Slashdot Mirror
HFT Nothing To Worry About (at Least In Australia)
angry tapir writes "Although software-driven high-frequency trading has got a pretty bad rap (being blamed for the so-called 'Flash Crash' in 2012 for example) Australia's chief financial regulator ASIC says that, in Australia at least, it's not cause for concern. After an in-depth study of HFT in Australian markets, ASIC decided to hold off on previously considered regulatory changes (such as implementing a 'pause' for some small trades)."
Don't laugh. I had a friend who was working on doing parts of HFT in FPGA's because the software wasn't fast enough.
Austrailia has a world-wide reputation of being laid-back, easy going, and - sometimes - incredibly rational (real gun laws in response to mass killings).
But on the other hand, they keep electing right-wing governments more than willing to be trained poodles for US corporate and foreign policy.
The HFTs are paying the stock exchanges a fee to have access to faster trades. The service HFT provides is market making. When you offer to buy shares at a certain price, there may not be any sellers at any given time. HFT ensures that there is always a seller as long as your buy price is high enough and that there is always a buyer as long as the sell price is low enough.
They essentially provide a similar service as banks. Banks borrow money at a lower rate and and lend money at a higher rate creating profit with each transaction. This was seen as immoral at various times in history, but now we know this serves to create liquidity. There is always someone willing to lend you money and always someone willing to borrow it from you as long as you are ok with market interest rates.
If you don't like the non-level playing field of the NYSE, then you can simply abstain from participating in it. This stock exchange is not a public service, it is a private enterprise. It is not supposed to be fair. It is supposed to make profit for it's owners by attracting customers (traders), and one thing it has decided to do (along with many other exchanges) is give preferential treatment to customers who are willing to pay for a higher level of service.
There is an example of a purely unregulated market; EVE Online.
I play EVE. It's not a "very stable market". Goonsquad decided to attack miners in highsec. Mining is one of the main ways raw materials are generated for product generation, and when they did that, key resources to fuel starbases (oxygen isotopes, etc.) shot up massively in price. It would be the realworld equivalent of bombing oil pipelines and refineries.
As you get farther away from the main trade hubs and out into nullsec, prices can easily triple for commodities. And many alliances have policies to prevent anyone else from getting in on their lucrative cartels of freighter transports bringing needed supplies out.
But within EVE Online everyone is a professional trader, not some dude/mom/dad who just gambles some money on the stock market from behind his PC like it happens in the real world.
Like hell they are. Most people avoid serious trading because of the lack of easy access to information on sales volumes, pricing, etc, market volatility, and (unlike the real world) getting your products to one of the main trade hubs is risky. If blowing your ship to hell is cheaper than the cost of losing their ships to the police (concord), they'll blow it up. There's no jail in Eve -- in 15 minutes you're just like every other pilot again... and they'll loot your wreck and be on their merry.
I suggest that everyone plays EVE Online so that people learn about markets, about logistics, about profit per hour (just profit is for noobs).
And I'd suggest they play it to understand why government regulation and military protection of traders and merchants leads to vastly lower costs to society, and to see first hand how far the effects of market manipulation can travel.
And you're leaving out another critical component of Eve that isn't at all like the realworld: You're never sure who you're trading with. Identities can be traded, and because of this, and the interface mechanics, you can be buying supplies from your enemies one day, and selling arms to them the next.
And all of this "free market" love makes people incredibly distrustful, very manipulative, and economic power equates directly with military power. And what's more interesting... the distribution of wealth looks pretty much like it does in the United States: 1% controls over half the total wealth in the game... and that 1% can be very petty, self-centered, and short-sighted. Kings and kingdoms alike are created and destroyed every day -- there is no stability. In nullsec, you always have an exit strategy... a way to burn your assets and get out quick, because if the enemy doesn't fuck you over, your would-be kings claiming to be on your side will.
Eve is the wild-wild west, seen through the lens of a hundred spreadsheets. When it's a game, this can be fun. When it's real life... do you really want to go to bed one night and wake up the next with your house on fire and your neighbors looting each other, you, and everything else as the next Great New Power rolls in? Because this is a frequent occurrance in the game.
#fuckbeta #iamslashdot #dicemustdie