Slashdot Mirror
Australia May 'Pause' Trades To Tackle High-Frequency Trading
angry tapir (1463043) writes "The Australian Securities and Investment Commission (ASIC), a government financial watchdog, is reportedly contemplating the idea of implementing a 500 millisecond delay on trades in an effort to put the brakes on high-frequency trading. ASIC last year knocked back the idea and stated that fears about HFT were overblown. However, in a government inquiry today representatives of the organization said the idea of a 'pause' is still on the table."
Again, you have an 'average' 3 second baseline to compete against. What you really want to do is accumulate trades into a queue, have said queue stop taking new trades for some period of time, then process that queue in random order. Then there truly is no difference whatsoever between trades getting in within a quantum of the trade processing slice.
XML is like violence. If it doesn't solve the problem, use more.
This is enough to show why your idea won't work... unless you plan is really to collapse the economy. What information is major enough to allow immediate sales of stock, and who gets to choose?
Gamingmuseum.com: Give your 3D accelerator a rest.
It will work. The majority of HFT's illicit profits accrue from speed arbitrage *between* the exchanges, not from a speed advantage at any particular exchange. A co-located HFT server at an exchange sees an order, and, in anticipation of that order representing a larger order that can't be filled in full at that same inside "best" price at that exchange, trades ahead of the order by sending a buy/sell order to other exchanges faster than the original buyer/seller can, resulting in a riskless vig for the HFT trader. By delaying orders on all exchanges by 500ms, the benefit of early-access to incoming orders on any particular exchange is eliminated because all the exchanges will have 500ms of order price discovery incorporated into their SIP, the consolidated price representing the aggregate of the best prices for all the exchanges.
Add a 1% tax to all stock SELL orders where the seller has held the security less than a day.
Lower the tax to 1/2% for SELL orders where the seller has held the security for less than a week.
Lower to 1/4% for securities held less than a year.
This scheme would:
a) Raise a large amount of revenue
b) Constitute a 'use tax', kind of like a road toll.
c) Only affect people engaged in short term trading (e.g. wall street manipulators)
d) Act as a brake to prevent market volatility (e.g. the flash crash)
e) Be immediately shot down by Teapublicans asshats, so it won't happen.
Well let's say you want to buy a share, who do you buy it from? Or let's say you want to sell a share, who do you sell it to?
It used to be you'd actually have to find someone to step in and take the contra side of your transaction. That's a pain in the ass, will cost you time and money, and in the event you need to sell and everyone else wants to sell you're screwed. All of this would mean that unless you had lots of money to invest, the stock market was not for you.
Fast forward to today. We have people willing to take a position, any position. They provide "liquidity" for the market by buying the share you wanted to sell, in the hopes that they can turn around and sell it for a fraction of a cent more when someone comes along with a buy order. They actively manage their inventory of shares (yes that's a thing), and adjust prices in the event information comes out causing a large price change in the shares.
This is a service that needs to continue if you want modern markets to maintain their efficiency.
Now here's the problem. Back when the "marketmakers" were actual human beings buying and yelling at each other in trading pits one would not be substantially faster than another. But, using computers, there's an arms race for speed. If you can get a few miliseconds (or even nanoseconds) faster than your competition, you can take all of the profitable orders. This means if you plough enough money into speed, you can just own the market. In addition, because computers are so fast, your computer can make many millions of silly trades before a human trader can push the big red stop button.
Now a solution needs to come about. But, because of the need for market makers speed can't really be limited to holding onto shares for months. (Sorry). 500 ms basically breaks the arms race since it's a very easy speed to obtain. So, you can't just plough money into being the fastest kid on the block.
Stop the bullshit. You're not changing your mind, you're trying to gain a lot very quickly by gambling.
If you don't understand the implications of what you're doing, please go to the casino instead of messing up our global economy.
Video of some good progressive thrash music
There's no need to set a minimum time; what is needed is a minimum tax or fee. It could be .01% and still completely put a stop to abusive trading.
The important issue is the ratio between investors and speculators. You need speculators in the market to provide liquidity, but you don't want too many because liquidity is the positive spin on volatility. If you have too high a ratio of speculation to investment then the market becomes completely decoupled from the thing it's trying to represent and it becomes a dangerous place for investors (and companies) because they can lose all of their money as a result of something completely unrelated to the actual profitability of the company. If you have too few speculators, then it becomes difficult to buy and sell shares.
The problem with HFT is not really HFT itself, it's that it magnifies the effects of speculators on the market, meaning that you need far fewer speculators with far less capital to have a disproportionate effect on the functioning of the market.
I am TheRaven on Soylent News
The traders are the only people who gain tangible benefit from that, though. It's only their insistence that makes the spread so small, and the duration so large.
The rest of us are interested in laws that facilitate investment, you're interested in laws that let your manipulate people with less immediate knowledge of the market than you.