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Under the headline, "The Wolf Hunters of Wall Street", The New York Times Magazine is running this review of a new book. It tells a long story that ends in the creation of IEX (Investors Exchange), a new stock exchange with the intent of bypassing the unfair advantages that co-located high-speed traders currently have. After a few weeks of operation near the end of 2013, their volume was larger than AMEX(!!)
Here's a quote from near the end of the book review:
IEX had made its point: That to function properly, a financial market didn't need to be rigged in someone's favor. It didn't need payment for order flow and co-location and all sorts of unfair advantages possessed by a small handful of traders. All it needed was for investors to take responsibility for understanding it, and then to seize its controls.
"The backbone of the market," Brad Katsuyama (President & Chief Executive Officer, IEX) says, "is investors coming together to trade." While the article is long, I enjoyed the story. I have no connection to this company, but here's their website.
(Score: 1) by monster on Wednesday April 02 2014, @12:56PM
A parasite, even if it doesn't a lot of harm, is still a liability. Put another way: If a thug robbed your house but only got a few dollars, would you feel the need to encourage robberies because it opens up new ideas and strategies in home security?
Would you like to experiment with HFT? Fine, start a new experimental exchange. Doing it in normal exchanges is akin to develop software directly against production servers.
(Score: 1) by khallow on Wednesday April 02 2014, @05:44PM
A parasite, even if it doesn't a lot of harm, is still a liability.
Only to those who don't develop protection against the parasite.
If a thug robbed your house but only got a few dollars, would you feel the need to encourage robberies because it opens up new ideas and strategies in home security?
Home security is pretty well tested. HFT works so well because there are a lot of big traders who aren't trading securely. If that same situation existed in homes where a thug could steal a few dollars from thousands of homes simultaneously but otherwise there would be no incentive to develop secure homes, I would have to say yes, we need the robberies in order to develop the security. I would apply the same logic to most modern malware as well. It helps protect us against the more dangerous stuff out there.
The parasites will exist anyway. But in this scenario, the parties susceptible to those parasites will develop defenses.
And that's based on the assumption that HFT is just parasitism. When you take into account the benefits such as liquidity and new technology/math R&D it adds, this accusation doesn't make sense.
(Score: 1) by monster on Thursday April 03 2014, @02:35AM
So, the old "they were looking for it!" argument.
(Score: 1) by khallow on Thursday April 03 2014, @10:03AM
So, the old "they were looking for it!" argument.
You decide whether it's important to you or not that your pension fund is "looking for it".