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)."

Comments

HFT

[girlintraining]

HFT isn't a system stability problem as much as it is an access problem. What it does is increase the cost of entry into the market -- those who don't engage in HFT wind up paying for those who do, and so it winds up penalizing people with smaller portfolios and shifting the costs of it onto them. What you need to understand about profit is that it is always at the expense of someone else. And HFT is the sublime example of how to nickle and dime the less fortunate to death. These fractions of a penny here and there add up because it gets compounded by interest rate. Over time, the spread between those who have it and those who don't will grow; As is the trend in any investment-based system.

Re:Sometimes I think *de*regulation is the answer

[girlintraining]

If the official rules stated "HFT is totally *un*regulated --- feel free to run your buggies, most insane, glitchy, and flawed HFT software" --- immediately all the other HFT software systems would be coded to watch for crazy non-justified buying&selling.

I love magical thinking like this. It keeps me employed. In other news, "too big to fail." Businesses don't pay for their mistakes: You do. That's the reason for regulation... it's to assure a baseline level of sanity... so when they screwup, they don't do it so badly that they take the rest of us with them.

Re:Screw The Big Traders

[swan5566]

"They amass billions by siphoning it away from the majority of people in the market, and in return give us nothing of social value."

How are they "siphoning" anything away from a majority of people?

How are they giving nothing in social value? The money these people make they spend on other business ventures, familial needs, education, healthcare, charity, do you have any evidence at all that this money is going into a black hole of sorts?

I thought not.

So would the guys a few milliseconds behind - that isn't a relevant point. And that's not even what the parent was referring to about "social value". They mean about giving a sense of "worth" to publicly traded companies, which compels them to make sound business decisions. And the "siphoning" refers to a lack of a "level playing field", which is the reason we have laws against monopolies, price-fixing, etc...

Re:Screw The Big Traders

[Hatta]

How are they "siphoning" anything away from a majority of people?

Easy, the value they extract through arbitrage would otherwise be retained by the parties making actual trades.

How are they giving nothing in social value? The money these people make they spend on other business ventures

So do any other sort of theives, what's your point?

Re:Screw The Big Traders

[Hatta]

The HFTs are paying the stock exchanges a fee to have access to faster trades. The service HFT provides is market making

If that was a valuable service, the stock exchanges would be paying the HFT guys, not the other way around.

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.

It's still immoral, despite creating liquidity. There's absolutely no reason we couldn't create all the liquidity we want with non-profit, publicly owned financial institutions.