing information before the other guy. If you truly examine how HFTs get their information, you would also recognize that they're not trading on inside information. But through their investment, they are able to move on the public information much faster than firms that didn't invest in the direct links to the exchanges. Of that 10% retail investor market, how many actually subscribe to live market feeds vs counting on 15-minute delays from Yahoo Finance? Don't you think that's a major disadvantage to the ordinary retail investor? Would you fix that, or recognize that people who spend the capital to improve their information flow and analysis should be able to take advantage of that investment compared to people who don't make that investment? Why don't you go out and see if you can build an airplane as fast and as cheap as Boeing can? And if you can't, why don't you come back and complain about the unfairness that Boeing put you through because they made the investments in their production, but you didn't. because we're not talking about building an airplane. we're talking about investing in equities. the actual process doesn't have to be unfair. why couldn't yahoo finance give real time quotes? what's stopping them? it's certainly not the technology. is it that someone in the elite circle doesn't want that to be so? that'd be my guess. it's inherently unfair . that's what your link said and it's true. furthermore it said it was silly to lead the public to believe that it might ever be fair. that's the disturbing part but unfortunately is probably also true. at least the process of buying securities doesn't need to be unfair. as far as inside information, doesn't anything that's not publicly available (even if requiring further analysis to become valuable) meet that description? do you believe the inside circle is void of such information generally? i don't. Link to comment Share on other sites More sharing options...
DC Tom Posted April 8, 2014 Share Posted April 8, 2014 because we're not talking about building an airplane. we're talking about investing in equities. the actual process doesn't have to be unfair. why couldn't yahoo finance give real time quotes? what's stopping them? it's certainly not the technology. is it that someone in the elite circle doesn't want that to be so? that'd be my guess. it's inherently unfair . that's what your link said and it's true. furthermore it said it was silly to lead the public to believe that it might ever be fair. that's the disturbing part but unfortunately is probably also true. at least the process of buying securities doesn't need to be unfair. as far as inside information, doesn't anything that's not publicly available (even if requiring further analysis to become valuable) meet that description? do you believe the inside circle is void of such information generally? i don't. "Inside circle?" Just relent and call them "The Rothschilds" already. Jesus... Link to comment Share on other sites More sharing options...
Deranged Rhino Posted April 8, 2014 Share Posted April 8, 2014 "Inside circle?" Just relent and call them "The Rothschilds" already. Jesus... That way I can join in the conversation since I know nothing about this topic but damn sure can talk NWO conspiracies! Link to comment Share on other sites More sharing options...
birdog1960 Posted April 8, 2014 Author Share Posted April 8, 2014 "Inside circle?" Just relent and call them "The Rothschilds" already. Jesus... "charmed circle" from the slate article. i kinda like it. evokes another wordly dimension. Link to comment Share on other sites More sharing options...
Deranged Rhino Posted April 8, 2014 Share Posted April 8, 2014 "charmed circle" from the slate article. i kinda like it. evokes another wordly dimension. Inter-dimensional overlords controlling the financial sector? I like it. Link to comment Share on other sites More sharing options...
GG Posted April 8, 2014 Share Posted April 8, 2014 because we're not talking about building an airplane. we're talking about investing in equities. the actual process doesn't have to be unfair. why couldn't yahoo finance give real time quotes? what's stopping them? it's certainly not the technology. is it that someone in the elite circle doesn't want that to be so? that'd be my guess. it's inherently unfair . that's what your link said and it's true. furthermore it said it was silly to lead the public to believe that it might ever be fair. that's the disturbing part but unfortunately is probably also true. at least the process of buying securities doesn't need to be unfair. as far as inside information, doesn't anything that's not publicly available (even if requiring further analysis to become valuable) meet that description? do you believe the inside circle is void of such information generally? i don't. And yet again, you continue to prove that you know nothing about the topic. It shouldn't matter if you are investing in equities or investing in airplane manufacturing. You are putting capital down in hopes of generating a return on that investment. Wall Street's trade is information, and that's where its investment is going. Goldman Sachs has two major expense items, people and technology. They spend that to be better and faster than their competitors. HFTs figured out that they can get an edge in electronic trading platforms by building direct links to the exchanges. Yes, it costs them a bit more, but it's been a good investment because they can react much faster. Is it illegal? Not under current regulations. Of course Yahoo can provide real time data, but then they would have to pay the exchanges for that data. Will you in turn pay Yahoo for that data? Somehow I doubt it, because you believe information and research should be free. Or, actually, you want others to gather the information, pay for it and then distribute it to you for free. Why don't you ask Boeing to give you a free airplane? Which brings us back to your perpetual complaints. You want a free lunch. There is no more inner circle in finance than there is an inner circle in airplane manufacturing or auto manufacturing. I can count the global aero and auto companies on two hands, while there are hundreds of global finance companies, and thousands of major global institutional investors. So how is that an inner circle? Or are you comparing yourself to an institutional investor who spends $100s of millions to bolster his information technology, and you want an even playing field? Link to comment Share on other sites More sharing options...
Tiberius Posted April 8, 2014 Share Posted April 8, 2014 Eastmen Kodak is dead Link to comment Share on other sites More sharing options...
B-Large Posted April 8, 2014 Share Posted April 8, 2014 Worked so well in 2006. Everything is subject to a bubble. True- but if you were smart and saved a bunch of cash during the ride up, there was a garage sale of good property in close to the city in great locations to be picked up at 25-50% discount from price highs. So, right now as people are bidding up property in Denver again, I am stashing cash again for the next crisis. The think I like about real estate is even when my property's value is down, in the right location rents usually go up- simple concepts, thats why I love it. I guess its the same with Equities- I know nothing about stocks, but I assume the financial crisis in 08 was a good time to buy up round lots of stable companies that were almost surely to go back up. Rigged? Don't know enough to add much to the discussion here, so I can't answer that question- but to me, for most Americans the gimmicks of the financial industry do not negate common sense, patience and a long-term approach to building wealth and stability. Link to comment Share on other sites More sharing options...
birdog1960 Posted April 8, 2014 Author Share Posted April 8, 2014 silly me. i though publiclty traded meant publicly traded. Link to comment Share on other sites More sharing options...
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