Equedia Letter

How Fast is High-Frequency Trading? Faster Than You Think

Comments (17)
  1. Fran Manns says:

    If this is allowed to continue, it is clearly the end of retail trading and a retail market. In Canada, we have lost our junior mining market to HVT simply because knowledgeable traders in the smaller brokerages cannot compete with the computer trades. Moreover, there are rebates paid to HVT traders regardless of the intrinsic value of the stock, the Company, the management, analyst reports, valuations or forecasts. Moreover, the trades must be flat at the end of a trading day. So for an algorithm to clip a penny, most days the stock finished down in order for the HVT to make money. It adds down.
    Most will say “so what”. Who cares about junior exploration Companies or for that matter any start up small cap Company. Most do not realise that mines are a wasting asset, and metal discoveries are made by small Companies run by geologists who know what to explore for and can turn on a dime as markets open and close.
    Discoveries are not made by multinational mining Companies. They buy other people’s discoveries. This death of retail, can only lead to insufficient metal in the pipeline, metal price inflation and inflation generally. Competition among 100s of junior Companies has always beaten inflation. That equilibrium is about to change and you will not hear the senior multinationals complain for a second about the lack of discoveries in the pipeline.
    There needs to be a correction made immediately to put a market cap cut off grade to disallow HVT trading from trading small cap Companies. It would allow share price appreciation to a level profitable for retail investors and protect them from aggressive trades based only on liquidity. At the same time a market cap cutoff value would discourage small Companies from pushing out too much stock which wouls also encourage retail interest.

  2. All you article does is confirm that if you intend to make money in the stock market through quick trades there is always going to be someone who is cheating the system, either with insider information or a technical breakthrough that no one has anticipated. However if you buy every stock as if you were buying the whole company and intending to live off the dividends then what happens in day-to-day trading is mostly irrelevant.

    You invest in a significant number of well run, established, profitable, under valued companies that you intend to hold on to for your life time. You will slowly become moderately rich and sleep well at night knowing that the chances for a catastrophic loss over your entire portfolio is just about nil. If your treat the stock market like a slot machine or a roulette wheel you have to accept that there will always be someone tampering with the machinery to increase their chances of winning. The temptation has to much appeal to the greedy 20% who think the 80% are suckers waiting to be fleeced.

    1. Fran Manns says:

      Retail is dead and HVT killed it, Ian. Your description of a retail investor as a gambler is simply ignorant. I have done more in depth analysis of junior exploration companies than you ever will as a lawyer, and as a geologist have deep knowledge of the business over 45 years inside it from every angle. I can tell the difference between real management and a promotion. I want to choose for myself. I am one of three analysts on the street who would not recommend Bre-X.

      With the market swarmed by HVT, individuals are not able to choose. I am not interested in mutual funds. I am not an ant in the anthill letting you choose for me.

      1. Michael S. says:

        That’s what big banks who control the regulators want. They want to control your money so they don’t let you make your own decisions.

  3. Wikiderm says:

    Here in the Excited States, long term holders pay tax on capital gains of 20% at the top end if held for 366 days – and 39.6% if held for 364 days (short term is anything less than a year). So lets say the POSITIVE reward for HOLDING LONGER is roughly a 20% tax saving at significant risk.
    Logic would suggest that there be a NEGATIVE reward for HOLDING only a microsecond or less, attracting a tax penalty for trades that carry much less, usually zero risk. What big trader (?Goldman, was it?) had NO LOSING TRADES last year?
    How about
    39.6% for ‘short term’ trades down to 48 hours,
    60% for ‘very short term’ trades down to one hour,
    95% for ‘really short term’ trades down to one minute, and
    99% for ‘ultra-short term’ trades down to 500 milliseconds.
    Any trade faster than that would be a ‘too-short term’ trade, taxed at 110%.
    There, all fixed.
    Sorry, Aequitas. But it was a good try.
    Our super-cooperative government down here will be on this like a check from a Koch. Not.

  4. Dave says:

    You say all we have when we invest in a company is a piece of paper……what paper? Bix Wier has reported on the entity that is supposed to keep track of the actual shares of stock at a building in Manhattan, NY but that much of the stock shares were ruined by the hurricane flood. With HFT it would be impossible to keep track of actual share certificates so all one really has is a computer record with a brokerage and how can we trust this is we have a massive power outage or disruption? Congressional oversight seems to be nonexistent.

  5. You are right it is not worth investing in any markets anymore.We now have high frequency trading algorithms derivatives short selling what chance as the average investor got NONE.I think all these things were invented to make the rich richer and us poorer.This CASINO as got to be closed down.I am out of here.

  6. John C says:

    This new exchange does sound to be promising, especially if it can make sure every one gets orders at the same time.

    My only concern is that HFT still make trades faster than we ever could.

  7. Jim Stewart says:

    What is most disconcerting is that those who have ” high speed technology” can tip the playing field to their advantage.
    The rest of us who rely on traditional methods of order entry are at a disadvantage.
    Is this fair to all?
    JS

    1. http://www./ says:

      Great post JKE. This is quite a comprehensive introduction to the world of East and South African blogs.A question: if we have a EUROsphere, does that mean that we also have an ? And if so, does it have an afro?

    2. AKAIK you’ve got the answer in one!

  8. Gord Siemens says:

    Nice! Very good article.
    As a struggling investor I know that it is probably my own fault that my success rate is sub prime but maybe not as much as I thought?

  9. Thomas Wakefield says:

    High Speed trading should definitely be discontinued.
    It is totally unfair to other traders. Everyone should
    be on the same playing field! Thousands of one second trades
    is ridiculous. Plus think of the hundreds of ways that the
    market can be manipulated using high speed trading. It is
    scary!! It is like standing on the edge of a waterfall. One
    false manipulation and the whole market crashes! It must be
    stopped!!

  10. Lee says:

    MANIPULATION: is at the very core of all market participants. You get to a point that you give up In trading as the manipulation ..is all over.. So much for the little guys… all orders should arrive and stay lamently listed for a minute to avoid speed-trading..

  11. odey says:

    This is market manipulation in all senses.. It’s amazing how the government allows this. Are the regulators working for big money traders etc. or us, the taxpayer..This looks like it could be worse than 2008 except in a financial collapse nearly everyone could say goodbye to their hard earned pensions, perhaps even gov’t pensions.. Again legalized theft.. aSo crime does pay – Bigtime.. Absolutely government approved ANTICHRIST.

  12. Smertrios says:

    I am new to stock trading (warning: I have never traded). I read this article and see LEE’s comment. That is exactly what I was thinking as a HFT killer *maybe*. I bet some HFT would still occur if someone used a buffer (assuming the profits are high enough to have “buffers”). IE: A HFT knowing that newly aquired stocks are going to be held for a minute decides to have some of that same stock available to sell while waiting to use the newly purchased stock. Eventually if profit is high enough to pay for the original purchase of the “buffer” it becomes profitable.

    Instead of a 1 minute limit on the purchase make it a 1 minute limit on the stock holder… no trading of that stock for 1 minute (after buying or selling or trading it).

    1. Smertrios says:

      never mind that last comment… If a buffer works for a 1 minute ‘delay’ on a stock it would also work for a 1 minute ‘stock holder’ limit but would require 2 accounts.

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