It's quite a statement. You're almost saying capitalism and efficient markets are pointless. Maybe they are, but I think it's nothing like crypto.

In the old days before HFT, you weren't sure you'd get the best price. You'd have to rely on a broker to make sure that happens, but as a retail trader you generally got a worse price/out of date price.

Nowadays with HFT you can get pretty much the best price anywhere. Those <1ms HFT traders make that happen. It's the efficient market hypothesis in effect, made possible by HFT.

Now is it pointless to shave off even more ns in the all out war to grab a piece of the order flow? For retail and institutional investors, at a certain point, yes it's completely pointless.

But it's also just pure capitalism at work. HFT firms compete against each other, and the competition is about speed to provide the best price and volume. If you try to regulate with something like enforced delays, then what do you compete on instead?

> You're almost saying capitalism and efficient markets are pointless.

Capitalism necessitates efficient markets (and efficient markets necessitate HFTs) so any criticism of HFTs is a direct criticism of capitalism as well. I mean this isn't really a problem that's specific to HFTs -- there are just a lot of jobs that we can perceive as providing no value or even negative value (jobs that are possible specifically due to capitalism e.g. payday loans, 2008 style trading, certain scams or predatory practices etc.)

I think we can all agree that this is a flaw, and we're not criticizing capitalism to replace it with something else, but rather just recognizing this as a problem. At the end of the day, a useless job is a useless job even if it exists solely because of capitalism.

To me what feels wrong is that millions of dollars of profit can be extracted from the system through such nanosecond fiddling.

It feels like there would be a lot of incentive to keep an inefficient system in place in order to keep the grift going, and a lot of convenient excuses available for why something better isn't possible.

>You're almost saying capitalism and efficient markets are pointless. Maybe they are, but I think it's nothing like crypto.

People are saying this because, HFT sounds similar to 'crypto mining'. That's people with best infrastructure, the 'big-guys' -- win. While leaving out the retail investors as broiler chicken, pumped with 'drugs' (by influencers) to spend more on imaginary assets, so that they can be used for 'food' by these 'big-guys'.

There are different influencers for retail investors vs crypto. In retail investing there are promises of 'retirement paradise', actual tax deductions, the Jim Cramer-like people (at least what I heard in US)

For crypto investing the influencer are different, the geography is wider. A promise to participate in markets if you do not live the country that has adopted US/UK-based financial services.

- - - By the way, I think the markets will still have liquidity if there is a rule to wait, for say, 30 min before a stock that was just recently bought -- can be sold (unless by a clear fat finger mistake)

This rule will cause the HFTs to stop existing in the current form.

So are retail investors truly no different from the people gambling their money on the lottery at the 7/11 every night?

Do any regular pedestrian middle class retail investors EVER actually earn enough to retire on? Or do anything meaningful with? If so.. what is THEIR secret sauce, since it's not HFT...

There are probably 3 classes of Retail investors

a)Members of political elite that get insider trading stock tips. (illegal of course). The number of folks in usa congress and senate that become 'very lucky' investors after they join the rank, has to be amazing

b)Lucky

c) everybody else -- that looses.

Overtime, I would say last 30 years, the amount of 'influencing' retail investors to trap them into unreasonable actions had gradually increased.

So the percentage of folks going becoming the victims of the charade, will become higher.

Certainly if you concentrate on ( b ) you create the plausible deniability defense for the manipulators

> efficient markets are pointless

You are profiting off workers as a middle man in the economy by doing HFT, and trying the justify it by some vague concept of the "correct price". You are producing nothing of value, merely taking away value before someone else notices it is there.

Just think about what you said. "There is no value in a middle man". Do you only purchase goods from the person who made it?

Our entire economy runs on "middlemen". Convenience has huge value to most people.

And like crypto, feel free to ignore it instead of making things you don’t like illegal.

Dont make scams illegal just because you don't like them!

Should it be illegal to be a fool?

Which part of consenting individuals choosing to use their money how they wish is a scam?

I hope someone steals from you and police ignores you.

Which part of consenting individuals choosing to use their money how they wish is stealing?

HFT provides a great deal of liquidity and efficient pricing in markets that are adapted to it. It provides a real service, allowing people to transact without using a large bank or broker efficiently on an open market. The fact you can click buy and it buys on almost any stock is likely due to a HFT on the other side. That may not mean much to you directly but it does provide a lot of utility in markets. The biggest gripe people bring about HFT is it during high volatility HFTs usually pull out of the market at a time when people really value the increased liquidity. I think some of the more advanced HFT firms though have moved into longer time range trades which helps provide more liquidity in those markets.

My understanding was that HFTs make the most profits during periods of highest volatility. Why do they pull out?

Depends on their strategy but a lot of strategies depend on some sort of price discovery which requires having a probable estimate of what the current price should be and some form of market making around the level. In a very dislocated market the price is unknowable and it becomes gambling, and generally market making strategies are explicitly not about gambling but about facilitating trades around the “true” price.

Nonsense - what could be more beneficial to society than providing imaginary "liquidity" by interposing yourself between legitimate buyers and sellers?

It's a bit like stock brokers - and why wouldn't we want stock brokers to operate at drastically faster-than-human timescales, because we all know the value of a company changes every nanosecond! And "flash crashes" create opportunities for investors to make huge amounts of money!

And just as crypto has poured money into GPU companies, HFT has poured money into networking companies.

Short of creating the great firewall or helping governments slurp up all the traffic on the internet, what could be a more beneficial application of network technology?

HFT (like finance in general) has also gobbled up lots of tech grads, making it easier to find jobs at tech companies.

> Nonsense - what could be more beneficial to society than providing imaginary "liquidity" by interposing yourself between legitimate buyers and sellers?

Now when I say the same thing about index funds people get all huffy

It's similar, though in theory you are paying the index fund to act as your agent, and the fee structure is observable.

Regarding liquidity, I imagine it's possible that the index fund might allow you to withdraw money faster than you could sell on your own, but realistically I kind of doubt it.

forget index funds, you could say the same thing about supermarkets. Pointless middlemen!

They are in the logistics and goods storage business. So you actually can't say that about supermarkets.

The classic theory of longer term investing is that you are providing capital to businesses and rewarded for that. That is a little bit different from being a middle man. My personal opinion though is that lending money/investing capital and capitalism in general is power. Money quantifies the potential of making other humans do things for you, it allows you to excercise power over fellow humans. Inheritance means you can inherit that power from your parents. It's not all that different from feudalism.

It may seem so at the first glance, but such trading if carried out by many independent providers actually increases the liquidity if the market for everyone else.

Likewise with crypto. Personally I don't think that if you're calling an API over an Internet it matters if your trading bot is written in go or python (mine was in python). Use the language you're most comfortable in. The network and trade submission/execution at your broker will be 10x slower than your bot anyway. Unless the size of your operation approaches the size where you can get direct market access which seems to be reserved for big forms only.

"increases the liquidity if the market for everyone else"

That's just it. The whole premise is pretty absurd. The market, the actors, everything. It's so far removed from literally anything remotely human. It's the financial equivalent of an infinite sea of AI bots producing CVs and research papers which are only being evaluated and read by other bots.

If you step away from it all for a second, what the hell is the endgame of this whole hustle.

I mean, efficient allocation of capital is the overarching goal. HFT is either a facilitator of that or a perverse byproduct, depending on who you ask.

At any point in time yes, this is an accurate description. When you integrate over time it’s not. At the end of the line it’s people betting with advanced tools for execution of their bets. Behind the mathematical beauty of risk free and arbitrage, there is a reality of someone, somewhere making a bet at end of a line of contracts. And there is also someone making the opposite bet. Markets are not disseminating information but beliefs as a proxy for information, and as such they are much more human than you would think. The end game is a network of beliefs, livelihoods, politics and petty or grand aspirations, the same mess as in any organisation. The only reason you question the futility of this one specifically is that it’s a clean room abstraction of the futility embedded everywhere. I would call it futility as a service.

Your analogy isn't applicable here. What the OP was trying to get at is that even an individual who doesn't know anything about markets, HFT, liquidity, etc can still benefit from high liquidity from HFT (since it allows for transactions to occur sooner and quicker). In the AI example, the implication is that the final product isn't benefiting consumers.

An individual who doesn't know anything about markets should not be trading, nor would they care about liquidity in the slightest.

It was always the only end game. AI on quantum computers is the ultimate computing technology — basically the final research technology in our made up little game of Civilization.

Anytime you create technology that sufficiently replicates the creators, you end up with the spirit of the creator embodied in the technology. So, of course digital brains are going to do weird things like crossword puzzles and sodoku at scale, because it's the same kind of useless shit we do to entertain ourselves.

You get into this conversation whenever you dive hard into cyberpunk, which is so many, many things. Even the Internet itself started out that way. The endgame started as a game, and it will end up being a game, played by our creations as odd mirrors of their creators.

I think there's a lot of people who subscribe to doing the same thing to save the planet, of which I have a keen interest. Solarpunk is the name of that movement, and it also has similar crazy ideas.

We're inventing digital brains. It's literally an architecture designed to be removed from being anything remotely human as it's a mimic or replacement technology for intellectual capacity.

If you really take a step back, the endgame is crazier than just bots producing content merely for other bots to consume (which basically describes the vast majority of scientific papers these days too, ironically). When you take that absurdity and multiply it by tens of thousands in terms of efficiency, the whole system we're building looks WILD and almost inconceivably strange to the way we do things now.

I know this is only tangentially related, so I appreciate your understanding that I already understood that and wrote this anyways. :)