Comment Re:Good, now put it in a kitchen appliance! (Score 1) 55
How about during surgery? Germ free information.
Imagine the batter life and weight of a Windows 7 tablet with two screens.
great for muggers.
hedge fund was run by Myron Scholes and Robert Merton
Granted, in the LTCM case the engineer and the salesmen were the same. But usually the tool maker is separate from the producer. In the CDO case David X. Li definitely did not sell $1.5tr of products himself.
- flash functionality (essentially, a 30ms-faster peek on large pending orders for people who pay a fee for it) is a big one, and has mostly been disallowed already by the exchanges I'm aware of.
Yep, fortune-telling is my main bugbear, as well as the ability to instantly remove an offer. Confidence in the market is damaged if all investors do not have the same access.
I admit that HFT algos are not all bad. They do help institutions make large trades whist minimising market movements, so aiding this sort of liquidity.
Thanks for the detailed reply and all the links. The forthcoming paper will be an interesting read.
I decide I want to sell 100 shares of MSFT today - right now - at a price of $25.27
A price is the point at which someone willing to buy. Lets say that normal market size (http://www.investopedia.com/terms/n/normalmarketsize.asp) is 10 shares, so we receive $252.70 and still have 90 shares. The market maker has to offer a price and has to accept that price. Repeat the process 10 times and you have sold all the shares, but the price gained for the remaining 90 shares is different to the initial quoted price. But this is just restating your post.
You describe how market makers create liquidity, but not how HFTs create liquidity.
In an 'efficient, liquid' market, I would have been able to make the sale of MSFT & AAPL immediately, and I would have lost less money in the process. HFTs are the ones buying my share of MSFT *right now*, expecting to turn around and sell those in a batch to someone else in about 20 minutes, for pennies (or fractions of pennies) of profit per share.
HFTs already know that they can sell on those shares. There is not waiting and they take no risk. They do not enter into trades that they cannot instantly get out of. Therefore they provide no liquidity.
Is this argument incorrect?
How does a flash order using HFT work?
As an example, let's assume that a buyer wants to buy 100,000 shares of INTC. The market price of an INTC share is $26.10, but the buyer's limit price is $26.40. In other words, the buyer is willing to pay up to $26.40 for each share of INTC or $0.30 more than its current price.[3]
"Some marketplaces, like NASDAQ, offer high-frequency traders a peek at orders for 30 milliseconds - 0.03 seconds - before they are shown to everyone else. This allows traders to profit by very quickly trading shares they know will soon be in high demand. Each trade earns pennies, sometimes millions of times a day." - The Thirty-Millisecond Advantage, The New York Times.
"Some marketplaces, like NASDAQ, offer high-frequency traders a peek at orders for 30 milliseconds - 0.03 seconds - before they are shown to everyone else. This allows traders to profit by very quickly trading shares they know will soon be in high demand. Each trade earns pennies, sometimes millions of times a day." - The Thirty-Millisecond Advantage, The New York Times.
Via flash orders from NASDAQ, high-frequency trading firms get a peek at these orders for 30 milliseconds before they are shown to everyone else. Having detected a demand for INTC shares, the computers at these firms then start issuing small immediate or cancel (IOC) orders at specific levels above the current price of INTC shares. If the first sell order at $26.15 is accepted by the buyer, another sell order at $26.20 is issued, and so on.
This continues until a sell order at $26.45 is issued. Because the buyer's limit price is $26.40, the sell order at $26.45 is rejected. At this stage, the firms' computers flood the buyer with sell orders at $26.39, causing most of the company's order of 100,000 INTC shares to be filled at $0.29 cents above market price.
Under normal circumstances, a buyer would see the sell order at $26.15 and might subsequently drop the limit price on his/her order. However, high-frequency trading computers are so fast that unless the buyer owned comparable machines, he/she would have no chance to do this.
If the Ask price is 35 and the Offer Price is 34.50
then the automated traders move the prices to 35.1 and 34.4!
You don't get to buy at the quoted price. The often quoted liquidity reason is a fallacy. Unfortunately I can't find the article I read to link too.
Greedo now shoots YOU first?
2 memes in one. No need to thank me.
"Experience has proved that some people indeed know everything." -- Russell Baker
