Does High Frequency Trading Add To Market Liquidity? Vote Here

Tyler Durden's picture

At this point it is safe to say that the world has far greater issues than simple trade scalping and a broken market structure courtesy of the few robotic algorithms that still trade, even compared to three years ago. Back than it was far less obvious that the global ponzi was on the edge every day, and that only coordinated efforts such as today's one-two punch by Jamie Dimon and his subordinates at the FRBNY could mask the fact that the stress test was never actually needed, as any time banks suffer a 20% drop the Fed would simply proceed to the New QE (pass go, and give the $200 direct to the banks). And yet, years after the flash crash, pervasive central planning notwithstanding, the High Freaks are still around, subpennying, stub quoting, channel stuffing and otherwise making a total mockery of the retail investor (at least the one who is dumb enough to put in a limit order and not split up a big order into many tiny ones). Which is simply stunning - by now, even if reading just a fraction of the hundreds of posts on the topic on this site alone of which this one may be the most encompassing, one would think that everyone, and that even includes the SEC, would be well aware of the borderline criminal, and certainly liquidity destroying (although volume spiking via churn), product that is High Frequency Trading. Apparently not.

It turns out that The Economist is actually having a debate, together with an unscientific poll (if it was "scientific" every vote would have been frontrun by some deranged subpenny algo) on the question of whether "High Frequency Trading contributes to the overall liquidity of markets." There even are formal representatives defending either side. Anyway, we urge readers, not like it will make a difference, to go here and be heard on the matter. Comments and votes can be cast here.

Remember: if the robots are losing, they will simply flash crash this poll into oblivion and all shall be well. In other words, this is another genuinely democratic vote.

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Clockwork Orange's picture

Do you agree that the Bernank is a treasonous criminal?

Select your vote below:

 

[  ]  Yes    [  ]  Yes

 

 

ACP's picture

More like...

After summary conviction, should Bernanke be:

[ ] Hanged

[ ] Drawn and quartered

[ ] All of the above

Xkwisetly Paneful's picture

Please reconcile the perpetual posts wishing for free markets-which given the current ineptitude of the SEC, the equity markets are as free as they have been in my memory,

and yet same folks advocating free markets have a problem with HFTs?

similar to the perpetual cries for an end to fractional reserve banking all the while bitching and moaning when the CME raises margins.

WTF? Want free markets or not? Want to be able to trade on margin or not?

citta vritti's picture

Spoiler alert: The wording of the motion has nothing to do, literally, with liquidity but rather, seems sadly ambiguous when peered at too closely, as I suppose one might expect from the Brits:

"This house believes that high-frequency trading contributes to the overall quality of markets."

So, an anti-HFT voter could as easily vote "yes" as "no," since necessarily HFT does contribute to the overall quality of markets, for good or ill, depending on your view. "Quality" by itself says nothing about the voter's view of the effect of HFT. Stupid gits.

Or, this may just be another example of being separated by a common language. In which case, go ahead, junk me.

Xkwisetly Paneful's picture

BTW the question itself is ludicrous,

just look at how they decimated the emini-the supposed culprit of the original flash crash.

http://www.nanex.net/Research/EMini2/EMini2.html

anything short of 32,287 down arrows on the other question will be disappointing,

so sorry for pointing out the earth is round.SEC had to go to third party data providers to investigate the flash crash, pretty much says it all about how much regulating is currently taking place where the regulator doesn't even have the data itself to investigate.

 

 

overbet's picture

I like this question better: How hard would it be for HFT to automate clearing his cache and voting over and over again? I doubt hard at all since I was able to vote many times pretty quickly by setting browser to always clear history and cahce on exit and then setting my hompage to the link. Then just open the browser, click your vote chocie, close and repeat. Thats 5 minutes effort from a non tech guy.

overbet's picture

Try to trade more than a few hundred shares of stock at once and talk to me about improved liquidity. You will move most stocks a few cents with more than 100 order displayed to the market. Its broken deliberately.

Jendrzejczyk's picture

Interesting point XP. Many have a "quaint" definition of free market. Everyone is free to do as they please including hiring math wizes to write programs that fuck everyone else in a truly free market.

In time, people (the market) will learn how to avoid getting screwed and the HFTs should lose their edge if the entire theory is correct.

Until then, play at your own risk.

Disclosure: Never bought a stock in my life and I'm a financial moron.

 

spiral_eyes's picture

free markets with no bailouts.

algos will all get wiped out in the long run; it is extremely fragile. most of the hft strategies are sophisticated forms of martingale.

ACP's picture

Really? Free markets don't include the arbitrary breaking of contracts and exchanges selling insider information to HFTs a fraction of a second before said information is made public. What about all those cancelled trades after the flash crash? Winnings are doled out to those with connections. How is that free?

After the crash of 87, the SOES was created to force MMs to honor their quotes when they didn't want to answer their phones any more. Back when there was still some sense of fairness in the govt. No so now. In fact, it has reversed course. All the new convoluted systems being introduced are to manipulate the markets or skim off other investors. Oh, but when the system breaks, they get back their money because they fucked up. How is that free?

A free market means the govt and exchanges don't have the ability to pick winners and losers.

lamont cranston's picture

I'm Homer Simpson's proxy, and he sez that if HFT makes more delicious donuts, he's all in for it. 

Marina's picture

define liquidity

Piranhanoia's picture

How about appearance of liquidity?

AbruptlyKawaii's picture

my liver says yes but only if it is colocated....

TraderTimm's picture

HFT, the herpes of the free market.

Id fight Gandhi's picture

But herpes is forever. Dis ain't

bluebare's picture

I thought everyone fractionalizes their purchases and sales to the ten-thousandths of a cent. I thought I was buying from a human. I was unprotected.  I'm so ashamed.

bugs_'s picture

I think its good news that they are asking....late certainly.  Why now?

MayIMommaDogFace2theBananaPatch's picture

Why now?

So they can front-run the connotation of the meme as the general public becomes aware?

  • War is Peace
  • Ignorance is Strength
  • High-Frequency-Battlebots are Good-for-the-Market
Lady Heather...UNCLE's picture

yes, define liquidity> I was deep underwater on todays move and (paradoxically) felt very illiquid.

Yen Cross's picture

 Y-FUCKING-YES  ( HFT dilutes bid/ask prices!)

   Markets are human! Not Sky Net! Machines don't Eat, & are not quite " SENTIENTE" yet<>

Rainman's picture

There's an HFT viper living under every rock and there are too many rocks to turn over. This is why cans get kicked....aside from valid structural excuses such as blatant point shaving and looting.

HelluvaEngineer's picture

divide by zero, bitchez

radicall's picture

Looks like people like HFTs more on an UP day than down or flat day. Look at response distribution.

 

The motion may be unclear to some ... what a Yes vs No means

UP Forester's picture

Doesn't matter.

Diebold counts the votes.

Cadavre's picture

No shit - half of those exiting TARP, according to GAO,  paid off their TARP obligations with taxpayer dollars.

In fact, when dollar debasement is munged into the payment scheme, they actually paid less. That 20 Zillion dollar gold toilet those "ladies" were buying with pre bail dollars have appreciated to twice their initial dollar purchase price - meanwhile when getting the same stack of bills every payday that are worth less with every tick that passes!

In other news, CNN reports swallowing semen reduces breast cancer risk. No wonder Sen. Lindsey Graham is staying in the closet, males in his family must have a history of breast cancer.

If there is anyone, or their girlfriend or their wife, I can volunteer my ejaculations to reduce the risk cancer, please call (not too fat, not too many pimples and not to old, will ONLY be considered).

Id fight Gandhi's picture

Restate the question I think people are voting wrong.

digalert's picture

This sounds like a California ballot question where yes means no and no means yes? WTF? I clicked the economist link and no more clear. Does HFT add liquidity? Hell yes, lots of it. Is HFT good? Hell no, these banksters are criminals and everyone knows it.

Racer's picture

It is a recognised way to 'alter' the responses to questionnaires..

you can manipulate the result purely by the way you word the question!!!

Benjamin Glutton's picture

yes

no

Do liquidity adding HFT algos result in free market price discovery?

UP Forester's picture

<-- Shoot your left foot

<-- Shoot your right foot

 

Gee, sounds good to me!

Cadavre's picture

Let's see ...

No retail traders.

No volume.

Canceled HFT price discovery orders are liquidity.

The earth is flat and Moma Cass wasn't fat!

One HFT box is trading with itself - well not actually trading - but pretending to trade for the purpose of price discovery,

I guess, if we accept that no-trade offers that are canceled until "the sweet spot" price is discovered (glory be double halalulya), in order to facilitate the one, the only lone HFT box in the universe, between games of chess, of course, may or may not buy or sale shares from, or to, itself can be called market liquidity if that's what the HFT wants to call what it's doing, then, by all means, let it call it "liquidity".

I wonder if the HFT follows CNBC's tick by tick fast money plays of the day?

They can call a dog a cat - but that don't make it so.

Let them eat semantics!

 

bond trader's picture

i totally agree. read all dont know how to vote. make it a yes or no on hft.

Schmuck Raker's picture

WTF TYLER?!

You have badly misrepresented the statement being debated:

"High-frequency trading-

This house believes that high-frequency trading contributes to the overall quality of markets."

[Verbatim from The Economist website]

 

If you hate HFT vote NO.

If you're scum vote YES.

Gromit's picture

Adds to liquidity when you don't need it, dries up when you do.

Just basically a tax on anyone reckless enough to trade stocks.

Waterfallsparkles's picture

When the Market sells off hard they beat everyone out the door by milliseconds.

batz's picture

 

 

What is the alternative to HFT, humans on telephones? I mean really, why not just have them use the telegraph, or send transnational dispatches by zeppelin? Speaking of which, I like the cut of that Bass fellow's jib, and my phrenologist said he's got the cranium of a leader.

 

 

Scalaris's picture

HFT sans algo frontrunning, as an alternative, should suffice. 

TraderTimm's picture

If we end up with "Economy 2.0" like in "Accelerando" we can only blame ourselves. I use technology to further my purposes, but I detest and abhor technology employed to benefit the most narrow group possible. It would be like inventing light bulbs that only screwed into gold-plated fixtures with a proprietary screw design.

The hell with the other folks, we can see our well-prepared feast just fine, isn't that so Giles? Now bring me my foot-stool, I have a few cigars that need smoking.

 

T-Bond's picture

Batz you're an idiot!

batz's picture

 

 

 

Maybe they would be more successful if they were smarter than an a few lines of code?

 

Scalaris's picture

I'd like to direct The Economist to Mr. Joe Saluzzi, if I may, for a more colourful critique on the current matter. 

Royal Fleming's picture

FUCK HFT's and FUCK the SEC and FUCK DARK POOLS AND FUCK . whatelse. OH YEA FUCK PELOSI,OBOOBA,BERNANK,KEITNER,and everyone on CNBS. Did I forget anyone?

UP Forester's picture

That guy that cut you off and took your parking spot at the grocery store?

toadold's picture

Why yes I believe in purchasing small quantities....of anything but stocks and bonds.  A little gold here, a little silver there, a box of 20 or 50 rounds at Wally World.  A firearm from an individual at a gun show.  Watch out for the ATF or State guy trying to sell you a non-compliant AK.