I agree- I really wish there wasn't such a stigma against, as you phrased it, "five-dollar words". I love reading older writing because (maybe without the internet and things like /r/iamverysmart?) they seem drastically less afraid to say exactly what they want to, in the way they want to.
There's also an anachronistic charm to them I guess, but I think the word-choice-freedom is still a big factor.
to be fair, a good portion of /r/iamverysmart is not just about using fancy words, but also about misusing them or using them to present yourself as better/smarter than other people
>“These studies were based on really hyperactive young white boys who were taken to clinics,” Littman says.
I don't really get what lines like this are supposed to be getting at. Why is race mentioned here at all? I'm now left wondering if there is also some effect of race on ADHD symptoms, in which case I feel like the quote was not really used honestly (used partly out of context- how much of this is due to gender and how much to race?) or whoever said the quote spoke incorrectly because they felt that the young boys also being white would drive home their point more.
Brain stuff is influenced by genetic makeup as much as any other health condition. Many health conditions present with different effect or prevalence in different racial sub-populations or between the sexes.
It's meaningful to include race if it was a factor, because she's saying it was a predominant trait in the study populations on which the diagnostic criteria were originally built.
If you don't study an effect in different populations to determine the universality of your criteria, you could very well be under- or over-diagnosing persons from those groups.
The article uses the term "front-running" incorrectly. Front-running is where a firm places their own trades ahead of trades they're placing for a client, to capitalize on the price movement that client order might generate. This is illegal.
What the market makers in the article are doing isn't front-running. It's just being smart with their orders.
And that's generally why HFTs cancel orders- they're reacting to market conditions that exist on the span of microseconds and will want to change their market positions very quickly- including canceling orders that they no longer think are suitable.
Agreed. Matt Levine is one of the few commentators that fully understands market microstructure. The Bloomberg View linked in a different comment (by John Arnold) is horrible with terminology, though.
Scare quotes are also bad composition. Since the author is the author, the author should word concepts correctly and take full responsibility for word choice.
Not only that, scare quotes are often used precisely to misrepresent an idea and then avoid responsibility for it, which seems like a pretty dishonest rhetorical strategy to me.
He's technically "not lying," but many people won't notice the footnote nor appreciate the difference. All they will hear is "front-running == should be illegal"
Ah, I read that but didn't parse it as the author trying to make the distinction between (misnamed) "front-running" and actual front-running.
Probably still worth pointing out, since one of the activities is illegal and harmful (uses non-public information) and the other is just reacting quickly to the public market information.
I subscribe to his column and I've read his criticism of Michael Lewis/IEX, so his snark is obvious to me. But I can see how this article in isolation might not convey that.
'[...] man, remember when "front-running" meant something? [...] But then came "Flash Boys," [...] And now, basically any time anyone trades on public information before someone else, it's "front-running," [...]'
I've seen this type of behavior described as "order anticipation", which I think is a much better term. "Front running" means that you are using confidential information that an order will be submitted. "Order anticipation" means that are you using public information and you are anticipating that an order will be submitted.
One of Matt Levine's consistent themes though is that there is often a very fine line between 'just reacting quickly to public market information' and illegal insider activity, so the scare quotes may be intended to imply a degree of 'you decide if you think this is completely above board'.
No, there is rarely a fine line. It's a very obvious line of "are you trading on information on the market". An HFT doesn't even have the ability to front-run unless they are also providing a brokerage service.
It's worth remembering that HFTs like yourself define front-running differently than others.
Others often (rightfully) feel that HFTs who engage in latency arbitrage where they take advantage that everyone else is using the NBBO (because they have to), and the NBBO is lagged, are front-running assholes who extract value without creating anything.
And we refer to that thieving, predatory, value-stealing activity as 'front-running', even though technically you're engaging in a slightly different activity.
Well, except in the industry, front-running has a precise regulatory definition.
It doesn't help the conversation to start using the name of a crime to describe something that's legal but you don't like (even if you think it should be illegal, but agree it doesn't fit the legal definition of the named crime).
I don't like that back when rape and pillage on the high seas was a large threat, some copyright holders were able to convince people to start calling copyright infringement "piracy". I don't like our current tendency to over-label things as terrorism or exaggerate the role of narcotics smuggling in financing Islamic terrorism. I also don't like labeling reacting quickly to public information and reacting to expected orders as front-running. I think it's a cheap trick that harms the quality of the dialogue.
I hope you understand that the thievery has been happening for centuries, millennia. There is no other way to gauge real supply and demand than to put buy and sell orders into the market yourself. HFT is doing at ultra-high speed what human market makers do all day long, and have been doing forever.
Now, possibly rightly, market makers in general, through the ages, have had a bad rap. They are indeed trying to get more information than the average joe, with very clever, and risky, techniques (see below) and skimming him after having done so. Nevertheless, you must remember, that without these people/machines taking these risks, you would not have a continuous market in which to trade. You'd have a much more stepwise price action and much more risk. They're providing s service.
Perhaps most controversially, being a good market maker means having some capital, so that you can wear a loss which is entirely possible during your price discovery. Thus, market makers who make money, inevitably already have money. This doesn't help their cause.
But the idea that HFT per se is the problem is wrong. If you don't like HFT, you don't like finance, period. That may be a legitimate view, or not, but the two are inextricable. They are not different one from the other - HFT is simply Amazon doing what Barnes and Noble does, more efficiently (without the monopoly aspects - HFT is fiercely competitive).
I agree. I've always thought of HFT as a way to let liquidity flow between exchanges, with a payoff equal to the degree to which the inter-exchange spread has been decreased. If the inter-exchange spread is wide, there is some value to be extracted from that spread, and HFT provides the (in my opinion) valuable service of extracting that value, making the market more efficient as a whole. The more people that are competing in that market, the smaller the value the HFTs can extract, until the actual market participants on the exchanges are only paying fractions of a penny for the privilege of buying shares "originating" from another market that has higher liquidity. I can't really see how this could be a bad thing (given enough competition).
For the incredibly small minority of people who can engage in it, and who enjoy special rules, maybe. For the majority of the people who's money is actually extracted by this system, it's an exclusive club.
> Without HFT, bid offers would be wider. Fact.
The majority of people who just want to save for retirement would prefer wider bid offers instead of having such a large chunk of money extracted from their future bank accounts. Fact.
The other reason why HFT is non-competitive is that you cannot go and start a market with your own rules without being deeply in bed with the government and the financial status quo. HFT is forced down our throats by a system that calls itself capitalistic but thrives on enjoying custom-made loopholes in heavily-regulated statism.
At what point in the history of the public markets in the United States was market-making of any sort not an activity reserved for an incredibly small minority?
The difference, from what I can tell, between the HFT "elite" and the human market-maker "elite" is that the human elite actively colluded to retain their status. Compare the largest HFT firms to the largest investment bank, and the number of entrances and exits in the market for electronic trading firs.
There are market makers, and there are Market Makers. In practice, the registration may simply be a formalization of an existing trading system, or a very light obligation on top of the existing system.
From the document that you listed, it looks like NYSE Arca has a requirement for 100% continuous quoting, but the quotes can be 8% away from the current market price (section 7.23.a.1). This is basically a free pass; nobody wants to trade against a quote that wide. For reference, take the most liquid ETF: SPY trades above $150 and regularly has a $0.02 spread, one THOUSAND times tighter than the 8% requirement.
On other exchanges, there are requirements for tight quotes, but they usually come with relaxed requirements on quoted time. For instance, maybe a market maker could be required to quote "90% of the time within a 0.5% spread". In such a scenario, allowing market makers to pull quotes for 10% of the day is basically giving them a free pass on the most volatile points of a day.
I have seen very few situations where registered/designated Market Makers are obligated to suicide themselves to provide liquidity; there's usually an "out". In practice, the top-tier HFT market makers (de-facto) are already exceeding the obligations required of Market Makers (registered).
Retirement savers are not churning their portfolios and are thus not paying anything to HFT. Not a strong argument.
Making money making markets takes risk capital. i.e. Money. The money makes more money. Fact. I agree. But don't blame HFT. Blame finance. That is how finance works. I see a completely legitimate case for being anti-finance. I don't see a legitimate case for being anti-HFT only. Indeed, the opposite, if HFT reduces the bid/offer paid by the average retail investor. Which it does. Fact.
Do you know who hates HFT even more than the general public? Human market makers. I think that says more than any of my arguments.
Retirement savers are losing a cut of every paycheck to HFT when they go and add to their account. Likely multiple cuts if they've diversified. It's basically a tax you pay for not having the best access to the fastest server closest to the database.
HFT on average narrows the bid offer. Retail (i.e. small) investors benefit. Human market makers lose out. Without HFT your little old lady retirement angel would be paying much more to a rapacious human market maker.
The point is that it is not the end users who are getting hurt. It's the old monopoly - the human market makers.
It's not a tax, it's the price of immediacy. You can either work your orders yourself (which doesn't in the least require speed), or you can pay a concession. It has always been this way and always will. HFT has made that concession the lowest it has ever been for the vast majority of market participants.
If we're going to arbitrarily redefine terms, why not go with carpet-bagging? Or baby-mulching? Think how many more people would join you in opposition to "baby-mulching HFT".
When Matt Levine includes anything in quotes, assume it's snark. He's written lots about "front-running" being, innaproporatiedy, a catch-all term, much like HFT itself.
I always assumed it was to obfuscate strategies and mess with other HFTs...kind of like in poker you bet based on probability of what the other guy will do, in conjunction with your hand.
Market conditions of real money players don't change in micro-seconds. For some reason this flapping of HFT strategies is a Nash equilibrium among the HFTs.
The SEC has been very recently and selectively cracking down on excessive order cancelling though, so it's not clear that it's not illegal and is "just being smart with their orders".
Exactly. I also wonder if the "canceled" orders are really just changing orders (either "cancel/replace" or "change" messages sent to the exchange) i.e. the desire to buy or sell is still there, just at a different price.
I used to work in it, and this guy's right. The short, layman explanation is: They change their minds very quickly, and very frequently. Hence the H in HFT.
How could the economic effect be the same? In its real-world legal sense, front-running is an agent-principal problem. HFTs are not agents brokering for clients; in fact, they're usually proprietary traders.
If a value trader goes and does a lot of good research on a company and then executes smart trades based upon that research they will make a profit. All well and good.
If a value trader goes and does a lot of good research on a company and executes some smart trades based upon that and their broker front runs them, a substantial portion of their profits are handed over to the broker. Not good. Value trader may not bother doing all that research in future (market for lemons; equity market becomes ever more disconnected from the real world). Broker parasitically extracted the value of value trader's real world research from them.
If a value trader goes and does a lot of good research on a company and executes some smart trades based upon that and an HFT detects the trade they're putting through and trades ahead of them using their superior speed, a substantial portion of their profits are, likewise, handed over to the HFT. Not good. Value trade probably won't bother doing all that research in future (market for lemons).
Front running is both a principal/agent problem and a market for lemons problem.
I believe the claim is that David Einhorn, Steve Cohen and other super rich hedge fund managers are providing incredibly valuable information discovery services to the markets. By by forcing them to suffer the price impact of their trades, we then reduce the incentive of such people to provide more information discovery.
tl;dr; Joe 401k should pay more for his retirement savings because by indexing, he's freeloading on the valuable labor provided by prop traders. HFT is bad because it makes this freeloading cheaper.
(Weird to hear argument lionizing hedge fund managers and calling out workers as freeloaders coming from left wing types.)
I'm not sure I understand the superpower you've just assigned HFTs. If a value trader does a ton of research and decides to adjust their position in a stock, exactly what is it that an HFT can do to capture "a substantial portion of their profits"?
The HFT can afford to provide a tight spread to Joe 401k, who typically buys at most 1 lot at a time. He can afford to do this because when there is a large surge of demand, he has the ability to rapidly reprice his orders.
Are you worried about parts of the TLS handshake being intercepted, or something? Because even then that's non-sensitive information like public keys and cipher lists and stuff, no? Or are we worried about side-channel attacks, or weak ciphers being chosen?
Just curious about your reasoning for why TLS alone isn't sufficient.
That explains it, thanks. Amusingly the wikipedia "longest common subsequence" page emphasises that this is different to and commonly confused with the "longest common substring". Illustrating this confusion neatly, the OP's repository implements subsequence, but is not only called substring but documented by a wikipedia link to substring!
I agree- I really wish there wasn't such a stigma against, as you phrased it, "five-dollar words". I love reading older writing because (maybe without the internet and things like /r/iamverysmart?) they seem drastically less afraid to say exactly what they want to, in the way they want to.
There's also an anachronistic charm to them I guess, but I think the word-choice-freedom is still a big factor.