Read the rest of Fran Swain's blog post: Will hypertrading lead to floating tech cities?High frequency trading (HFT) exploits tiny differences in the price of a commodity across two markets. As these discrepancies can last a fraction of a second, trading is carried out by computers that make thousands of transactions in milli- or even microseconds. At these speeds, the time it takes to communicate between stock exchanges becomes a major factor in the success of a trader.
The demand for ever-lower latencies have pushed 'tick times' between trading hubs close to their physical limit. Last year, telecoms company Hibernia Atlantic announced plans to lay an optic fibre cable running the shortest possible route between London and New York to achieve a latency of 60 milliseconds. The same journey at the speed of light takes 52.2ms.
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High frequency trading
High frequency trading
The technology is certainly impressive, but is this really any kind of pinnacle of human progress? Does anyone else see this as an utter waste of human ingenuity [---][/---] technology whose sole purpose is to move 'money' around even faster?
Alan Henness
There are three fundamental questions for anyone advocating Brexit:
1. What, precisely, are the significant and tangible benefits of leaving the EU?
2. What damage to the UK and its citizens is an acceptable price to pay for those benefits?
3. Which ruling of the ECJ is most persuasive of the need to leave its jurisdiction?
There are three fundamental questions for anyone advocating Brexit:
1. What, precisely, are the significant and tangible benefits of leaving the EU?
2. What damage to the UK and its citizens is an acceptable price to pay for those benefits?
3. Which ruling of the ECJ is most persuasive of the need to leave its jurisdiction?
Re: High frequency trading
It surprises me not - if there is an exploitable edge there will be an exploiter!
This reinforces what was said in an item about the latest super-hyper-ultra accurate clock recently started in the UK. They said that modern global commercial needs (as well as Internet and GPS) required timing to incredible accuracy.
One minute error in the timing of registering a purchase or sale could cause a lot of trouble.
This reinforces what was said in an item about the latest super-hyper-ultra accurate clock recently started in the UK. They said that modern global commercial needs (as well as Internet and GPS) required timing to incredible accuracy.
One minute error in the timing of registering a purchase or sale could cause a lot of trouble.
"Look forward; yesterday was a lesson, if you did not learn from it you wasted it."
Me, 2015
Me, 2015
Re: High frequency trading
Me.Alan H wrote:Does anyone else see this as an utter waste of human ingenuity — technology whose sole purpose is to move 'money' around even faster?
Many of our fellow humans don't have clean water, roof over their heads, education or health care services. The rich making a swift buck through no actual work is not exactly equitable is it? I despise the 'I'm all right Jack' attitude so the rest of the planet can go hang
I'd be more impressed if someone did this to give the profits to organisations who help provide the essentials to many who have nothing.
Re: High frequency trading
ER, that was "minute" as in "really teensy weensy" not as in 60 seconds!Dave B wrote:It surprises me not - if there is an exploitable edge there will be an exploiter!
This reinforces what was said in an item about the latest super-hyper-ultra accurate clock recently started in the UK. They said that modern global commercial needs (as well as Internet and GPS) required timing to incredible accuracy.
One minute error in the timing of registering a purchase or sale could cause a lot of trouble.
"Look forward; yesterday was a lesson, if you did not learn from it you wasted it."
Me, 2015
Me, 2015
Re: High frequency trading
The likely effect of this innovation is to reduce margins and volatility, and to increase liquidity, for the benefit of producers and consumer alike. It is in this way that economies grow, to provide all the benefits that Fia, like the rest of us, wants to see. And all the owners and employees will be paying large amounts in tax. The money comes, not from consumers, but from the increases in the efficiencies in the market.
Hope that makes you all feel more sanguine aout it.
Hope that makes you all feel more sanguine aout it.
Re: High frequency trading
I knew you wouldn't agree Nick
As I've been banging on here for years, whatever the question was I'm pretty sure market forces aren't the answer. Thundril had some good thoughts on this a few threads ago.
What funny words economists use. To reduce volatility it seems to make huge sense to go back to treating money as an exchange for goods and services. Increasing liquidity? What's that? The amount of extra pennies that can be squeezed by playing the markets benefiting no-one but some egos, software designers and electricity providers? These boys (I bet they are!) are wasting their brainpower playing around with something that doesn't really exist - no paper money is exchanged for goods, I can't see this as a service, just numbers going up or down on a computer screen. To my mind that's morally wrong.... awaits flakNick wrote:The likely effect of this innovation is to reduce margins and volatility, and to increase liquidity, for the benefit of producers and consumer alike.
Firstly, us consumers pay loads of tax: VAT, petrol, clothing, on many services etc. And just how jolly 'efficient' does the 'market' have to be before we help those less fortunate than ourselves?Nick wrote:It is in this way that economies grow, to provide all the benefits that Fia, like the rest of us, wants to see. And all the owners and employees will be paying large amounts in tax. The money comes, not from consumers, but from the increases in the efficiencies in the market.
As I've been banging on here for years, whatever the question was I'm pretty sure market forces aren't the answer. Thundril had some good thoughts on this a few threads ago.
No, not really. But thank you for tryingNick wrote:Hope that makes you all feel more sanguine aout it.
Re: High frequency trading
Since we are getting into the realm of economics, I found this the other day . . .
“The only function of economic forecasting is to make astrology look respectable.”
J. K. Galbraith (a realistic economist?)
“The only function of economic forecasting is to make astrology look respectable.”
J. K. Galbraith (a realistic economist?)
"Look forward; yesterday was a lesson, if you did not learn from it you wasted it."
Me, 2015
Me, 2015
Re: High frequency trading
I couldn't bear to disappoint you, Fia!Fia wrote:I knew you wouldn't agree Nick
Being 'dismal' scientists, it's the only fun we get....What funny words economists use.Nick wrote:The likely effect of this innovation is to reduce margins and volatility, and to increase liquidity, for the benefit of producers and consumer alike.
How come?To reduce volatility it seems to make huge sense to go back to treating money as an exchange for goods and services.
Increasing the ease with which buyers and sellers can interact. Your house is illiquid. It might be "worth" £XXXthousand pounds, but only to a few people, who may, or may not, be in the market at the moment. The more illiguid the asset, the greater the price variation can be.Increasing liquidity? What's that?
Dunno why I bother...The amount of extra pennies that can be squeezed by playing the markets benefiting no-one but some egos, software designers and electricity providers? These boys (I bet they are!) are wasting their brainpower playing around with something that doesn't really exist - no paper money is exchanged for goods, I can't see this as a service, just numbers going up or down on a computer screen. To my mind that's morally wrong.... awaits flak
As the efficiency of the economy increases, the national income increases, and so we can increase help to those less fortunate than ourselves. That's what those taxes are for. You do like paying all those taxes. Don't you?Firstly, us consumers pay loads of tax: VAT, petrol, clothing, on many services etc. And just how jolly 'efficient' does the 'market' have to be before we help those less fortunate than ourselves?Nick wrote:It is in this way that economies grow, to provide all the benefits that Fia, like the rest of us, wants to see. And all the owners and employees will be paying large amounts in tax. The money comes, not from consumers, but from the increases in the efficiencies in the market.
Ok, and the answer is.....?As I've been banging on here for years, whatever the question was I'm pretty sure market forces aren't the answer. Thundril had some good thoughts on this a few threads ago.
Re: High frequency trading
Bankers: an anthropological study
Some selective quotes:What happens in the City of London affects everyone, but most of us know very little about the people who work there – or what they do all day. The Guardian is launching a new project: an anthropological study of the Square Mile
"Let me tell you, the financial sector is not rocket science. There is a lot of lingo, I mean a lot, and you have to master all that jargon. But you don't have to be brilliant to work in finance; you have to be smart enough. And then you have to be willing to put in really, really long hours. And be competitive. It is an endurance game, in part."
Finance directly affects everyone's interests, but many have a hard time maintaining their interest in it. But as the collapse of Lehman brothers and the following three years have shown, the financial word is too important to leave to the bankers – in fact in some countries democracy is beginning to look like the system by which electorates decide which politician gets to implement what the markets dictate.
Alan Henness
There are three fundamental questions for anyone advocating Brexit:
1. What, precisely, are the significant and tangible benefits of leaving the EU?
2. What damage to the UK and its citizens is an acceptable price to pay for those benefits?
3. Which ruling of the ECJ is most persuasive of the need to leave its jurisdiction?
There are three fundamental questions for anyone advocating Brexit:
1. What, precisely, are the significant and tangible benefits of leaving the EU?
2. What damage to the UK and its citizens is an acceptable price to pay for those benefits?
3. Which ruling of the ECJ is most persuasive of the need to leave its jurisdiction?
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- Posts: 38
- Joined: October 23rd, 2010, 9:28 pm
Re: High frequency trading
"in fact in some countries democracy is beginning to look like the system by which electorates decide which politician gets to implement what the markets dictate."
That's really not far from the truth in this country as far as I am concerned. It's frequently one of the most annoying things on the UK news, when after a budget, election, interest rate change/freeze etc, virtually the first thing considered after the headline is 'how did the markets/city react'. It's really as if the rest of us barely matter as long as a few (unelected) city bods are happy (and happy meaning thinking they can make more money for themselves!).
That's really not far from the truth in this country as far as I am concerned. It's frequently one of the most annoying things on the UK news, when after a budget, election, interest rate change/freeze etc, virtually the first thing considered after the headline is 'how did the markets/city react'. It's really as if the rest of us barely matter as long as a few (unelected) city bods are happy (and happy meaning thinking they can make more money for themselves!).
Re: High frequency trading
How depressing. Id rather economists modified their everyday trading and create a position where it's impossible for them to screw the countrys economy. Why should the risky actions of a few have the potential for such large scale negativity. It wasnt always thus. Robert Pestons analysis is utterly damning. Fascinating too.
John
Re: High frequency trading
Its also crazy to be in a position where we rely on financial transactions within the world of finance itself as a means to sustain an economy. This is particularly worrying when this world is so unstable as to rely on its own perception of 'confidence' to sustain itself.redsquirrel wrote:"in fact in some countries democracy is beginning to look like the system by which electorates decide which politician gets to implement what the markets dictate."
It's frequently one of the most annoying things on the UK news, when after a budget, election, interest rate change/freeze etc, virtually the first thing considered after the headline is 'how did the markets/city react'. It's really as if the rest of us barely matter as long as a few (unelected) city bods are happy
The sooner our economy is based on something more tangible the better. I suspect this may mean things get much worse before they change. Id start by getting rid of the lowest tax bracket. People/families on lowest incomes spend most on essentials so the cash spent stays at home, and often within the communities which need it. Oh but our government are more interested in clearing the 50p rate for highest earners. Just Great!!
John
Re: High frequency trading
Yeah, it all depends on whether a bunch of people have an attack of the vapours!
"Look forward; yesterday was a lesson, if you did not learn from it you wasted it."
Me, 2015
Me, 2015
Re: High frequency trading
How does that work? If this is true for current and/or future advances in speed, has the same thing applied in the past or is it a new phenomenon? If so, what data are available that previous slower systems resulted in less liquidity, more volatility and higher margins?Nick wrote:The likely effect of this innovation is to reduce margins and volatility, and to increase liquidity, for the benefit of producers and consumer alike.
Presumably you would argue that increasing trading speeds is not the only way economies grow, but as is said in the article, there isn't room for much further improvement - unless these traders can redefine the speed of light. What happens to growth when they hit the (very imminent) barrier?It is in this way that economies grow...
I doubt I'm the only one who can't see that just moving numbers (I'm not even sure it can be called money) around faster provides benefits anyone....to provide all the benefits that Fia, like the rest of us, wants to see.
Can you explain - in simple terms, please - why making numbers move faster is more efficient (and what the measure of that efficiency is) and where the money so generated was sitting before one trader was able to grab it more quickly that previously?And all the owners and employees will be paying large amounts in tax. The money comes, not from consumers, but from the increases in the efficiencies in the market.
No.Hope that makes you all feel more sanguine aout it.
Alan Henness
There are three fundamental questions for anyone advocating Brexit:
1. What, precisely, are the significant and tangible benefits of leaving the EU?
2. What damage to the UK and its citizens is an acceptable price to pay for those benefits?
3. Which ruling of the ECJ is most persuasive of the need to leave its jurisdiction?
There are three fundamental questions for anyone advocating Brexit:
1. What, precisely, are the significant and tangible benefits of leaving the EU?
2. What damage to the UK and its citizens is an acceptable price to pay for those benefits?
3. Which ruling of the ECJ is most persuasive of the need to leave its jurisdiction?
Re: High frequency trading
I'm with you on this, Alan, if these techniques make more money I am cybically sure that 99.99999999999999% of that will end up in the hoards accounts (non-spending and economy supporting) of already stinking rich people who will never be able to spend a minute fraction of their wealth.
To some making money is merely a hobby, despite what effects it may have on the pockets of those with less. There does seem to be a kind of greed that runs the world - it is not money that causes problems in the old quote but the lust for it IIRC - greed is as equally a destructive force as politics.
That does not go for the few who give lots to good causes.
Tax the arses off them!
To some making money is merely a hobby, despite what effects it may have on the pockets of those with less. There does seem to be a kind of greed that runs the world - it is not money that causes problems in the old quote but the lust for it IIRC - greed is as equally a destructive force as politics.
That does not go for the few who give lots to good causes.
Tax the arses off them!
"Look forward; yesterday was a lesson, if you did not learn from it you wasted it."
Me, 2015
Me, 2015
Re: High frequency trading
OK, let's try to explain this with an example.Alan H wrote:How does that work? If this is true for current and/or future advances in speed, has the same thing applied in the past or is it a new phenomenon? If so, what data are available that previous slower systems resulted in less liquidity, more volatility and higher margins?Nick wrote:The likely effect of this innovation is to reduce margins and volatility, and to increase liquidity, for the benefit of producers and consumer alike.
If the only way for a currency dealer to trade sterling to dollars was to sail the Atlantic with a suitcase full of notes, there would in all likelihood be times when the price would be high, not because of any change in total potential supply, but because of short-term constraints. Or the trader might run out of dollars. Or conversely, he may have more dollars than he needs, which would cost him money. The price margins and price volatility are therefore likely to be high, and the liquidity low. If there are more than one dealer, it is likely to reduce price margins and volatility, and increase liquidity.
If instead of having to cross the Atlantic, they could get the money overnight, then price volatility would fall as liquidity increased. If we now add an arbitrageur, who buys and sells between dealers as their prices and supplies vary, we will see liquidity rise and price variation fall. But the cost of the currency to the end user would not be increased because of such trade, but probably reduce, along with the dealers' profit margins, as the market grows, and only currency for immediate use is purchased by the end user.
The example you originally cited, is just the very end of this process.
Presumably you would argue that increasing trading speeds is not the only way economies grow, but as is said in the article, there isn't room for much further improvement - unless these traders can redefine the speed of light. What happens to growth when they hit the (very imminent) barrier?[/quote]You are right. If trading speeds have reached an absolute maximum, then further improvement is no longer possible in that area. Luckily for us, we have not reached limits in many other fields, so continued growth is possible.It is in this way that economies grow...
Well, I hope you can see it now....I doubt I'm the only one who can't see that just moving numbers (I'm not even sure it can be called money) around faster provides benefits anyone....to provide all the benefits that Fia, like the rest of us, wants to see.
In my example, the money was either resting with the dealers, who were making larger margins, or the money was not being made at all, if trade was being curtailed through bottlenecks in supply. Some profit would also come from not having to hold so much stock (of currency, in this case) as well as the size of the market growing as it became cheaper to trade using dollars.Can you explain - in simple terms, please - why making numbers move faster is more efficient (and what the measure of that efficiency is) and where the money so generated was sitting before one trader was able to grab it more quickly that previously?And all the owners and employees will be paying large amounts in tax. The money comes, not from consumers, but from the increases in the efficiencies in the market.
That's the Alan we all know and love!No.Hope that makes you all feel more sanguine about it.
Re: High frequency trading
Perhaps allied to this subject.
On the way home this afternoon I was listening to the R4 Open Book prog. Not sure of all the details but someone called Robert Harris had written a novel about some aspect of the global financial/stock market system, entitled "The Fear". I missed a lot but he did talk about the super-computer systems involved and the people who run them.
Reasonably he said that these computers like to run on patterns. When people are afraid they behave in predictable patterns - so the computers love this and can use it to, operating at very high speed, take advantage of these patterns. He said that more and more mathematicians and physicists are working in this area, people who are not so interested in the money per se but in developing systems that approach artificial intelligence.
He also said that this would cause the gap between the have and have-nots to get ever wider as the clever people used their expertise and machines to prosper. I would suggest that for one person to prosper in this way another might have to suffer - these are not normally altruistic people.
If there any danger that those using these systems might invoke fear inducing events so they can make even more? Or am I just being paranoid?
Must listen to it again, here's the link.
On the way home this afternoon I was listening to the R4 Open Book prog. Not sure of all the details but someone called Robert Harris had written a novel about some aspect of the global financial/stock market system, entitled "The Fear". I missed a lot but he did talk about the super-computer systems involved and the people who run them.
Reasonably he said that these computers like to run on patterns. When people are afraid they behave in predictable patterns - so the computers love this and can use it to, operating at very high speed, take advantage of these patterns. He said that more and more mathematicians and physicists are working in this area, people who are not so interested in the money per se but in developing systems that approach artificial intelligence.
He also said that this would cause the gap between the have and have-nots to get ever wider as the clever people used their expertise and machines to prosper. I would suggest that for one person to prosper in this way another might have to suffer - these are not normally altruistic people.
If there any danger that those using these systems might invoke fear inducing events so they can make even more? Or am I just being paranoid?
Must listen to it again, here's the link.
"Look forward; yesterday was a lesson, if you did not learn from it you wasted it."
Me, 2015
Me, 2015
Re: High frequency trading
I half-heard it too. I presume it is the same Robert Harris who wrote Fatherland and Enigma, but I don't know for certain. (Maybe it says on the BBC site).Dave B wrote:Perhaps allied to this subject.
On the way home this afternoon I was listening to the R4 Open Book prog. Not sure of all the details but someone called Robert Harris had written a novel about some aspect of the global financial/stock market system, entitled "The Fear". I missed a lot but he did talk about the super-computer systems involved and the people who run them.
Reasonably he said that these computers like to run on patterns. When people are afraid they behave in predictable patterns - so the computers love this and can use it to, operating at very high speed, take advantage of these patterns. He said that more and more mathematicians and physicists are working in this area, people who are not so interested in the money per se but in developing systems that approach artificial intelligence.
This is generally not the case as most of the time it is not a zero sum game.He also said that this would cause the gap between the have and have-nots to get ever wider as the clever people used their expertise and machines to prosper. I would suggest that for one person to prosper in this way another might have to suffer - these are not normally altruistic people.
Such tactics have been going on for centuries. I'd say it was much more difficult to engineer such a crisis these days, compared to say, Rothscild's manipulation of the news during Wellington's campaigns.If there any danger that those using these systems might invoke fear inducing events so they can make even more? Or am I just being paranoid?
The key thing about our current mess is that the first was induced by US givernment policy (Fanny May and Freddie MAc are both government institutions) and the second by governments over-borrowing and grandiose European ambition..
Re: High frequency trading
How would the oft-discussed Tobin tax affect this high-velocity lark? Would it set a limit on the frequency, because the margins on each individual trade get smaller as the speed increases? If the margin needs to be big enough to cover all the costs of the transaction plus the tax, and still leave something for the dealer, would the Tobin tax itself place a speed-limit on the market?
Re: High frequency trading
The Tobin tax would reduce the speed to an absolute stop. It would be an absolute disaster, leading to greater volatility and instability, and kill off the City of London as a world-leader, without raising anything like the envisaged revenue.
Just a simple example. Suppose a bank places money on overnight deposit. If a Tobin tax of say .05% were imposed, assuming 250 trading days in a year, that would result in a tax of 12.5% a year, when the rate is less than a quarter of that. So banks would not lend to each other. That's exactly what happened to cause the Lehmans collapse. Supporters claim it will raise £50 billion a year, of which about £40 billion would come from the City. The City is making emigrating noises at being taxed £2 billion extra. There is not a chance of raising anything like that sort of money.
And all this at a time when the banks are being told they have to re-capitalise! Has the world gone mad?!
Just a simple example. Suppose a bank places money on overnight deposit. If a Tobin tax of say .05% were imposed, assuming 250 trading days in a year, that would result in a tax of 12.5% a year, when the rate is less than a quarter of that. So banks would not lend to each other. That's exactly what happened to cause the Lehmans collapse. Supporters claim it will raise £50 billion a year, of which about £40 billion would come from the City. The City is making emigrating noises at being taxed £2 billion extra. There is not a chance of raising anything like that sort of money.
And all this at a time when the banks are being told they have to re-capitalise! Has the world gone mad?!