[Lazare]

"Holy shit, someone is working there way through every broker, buying ever share of Ford stock they have! ...huh, I've got some Ford stock for sale. Maybe if I quickly pull it out of the shop window, and change the price, I can make some extra cash!"

That's what it is: People are seeing the orders pour through the various exchanges, and are reacting to it. If they were seeing the orders before they hit the exchanges, that would be front running, and it would be illegal. But Nanex appears to be showing people responding to orders after they hit the exchanges, and that would seem to be legal and moral.

The moral is that if you want to buy so much of a single stock that you can't even buy it all from a single exchange, you MAY end up paying a bit of a premium, unless you're quite good at hiding what you're doing. And in this example, the purchaser was not. It's a story as old as markets.

[nhaehnle]

The question, from a society-design point of view, is whether it is useful to have a whole class of people who engage in what is ultimately a zero-sum game and therefore an arms race, and whether it wouldn't be better to design markets in such a way that a large buy order can be placed without having to be an expert at HFT.

After all, the market is supposed to be useful for organizing long-term investments. The short-term stuff is pretty far removed from the progress of society.

[kasey_junk]

"After all, the market is supposed to be useful for organizing long-term investments"

This is a very HN specific way of thinking (and probably obvious given the startup culture here) but it is not a truism. Many, many, many (perhaps most) market participants are not involved in the markets to organize long term investments. They are there to hedge risk (whole classes of exchanges exist nearly solely for this, think commodities markets).

But that is the glory of the markets. You can be a participant who is looking for long term investment, Southwest Airlines can be there to hedge risk, and I can be there to make a dime fast and we can all participate in what seems to be a zero sum game and win.

[zelos]

That's what I've always thought as well. We have large numbers of very intelligent people dedicating all their efforts to playing games with the values of real companies. It seems like a massive waste of talent IMHO.

[30thElement]

Is this comment real? You made this comment on a site that most people use to waste time, and where one of the top posts is an Assembly implementation of Flappy Bird.

Fun fact: HFT has an annual revenue ~1/50th[1][2] of Google's. What's worse: a few hundred people wasting their time moving prices of select stocks a few pennies, or several thousand wasting their time collecting scary amounts of data about you to try and get you to click an ad?

[1]http://en.wikipedia.org/wiki/High-frequency_trading#Market_s...

[2]http://en.wikipedia.org/wiki/Google

[barrkel]

But Nanex appears to be showing people responding to orders after they hit the exchanges, and that would seem to be legal and moral.

It's legal, yes, but you can't make a jump to moral so easily.

I don't think it's necessarily immoral either, but morality depends on much more - what the end results are, who is affected, what kind of effect, etc. Morality doesn't exist in the vacuum of an isolated decision.

[Lazare]

Very true! But the reverse is also true: Critics need to show that something immoral is going on. Nanex's analysis does not, to my eye, even try and make this case.