My dad doesn't think we are aliens, and he used to listen to music encoded on disks as a kid...
Humanity is changing much slower than you may think. The big leap was electricity, and that is well behind us. I doubt the next big leap (nanotech) will become widespread for a hundred or more years.
1. The technological gap between your father and your grandfather was much smaller, than between you and your father. The gap between you and your son in 50 years will be much bigger. Iphone4, Android will be antiquated technology for your son in 50 years.
I remember some article about a kid, who found old walkman in his father's closet. It's took him some time to learn how to use it. And he wrote article comparing walkman with iPod ;)
2. Nanotech is much closer, than you think!
Toshiba is already working on 16nm semiconductor process. The transistors will be of the size of atoms.
Intel Nehalem is already 32nm process, so 16nm is two tic-toc cycles aways.
32 nm — 2010
22 nm — approx. 2011
16 nm — approx. 2013
11 nm — approx. 2015
You will need nanorobots to build chips of the NEAR future.
My startup in the nanotech area, so I know what I talking about.
Yeah I know nanotech has current limited applications. That's why I said "widespread". As in electricity once had limited applications, now it's widespread.
I love the lobster idea. It would be even better if the lobsters survival was based on the integrity of the data. This would provide evolutionary ECC.
You would also need some mechanism to signal people in the far future that the lobsters were data carrying devices. Otherwise they wouldn't have any reason to randomly decode sea creatures. Perhaps you could program the lobsters to develop spots on their shells every century which denote the first 10 prime numbers.
I accept the concept that Wikileaks puts informants at additional risk. I also accept that the government is lying through their teeth about the activities on the ground in Afghanistan.
Is it more important for a the taxpaying population to be informed of what the military is doing in their name? Or is it more important to hide all information that may have any connection to the activities of informants?
I would suggest, that as an informant you make a direct choice to act, which effectively stakes your claim to a large majority of the repercussions. No such choice is offered to the public, and even if it were, a large heterogeneous group of people cannot be saddled with the same responsibility that an individual chooses for them self.
Additionally, any government that hides non national security type information from their population, puts itself at risk by allowing it's informants to be possibly exposed by leaks. If it wanted to provide protection from possibly damaging leaks, thus ensuring the anonymity of it's informants, it would provide a robust channel of accurate information to the public. Such information would greatly reduce the perceived need for leaks, hold the government and military more accountable, better serve the public good, and provide additional protection for informants.
effectively stakes your claim to a large majority of the repercussions
So what are you saying, that if Wikileaks got access to the data of the Witness Protection Programme in the US it should publicize that too? Because all government coverups are bad?
So was I. But technically "No Support Staff" means no one, on staff, doing any support. Thus the customers would have to use a stack exchange or some other type of self-sufficient system.
A market for trading perception of value should be regulated to increments of days or weeks, not minutes.
The current structure for valuating securities does absolutely no good for our society. Not that it's overly evil or anything, it's just pointless, a massive waste of time and money, and is a cancer on our economic system. It's got to be a thrilling thing to code for though.
However it also adds high levels of volatility and self-organizing behavior (i.e. trends that feed on other trends, not on underlying signals). One might add another fallacy: "The market does X, therefore X is good".
I'm not an expert, but how does HFT increase liquidity?
One definition of liquidity is when you can sell something without affecting the price much. Most people on Wall Street will tell you their job somehow increases liquidity -- connecting buyers and sellers in more and more efficient ways.
HFT seems different. It is comparable to front-running other people's orders. Someone tries to buy an item for $1.00, and the HFT algorithm tries to grab the item first and resell it to our original buyer (and other people in the market) for just a tiny bit more.
From my perspective it's effectively a sort of tax, like a bridge toll. It seems to me like this has to make every transaction affect the price more, not less. How does this increase efficiency or liquidity?
Someone tries to buy an item for $1.00, and the HFT algorithm tries to grab the item first and resell it to our original buyer (and other people in the market) for just a tiny bit more.
No. The matching engine will match first the highest priced order, and in the case of orders at the same price, whichever order was placed first. You can't jump ahead in the queue, no matter how fast your algorithm is [1].
[1] This statement only applies to US equities/futures/derivatives markets. I think it might be possible in Canadian markets under some limited circumstances.
Can I ask you how this is physically laid out?
Is there just a big centralized computer at the exchange
with two input queues, one for buys and one for sells?
What if I want to place an order at the best price across multiple different exchanges?
It's basically what you think; a computer system keeps a queue of buy and sell orders, sorted by price/time (i.e., best price wins, if prices is equal, earliest order wins). It then matches trades by popping the top of the queue. If you place an order on INET which can be filled at a better price on ARCA, then INET routes your order to ARCA and you are charged a small routing fee. This is required by RegNMS.
(There is a "don't route me" flag if you don't want to be routed. In that case, your order will simply go unfilled - exchanges can't match you at a price worse than the best price available on all exchanges.)
But how are prices synchronized between exchanges (if at all)?
i.e. say the best chance for my order being filled is
at ARCA, but I submit it at INET. Does the fact that it
will most likely get routed to ARCA via INET imply there is a greater chance of the order not filling than if the order had been submitted to ARCA directly?
Current price $100. Firm puts in order to buy at any price up to $110. The HFC algorithm puts small volume sells to work out that they are doing that, then sell to them at $109.99. They then turn around and fill their position at any lower prices. If the HFC was not there the limit order would be filled more slowly at lower prices.
You right. But I'll give you the counter-argument.
In the stock market, just like the real estate/auto market, there are never just true buyers and sellers; there are also brokers and dealers who keep a inventory of goods, so that they can sell to non-discriminating retail customers who just want the goods right now. Their expertise and self-interests in turns, affects the price of the good in the whole entire market.
The stock market once have had traditional broker-dealers that controlled the spread of a stock. That is, dealers are willing to buy stocks from impatient traders who are willing to sell at a market order at a price that is set by the dealer; the dealers then in turn, later sell their inventory at an artificially inflated price to impatient traders who are willing buy the stock at a market at the price named by the dealer.
Traditional dealers, in order to tack on the risk of carrying their inventory of stocks (after all, a stock could theoretically drop to zero before they could sell the whole lot), keep the spread of the stock big (they are willing to buy low and sell high) at the expense of retail investors.
HFT, due to their high-tech platform and high execution speed tightens this spread because they don't carry as high a risk of inventory; because their execution speed is in timescale of micro-seconds; so essentially, in the timeframe of seconds, they buy a position and then sell that position subsequently and not really carry that position through for the market to affect the value of that position.
This in theory is good for retail investors as they actually end up paying less for their stocks. But with good technology, you could also use it for bad. With fast computers and sophisticated algorithms, HFT traders could learn how to game the traders and big funds that they are suppose to server - just like a regular car or real estate dealer.
If you know where the consumer demand is, you could buy up all of the supply ahead of time and artificially inflate the price to make people pay more. If you know that your competitors are replicating your every move, you could deceive them by making a small trade against your true intention, have them jump on the bandwagon and swiftly punish them by executing your true big trade afterwords. The possibilities are endless.
Mechanics of flash trading: say the best ask price on INET is 100, the best ask price on ARCA is 99. If you place an order buy at 99 on INET, INET is legally obligated to route your order to ARCA (since ARCA has the NBBO). You will pay 99/share + commission + routing fee, with the fees paid to ARCA.
If INET were to flash your order, they give some HFT firm the opportunity to sell you shares at 99. The HFT firm can accept or reject - if they accept, you pay 99/share + commission and INET gets the commission.
That's a completely different game than front running. It has other issues, like being potentially unfair to ARCA and traders who can't afford flash orders, but it isn't front running.
Liquidity means you can easily find a buyer or seller. In what circumstance would this not be a good thing? You get minimal markups (bid/ask spread), you can get in and out of trades quickly, and you can easily determine the market value of your securities. Housing is totally illiquid: there's a big broker fee, it takes a while to sell your house, and you can only guess at its true value by comparing to recent sales of similar houses. There's some weird cases in global markets where liquidity allegedly causes problems.
Good answer. Arguably, in a simplistic sense more liquidity is always better for the functioning of the market. But if we have a lot of "false" liquidity that perhaps encourages people to make optimistic assumptions, and that liquidity can go away... like it did a few weeks ago (or during a crisis...). Maybe some people can profit from this, especially if they have the ability to front-run?
Imagine liquidity as tank full of fuel in your car. The possibilities of going with a full tank are endless. More fuel than tank's holding capacity is pretty much useless.
No, imagine liquidity as a keg of beer. If you drink some, it tastes great. If you drink some more, you feel dizzy, and eventually you wake up with a really ugly girl in your bed.
When using analogies, some explanation is helpful.
If there are 10 people who want move to street x, having 14 sellers all selling identical apartments, at identical prices is no different than having 50 people selling identical apartments at identical prices or 200.
The difference with HFC is they don't provide any actual liquidity that matters. They don't hold the apartments across different move in dates.
Whatever number happens to mesh with the poster's predetermined position on the matter. If they think that HFT isn't "real work"[0], they'll set the level low. If they're a free-market fetishist, they'll say the tank is indefinitely large.
Metaphors are rarely a useful approach to understanding something.
[0] An amusing position for a programmer to take, considering we make completely intangible stuff while spending hours a day sitting on our asses, but one that a lot of people on this site seem to hold.
If you can think of a better term than "real participant" please let me know.
If your job is to record or settle trades, be a day trader with no overnight position, track share holdings, etc. then you are a part of the machinery of this capital market, but you are not one of the participants who provides, or consumes capital. You are part of the cost structure.
The real participants are those who actions reflect beyond the casino itself, and out into the economy beyond.
The purpose of share markets is to provide capital. Long term capital for companies to invest, and in return to provide long term profits for those providing that capital.
If you are providing or consuming capital, even for one day, you are to some extent a real participant.
I think it is fine for people to make money, brokers to charge a fee for a trade, day trading, advising on diversification, etc.. But we should understand that these are costs associated with this system of providing capital/investing.
You sound like you provide capital and participate as an investor.
You can't possibly argue that doing billions of trades a minute has anything to do with real-life liquidity. By real-life, I mean liquidity that's relevant to a bank's customer, eg. a private citizen who possibly even owns a trading account. And that's the only kind of liquidity I care about. It's just a game to extract money from the economy without doing real work.
Everyone understands that high liquidity is beneficial: it lowers the cost of capital thus allowing businesses to expand. But have researchers ever quantified the liquidity premium reduction provided by HFT versus the economic rents extracted by the traders? Depending on the ratio, society might actually be better off with a little less liquidity.
I think that we do overpay for this liquidity. Both in terms of economic rents extracted, and the wasted resources poured into the competition. I wonder if there might be a way to keep most of the liquidity but at a fraction of the cost
I don't recall us having significant liquidity problems prior to HFT, except during crisis, and as the recent one shows, we had liquidity problems even with HFT then.
I'm not buying the argument that 'HFT' provides any meaningful additional liquidity.
The typical trading range for the day is $100 to $110.
Scenario 1:
So someone offers (is willing to sell) a limit order at $100. Buyer bids at $110. They wait until the other order appears and cross according to some market rules (perhaps at $100, $105 or $110), no-one else gets anything.
Scenario 2:
HFC works out the trading is in range $100 to $110, puts bids in at $104, offers at $106, and makes $2. The sellers gets $104, the buyer pays $106 and both are better off than scenario 1?
(I'll note that the bid/ask spread becomes effectively zero every time an actual trade happens -- what if it actually reflected market prices rather than a bunch of video games competing against each other?).
Does it hurt the buyer and seller more than the little nibbles these guys are taking to smooth out that curve?
I see a lot of paychecks being cut in this industry and I don't see the value being created. Looks like highway robbery to me.
I don't see why high-frequency trading contracts that spread.
If they overlap very briefly (say, across different markets) and nobody else has noticed yet, a trading program jumps in and arbs the difference. That increases the spread.
If they overlap very briefly (say, across different markets) and nobody else has noticed yet, a trading program jumps in and arbs the difference.
Utter nonsense. In the case of crossed markets it is illegal to trade. Trading under these circumstances would violate RegNMS and most matching engines will reject orders that would cross the markets.
HFT firms reduce the spread due to competition. If the spread is $0.03 (say $9.97 and $10.00), I can do one of two things to be at the top of the order book and be the first to trade. I can either place my order first, or I can place an order at a higher price. If I'm the fastest, I have the earliest order at price $9.97 and I get filled first in the event of a trade. In this case, I make $0.03/share. If I'm not the fastest, I can still get to the top of the book by placing an order at $9.98. This reduces the spread to $0.02, and I can only make $0.02/share.
I can see an obvious cost to X, after many years no-one has produced any evidence of value to X, therefore X should be abolished, if it can be done at reasonable cost.
Investors providing capital should not care what time of day their trade goes through because it will settle at the same time anyway. So this 'liquidity' is worthless.
The purpose of shares is to raise capital for productive investment, in return for income to long term investors who provide the capital.
Both non-computerized traders, and computerized HFC traders have an obvious cost, they extract return from the markets that would otherwise go to investors. This reduces the returns for investors.
What if we create an exchange where market participants submit orders which are crossed once a day? You establish a fair matching system and clearing price algorithm. In that environment there is less money going to minute traders and so there would be better returns for investors.
The thing that speaks to people in this is the human-like uncertainty of the statement "a bit more". It's almost certainly not the case that the machine has a concept of "a bit", or introduces randomness for the interval to be human-like; technically it's simply heating the bread for a fixed amount of time. The trick is in observing the usage patterns of people using toasters (wanting their bread toasted "a bit more" is a common goal), and naming the feature in a way that corresponds to the goal very directly, and creates emotional engagement.
I own this very toaster, and humanity is exactly the right term. The 'A bit more' button was a motivator in the purchase. When I read it I thought, "This company understands how I make breakfast. I should buy from them."
incorrect. insert mode is still 'i'. and search is still '/'. They are at different places on the keyboard but nothing changes except for the one single thing: hjkl that could be used to move the cursor are not as neatly together now. You can talk to a qwerty vim user w/o any problem. just don't tell him to press the "third key from the left" or smth ;).
This is a great idea. And when you sell/toss out your computer there should be a "shut down, for the very last time" button you can press that would play something like this:
http://www.youtube.com/watch?v=QbN0g8-zbdY
Although after the first minute you might be tempted to just yank the power cord out.
Humanity is changing much slower than you may think. The big leap was electricity, and that is well behind us. I doubt the next big leap (nanotech) will become widespread for a hundred or more years.