[caffeine]

Your idea is right but the timescale is much shorter. Essentially it's a race. And in 2014 you could make good money doing exactly what you described, the timescale was millis. In 2016-2017 even more money, but different venues.

What you are describing is the most basic, canonical form of latency arbitrage.

That idea is implemented widely in the HFT industry across all sorts of products, not just crypto, with billions spent on trading the information faster

(Source: this is my job).

[andrepd]

Honest question: do you feel comfortable knowing that your job is doing something which is essentially net zero value to society? Negative in fact, you're burning resources which are needed elsewhere, and contributing to concentration of wealth.

Not being rude or judgemental, just want to know how you feel about this.

[caffeine]

Short answer: I am comfortable with my job.

I think your question makes some incorrect factual assumptions, but also it incorporates a world view that I don't subscribe to (not wrong, but also not what I believe).

I think that if I had your belief system and your set of facts, I would probably feel uncomfortable about it.

[andrepd]

The world view is simply that this technology arms race performs no useful work to society. It's simply people with capital investing enormous sums into gaming a system and extracting $$. Okay, this so far is not even a view, it's just how things are. The "view" is that it is wrong x) Much like one could argue that e.g. the yacht industry diverts resources and people from other more pressing needs.

As for "my" set of facts... well they're just facts :) not "mine" or "yours".

[qw3rty01]

This is a pretty loaded question to then say "not trying to be judgemental"...take out the bias if that's actually the case: "What kind of benefit do you believe your work provides to society?" or "How do you justify the extra resources taken away from society that may be more beneficial elsewhere, such as X?"

[andrepd]

Well I don't know how to make it less loaded x) It's just how things are, it's a work that does no useful work in any meaningful sense, but serves to make some already fabulously rich people even richer (in fact, it extracts that value from non-HFT traders, so even those are shafted here).

My point is that I'm curious regarding how the people who work in these things feel about their job. Do they think they're doing a right thing? Do they "own it" to themselves that they don't care as long as they make money? Do they not think about it too much?

[sbeller]

> (in fact, it extracts that value from non-HFT traders, so even those are shafted here).

in return HFT provides liquidity (and by that smaller spreads) to the market, I would think.

If you ever bought or sold a stock with a market order, you profited from the work the HFT is doing.

[logifail]

> it's a work that does no useful work in any meaningful sense, but serves to make some already fabulously rich people even richer

Isn't Robinhood able to offer free trading to customers solely because they sell their order flow on to, among others, HFT firms?[0]

[0] https://www.cnbc.com/2020/08/13/how-robinhood-makes-money-on...

[MockObject]

The abstraction of "society", that is presumably supposed to benefit from everyone's job, is hiding the crucial details.

His job facilitates trades between people who want to trade with each other. Since they are part of society, our society benefits from his work.

Evidently it's doing more than "make some already fabulously rich people even richer", because it's paying salaries for some programmers, as well.

[wizzwizz4]

I'd argue that “how do you justify” is more loaded. “Do you feel comfortable with [objective description of the reason one might be uncomfortable with it]?” is better than how I'd ask it.

[KittenInABox]

Intuitively, providing more flow + allowing more efficient allocation of resources via algo is pretty valuable to society. Problem is that society is squandering that efficiency.

[wizzwizz4]

The stock market is about allocation of profits, and high-frequency trading is about extracting profits from the profit allocation system. This isn't investment we're talking about; this is the stock market.

[IgorPartola]

Thank you. That makes a lot of sense. The problem was that I was doing this on my residential cable connection from the US and the exchange where I was executing trades would be in Eastern Europe. The ironic thing is that even back then I had a good idea of how to set up communications with a server like theirs to be significantly faster but it didn’t occur to me that milliseconds mattered. A typical trade if they executed it almost instantly still took 300ms. And they didn’t execute instantly so it was closer to 2 seconds more likely than not. Out of curiosity, what are the fancy examples of this vs this simplistic one?

[caffeine]

Trading the same product on two exchanges is the most basic one because you know it's the same product, so correlation should be 1, assuming the cost to transfer between exchanges is zero. Example is arbing US equities.

Crypto is one level more complicated, because you don't share inventory across exchanges and transaction costs are high, which means a coin on Exchange1 isn't perfectly fungible with a coin on Exchange2.

One level more indirect than that might be basis trades, where you trade a derivative ( like SP500 futures) vs it's underlying (the SP500 stocks, although in practice it's SP500 ETFs). So here the correlation is very high but there is a difference between futures, stocks, and ETFs fundamentally, and those play into the pricing.

Going even further might be trading correlated products that don't have the same underlying, example is Nasdaq futures vs SP500 futures.

To simplify: It's basically about the level of correlation between the products. The strategies used to trade different correlations look qualitatively different.

[IgorPartola]

That makes sense and sounds pretty interesting. How “exciting” is this field in terms of innovation currently? Is it mostly about getting high level access to exchanges to speed up trading (which presumably requires paying your way in), or is it more about finding novel signals and ways to use them?