[gnaritas]

I'd say you don't really understand what you're critiquing; you think those things are bad because you heard they were, from someone else who likely doesn't understand it either. There's absolutely nothing wrong with short selling or high frequency trading. Short sellers help keep prices fair and companies honest, HFT makes trading cheaper for everyone.

The markets are worse without them, the market was worse before HFT which is the only thing new here, trades used to cost way more due to wall street middle men taking a big cut of every trade, far far bigger than HFT's take now. The only people who have a logically valid reason to hate HFT are the old school manual traders who were displaced by them and can no long make a living trading chart patterns. As late as the 70's and 80's there were people getting rich with strategies as stupid simple as buy the 10 day high and sell the 10 day low. Those people hate HFT, it took away their cash cow.

HFT is a sign of a healthy free market, better traders came in and offered to take your trades for far less money than the manual traders could, and took over; that's healthy competition, and they competed with each other driving the prices lower and lower until they hit the penny. Now they all fight over that penny to see who can be fastest because congress won't let them compete on price anymore (the sub penny rule) so they compete on speed instead.

[pdkl95]

> I'd say you don't really understand what you're critiquing

I'd say that you are assuming that optimizing for price is good, and presupposing how a market should be judged. Cheaper is good when it represents new innovation, less energy waste, and similar improvements. Cheaper can also mean cuts to wages and jobs, or a reduction in quality.

> There's absolutely nothing wrong with short selling

Leverage can be used for good, and sometimes it's used irresponsibly. As this thread's article demonstrates, short selling also creates systemic risk.

> trades used to cost way more due to wall street middle men taking a big cut of every trade

Eliminating middlemen and/or reducing transaction overhead costs do not require high frequency. You're seeing effects of technological improvements and better regulations. The same improvements also benefit "slow" trading.

> chart patterns

> getting rich with strategies as stupid simple as buy the 10 day high and sell the 10 day low

"Buy low, sell high." is the foundation of any successful trading strategy. HFT (when successful) is literally the same thing at much shorter time scales and improved heuristics. Machine learning can probably provide more detailed at a much finer-grain than a simple 10 day sliding window. Again, this does not require high speed.

> HFT is a sign of a healthy free market

It tells you little about the health of the market; HFT is a sign of a market uses short-term transaction ordering heavily when reconciling trades. It's entirely possible to have a healthy market batched trades that all execute at the same unified price.

[gnaritas]

> I'd say that you are assuming that optimizing for price is good,

No, capitalism assumes that. HFT traders offer a product to the free market, they sell liquidity and they do it cheaper than their old school competition, there are willing buyers, that is the only justification they require to exist.

> Leverage can be used for good, and sometimes it's used irresponsibly. As this thread's article demonstrates, short selling also creates systemic risk.

Leverage and short selling are different issues, that leverage can be dangerous is not a valid critique of short selling, you're trying to move the goalpost, this is a fallacious argument.

> Eliminating middlemen and/or reducing transaction overhead costs do not require high frequency.

No one said it did, however HFT does do that, which is what was claimed, so again, a fallacious and baseless critique.

> "Buy low, sell high." is the foundation of any successful trading strategy. HFT (when successful) is literally the same thing at much shorter time scales and improved heuristics. Machine learning can probably provide more detailed at a much finer-grain than a simple 10 day sliding window. Again, this does not require high speed.

Again, baseless critique, no one said it required HFT. HFT trading sells liquidity cheaper than those old school simple traders, the market chose HFT.

Do you have any actual critique of HFT, or do you simply presume it's bad and then employ fallacious arguments that X doesn't require HFT? You quite literally have added nothing to the conversation. That it's possible to have a healthy market without HFT is irrelevant, it asserts HFT is bad without evidence, HFT traders have the same right to trade that anyone else does, you don't just get to ban them because you don't like them without cause. That something still works without HFT is not evidence against HFT any more than the fact that I can still travel without a car is evidence against cars.

[rsync]

"Leverage can be used for good, and sometimes it's used irresponsibly. As this thread's article demonstrates, short selling also creates systemic risk."

What critics of short selling are often unaware of is the role that short holdings play in dampening a market crash.

The act of unwinding your short position involves buying the stock which means that for every tick downward in stock price there is new upward pressure on the price as buyers step in to cover their short position.

Were these constant, ready buyers not extant, market downturns can turn into precipitous crashes very quickly.

[pdkl95]

I should have used more specific language; I'm not trying to argue that short selling is "bad". The benefits - such as dampening a crashing market - are large enough to accommodate some risk. I'm primarily addressing the claim that, "There's absolutely nothing wrong with short selling". Ignoring small, acceptable risks is normalizing deviance[1].

[1] https://www.youtube.com/watch?v=PGLYEDpNu60

[the_mitsuhiko]

There are plenty of people that have legitimate concerns about HFT or rather the mechanics they promote (frontrunning trades in particular).

[gnaritas]

HFT doesn't front run trades, that's a misconception and really just a way to slander HFT as evil. Calling their misconceptions legitimate is an abuse of language. Front-running is a crime, it has an actual meaning and you are misusing the term. Front-running is when a broker buys or sells using advanced knowledge of trades they're making on behalf of their clients, i.e. it is risk free and is theft. HFT does not front run their clients, they attempt to trade faster than their competition at risk, these are vastly different things and to call HFT front-running is dishonest slander.

There are no legitimate complaints against HFT trading that aren't simply misconceptions about what they do or how markets work.

[the_mitsuhiko]

Then call it what you want. It's running in front of other trades just that you do it on arbitrary trades and not the ones of your customer.

[gnaritas]

No, front running is risk free because it uses inside information, that's why it's illegal. Trying to trade faster than someone else is not risk free, requires guessing, is gambling, and is not illegal, and is thus not front running. What you're claiming is simply wrong. So please do explain why you think HFT is doing something wrong. It doesn't matter what we call it, you're claiming HFT is doing something they are not doing, they are making educated guesses and trading on that guess, same as any other legitimate trader.

[the_mitsuhiko]

There is no risk involved in HFT frontrunning. There is however an investment cost for having lower latency connections than others. There are no guesses. And not sure how what I'm claiming is wrong. This has been the entire reason why IEX exists.

[gnaritas]

> There is no risk involved in HFT frontrunning.

False. If there were no risk, it would be illegal, and your'e still tossing out that incorrect term without explanation as to what you mean by it since you clearly can't mean the illegal practice of front-running that we've already agreed they aren't doing.

> There is however an investment cost for having lower latency connections than others.

Not relevant.

> There are no guesses.

False.

> And not sure how what I'm claiming is wrong.

Because it's simply not true. Once again, you've ignored my question, you still cant' explain what HFT's are doing wrong, my guess is because you don't actually know what you're criticizing so you toss out flash boy hyperbole like front-running without actually being able to explain what you mean.

> This has been the entire reason why IEX exists.

The IEX exists as a reaction to traders who were displaced by HFT creating a desire for an exchange that doesn't allow it; it in no way proves HFT is doing anything wrong. It's nothing more than marketing capitalizing on fear to establish a new exchange, perfectly legal, but it doesn't make the irrational fear against HFT legitimate.

[tnone]

Healthy competition optimizes for value, HFT is just optimizing for profit. These are not the same. It's paperclip maximizing, using an economic Maxwell's demon.

[gnaritas]

> Healthy competition optimizes for value, HFT is just optimizing for profit.

Value is measured by profit, if what the HFT's were offering was of no value, there would be no profit in it as no one would buy their liquidity. HFT sell liquidity, that there are willing buyers proves their value. Quite simply, you do not know what you are talking about.

[prostoalex]

> HFT is just optimizing for profit

And low-frequency trading isn't?