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70% Of All Stock Market Trades Are Held For An Average Of 11 Seconds


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There is no benefit except to the scammers with fast powerful networks and computers, and access to huge funds and/or leverage.

Its like me knowing the town will want carrots on Saturday, I rush out and buy all the carrots. OK I only own those carrots for 11 seconds, I'm a few quid better off, everyone else is poorer. I'm not providing carrot "liquidity" by ensuring there is a market for carrots, just inserting myself artificially into a transaction.

Then consider my proposal a tax on artificiality. We've had enough of that to last a generation.

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what you are describing already exists. It's called variously, spread, commission, exchange fees, stamp etc.

Every time you trade it incurs a cost. The shorter the trade, the more trades you'll make, the more costs you incur.

And who does that cost fall upon? The exchanges that amalgamate the market makers? The market makers? The brokers? The Fund managers? The pension fund managers? Or the schmuck who's just looking to keep his pension fund from lagging too far behind inflation? And who would pick up the tab for higher transaction costs?

And let's say you can make the cost stick with, say, the brokerage house that's executing deals as agent for a client. Will the trader who places the deals lose some of his commission? Or will it be the shareholders of the brokerage? And who might they be? Brokers, or just more pensioners?

Let's make sure we're targetting the right people before we suggest such things.

While those terms are charged flat rate or according to the volume of the trade, they are not charged inverse proportionally to the duration the asset is held.

Edited by Dave Spart
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And? It's just gambling, everyone knows that. What difference does it make if the position is held for 11 seconds or 11 years?

It sounds like an incredibly efficient market to me.

IMHO (and it really is very humble) it's the difference between speculating on stocks and speculating on the actual thing they represent. If I hold stocks for only 11 seconds, I'm gambling on market volatility, not on the actual worth of the company who issued the stocks. It's not exactly mal-investment, in the same way the amorality isn't exactly immorality, but it's value-neutral and distorting.

That said, the dot-com bubble was mal-investment*, and that came out of normal trading afaik.

* I think it was - but you could just say it was over-optimism.

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Give that man a cigar. After you have factored out changes in the level of the market, this is a zero sum game. These guys are taking money from non-HFT traders (also known as investors) and increasing market risk at the same time. We need a transaction tax to shut HFT down. It is parasitism.

I always imagined two types of investor.. long term and day trader.

I imagine long term investors to be the buy-and-hold 'mom & pop' investors, pension funds and investment trusts.

I imagine day traders to be individual and corporate gamblers who 'play' against each other to try and win a profit.

From the point of view of the long term investor the daily noise is of little/no importance to them. They have their share and get their dividend. If the company does well the price will rise over time, if not it will fall. I presume the day traders who win/lose money based on small short term fluctuations in the market are generally only winning/losing it from each other.

I'd be interested if there are any traders here who could shed more light on it.

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I always imagined two types of investor.. long term and day trader.

I imagine long term investors to be the buy-and-hold 'mom & pop' investors, pension funds and investment trusts.

I imagine day traders to be individual and corporate gamblers who 'play' against each other to try and win a profit.

From the point of view of the long term investor the daily noise is of little/no importance to them. They have their share and get their dividend. If the company does well the price will rise over time, if not it will fall. I presume the day traders who win/lose money based on small short term fluctuations in the market are generally only winning/losing it from each other.

I'd be interested if there are any traders here who could shed more light on it.

I agree HFT is just day traders playing games to try to hoover up any remaining residual profit in the market.

The result of this competition is that markets get more efficient, and takes info account more information into the market.

I will give an example of a HFT strategy:

The HFT firm compares the price of BP and Shell. If the price of Shell goes up and the price of BP stays the same, then they will pay the offer for BP and Sell the bid in Shell in the hope that a few seconds later BP will rise or shell will fall again. This takes into the information that Shell has gone up, and the new price of BP should be higher. The firm that is able to do this trade does it through massive investment in infrastructure to gain speed. How is this strategy benefitting or screwing the mom and pop types?

Edited by blackgoose
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And? It's just gambling, everyone knows that. What difference does it make if the position is held for 11 seconds or 11 years?

It sounds like an incredibly efficient market to me.

Yes the stockmarket (and investing in 'risk' assets) has always been gambling. BUT, there's gambling and there's gambling. Some forms of gambling can involve some level of underlying skill if one is to remotely have a chance of improving the odds in their favour, and other types of gambling are genuinely 100% games of random chance.

Two examples that come to mind are the differences between horse racing and roulette. Yes, for the vast majority of the populace, horse racing is as much a flutter as roulette. Just as Joe Public wont really be that clued up as sto whther they should by shares in BP or Shell. But, for a small dedicated 'professional' number who do diligent research on the health of a horse, performance of a jockey, etc etc, they can glean information that the masses will not know and so may gain an advantage in deciding whether to back a horse in a given race or not.

Of course the horse may fall ill on the day of the race, or get bitten by a wasp on its **** before it leaves the starting line, etc. - and these count as unforseeable events - just as a volcanic ash cloud is an unpredictable event to the airline industry and will wreak havoc with their profitability and hence share price.

BUT, by comparison, roulette will always be a random game of chance no matter what. High frequency trading is more akin to roulette. Bets are placed while the wheel is still moving and, with the share price having moved a miniscule fraction in your favour, you remove the bet before the ball stops tumbling around the wheel. You compensate for the miniscule profit in each such transaction by sheer volume of such bets.

In times past people would invest their money in companies with varying risk profiles, and the frequency they would check the share price in the back pages of the newspaper would depend on that risk level. Today people check share prices intraday! Not because the underlying profitability or viability of the company has changed between 10am and 11am, but because price movements can be large enough to make the equivalant of a years interest (in todays low rate environment) in just hours. (Of course when that does happen many wont take the money and run, they will be greedy and hang in there for more - and thats another story altogether)

HFT really has turned the equity markets into casinos in which genuine investors seeking to assess price in terms of the underlying value of a commercial venture have greatly reduced chance of being able to do so because of the 'distortions' such activity has on prices.

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Yes the stockmarket (and investing in 'risk' assets) has always been gambling. BUT, there's gambling and there's gambling. Some forms of gambling can involve some level of underlying skill if one is to remotely have a chance of improving the odds in their favour, and other types of gambling are genuinely 100% games of random chance.

Two examples that come to mind are the differences between horse racing and roulette. Yes, for the vast majority of the populace, horse racing is as much a flutter as roulette. Just as Joe Public wont really be that clued up as sto whther they should by shares in BP or Shell. But, for a small dedicated 'professional' number who do diligent research on the health of a horse, performance of a jockey, etc etc, they can glean information that the masses will not know and so may gain an advantage in deciding whether to back a horse in a given race or not.

Of course the horse may fall ill on the day of the race, or get bitten by a wasp on its **** before it leaves the starting line, etc. - and these count as unforseeable events - just as a volcanic ash cloud is an unpredictable event to the airline industry and will wreak havoc with their profitability and hence share price.

BUT, by comparison, roulette will always be a random game of chance no matter what. High frequency trading is more akin to roulette. Bets are placed while the wheel is still moving and, with the share price having moved a miniscule fraction in your favour, you remove the bet before the ball stops tumbling around the wheel. You compensate for the miniscule profit in each such transaction by sheer volume of such bets.

In times past people would invest their money in companies with varying risk profiles, and the frequency they would check the share price in the back pages of the newspaper would depend on that risk level. Today people check share prices intraday! Not because the underlying profitability or viability of the company has changed between 10am and 11am, but because price movements can be large enough to make the equivalant of a years interest (in todays low rate environment) in just hours. (Of course when that does happen many wont take the money and run, they will be greedy and hang in there for more - and thats another story altogether)

HFT really has turned the equity markets into casinos in which genuine investors seeking to assess price in terms of the underlying value of a commercial venture have greatly reduced chance of being able to do so because of the 'distortions' such activity has on prices.

as someone whos very interested in market form and looked at it meticulously, i cant see any difference in form and price action of the markets today to 100 years ago. I think the volatility that is being blamed is bog standard bear market volatility, the problem being very few people have experience of a major bear market, bear markets are always more volatile because of what they are.

I cant see anything more than liquidity being added. The Aim market doesnt have these HFTs yet its form is no different to the main markets as far as i can see, and in fact the housing market also shows identical form and the same record volatility, we can start blaming shorters aswell no doubt when the markets are falling again forgetting of course that they are also present when the market goes up,

Edited by Tamara De Lempicka
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HFT is effectively a stealth tax on retail and institutional investors. Yes real investors like you and me, or our pension funds. Taking money away from the "rest of us" to the HFT with the fastest computer and network.

Exchanges are complicit as they get paid millions, indeed the HFT servers, networks have to installed in the exchange itself of very close to it. However much you dress it up and make it look respectably its high tech front running.

http://www.marketoracle.co.uk/Article18911.html

Edited by Sir John Steed
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Yes the stockmarket (and investing in 'risk' assets) has always been gambling. BUT, there's gambling and there's gambling. Some forms of gambling can involve some level of underlying skill if one is to remotely have a chance of improving the odds in their favour, and other types of gambling are genuinely 100% games of random chance.

Two examples that come to mind are the differences between horse racing and roulette. Yes, for the vast majority of the populace, horse racing is as much a flutter as roulette. Just as Joe Public wont really be that clued up as sto whther they should by shares in BP or Shell. But, for a small dedicated 'professional' number who do diligent research on the health of a horse, performance of a jockey, etc etc, they can glean information that the masses will not know and so may gain an advantage in deciding whether to back a horse in a given race or not.

Of course the horse may fall ill on the day of the race, or get bitten by a wasp on its **** before it leaves the starting line, etc. - and these count as unforseeable events - just as a volcanic ash cloud is an unpredictable event to the airline industry and will wreak havoc with their profitability and hence share price.

BUT, by comparison, roulette will always be a random game of chance no matter what. High frequency trading is more akin to roulette. Bets are placed while the wheel is still moving and, with the share price having moved a miniscule fraction in your favour, you remove the bet before the ball stops tumbling around the wheel. You compensate for the miniscule profit in each such transaction by sheer volume of such bets.

In times past people would invest their money in companies with varying risk profiles, and the frequency they would check the share price in the back pages of the newspaper would depend on that risk level. Today people check share prices intraday! Not because the underlying profitability or viability of the company has changed between 10am and 11am, but because price movements can be large enough to make the equivalant of a years interest (in todays low rate environment) in just hours. (Of course when that does happen many wont take the money and run, they will be greedy and hang in there for more - and thats another story altogether)

HFT really has turned the equity markets into casinos in which genuine investors seeking to assess price in terms of the underlying value of a commercial venture have greatly reduced chance of being able to do so because of the 'distortions' such activity has on prices.

At least horse racing is a free market and there are no governments or central banks distorting things. You can trade the price of horse pre-race (

) and also in-play too!, and many people make a decent living from it. I suppose you could argue that it is socially useless too, but the commissions paid to Betfair supports a large company in which the UK leads the world! - betting exchanges. Betfair ploughs a decent amount of money back into racing which also supports that industry, and there are many smaller companies who also exist on the back of such gambling/trading (and they pay taxes and employ people etc., so i can't see the problem).

It's the same with trading futures - socially useless maybe, but it employs a lot of people and generates a lot of revenue for the government to spend, hopefully, on more socially useful things.

I don't agree that HFT prevents price discovery - governments and central banks are the culprits here - traders are only trading the stock markets upwards because governments and central banks have given them a guarantee that they'll try to prop them up (via QE, PPT etc.).

I worked in the diamond industry for many years and you could argue that it too is socially useless - diamonds aren't needed by anybody, and you can make artificial gemstones that are brighter and more sparkly without digging big holes and processing millions of tonnes of rock to get a few of them. I think people need to be careful before jumping to conclusions about the finance industry.

Edited by Constable
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HFT is effectively a stealth tax on retail and institutional investors. Yes real investors like you and me, or our pension funds. Taking money away from the "rest of us" to the HFT with the fastest computer and network.

Exchanges are complicit as they get paid millions, indeed the HFT servers, networks have to installed in the exchange itself of very close to it. However much you dress it up and make it look respectably its high tech front running.

How? given that dealing costs are lower than ever before and bid /offer spreads are smaller than ever before how are you losing out as an investor?

The only reason you are going to lose out is if you are invested in a historically fundamentally overvalued equities bubble and the price falls/collapses, thats got fck all to do with anything other than bad fundamental/technical analysis

Edited by Tamara De Lempicka
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HFT is effectively a stealth tax on retail and institutional investors. Yes real investors like you and me, or our pension funds. Taking money away from the "rest of us" to the HFT with the fastest computer and network.

Exchanges are complicit as they get paid millions, indeed the HFT servers, networks have to installed in the exchange itself of very close to it. However much you dress it up and make it look respectably its high tech front running.

http://www.marketoracle.co.uk/Article18911.html

But why does it harm pension funds or long term investors? They invest in a company based on the fundamentals and hold that investment and hopefully pick up nice dividends. Short term price fluctuations don't force long term investors in or out of the market.

Edited by Constable
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How? given that dealing costs are lower than ever before and bid /offer spreads are smaller than ever before how are you losing out as an investor?

The only reason you are going to lose out is if you are invested in a historically fundamentally overvalued equities bubble, thats got fck all to do with anything other than bad analysis

The Notorious Market-Rigging Ringleader, Goldman Sachs

Tyler Durden, writing on Zero Hedge, notes that the HFT game is dominated by Goldman Sachs, which he calls "a hedge fund in all but FDIC backing." Goldman was an investment bank until the fall of 2008, when it became a commercial bank overnight in order to capitalize on federal bailout benefits, including virtually interest-free money from the Fed that it can use to speculate on the opaque ATS exchanges where markets are manipulated and controlled.

Unlike the NYSE, which is open only from 10 am to 4 pm EST daily, ATSs trade around the clock; and they are particularly busy when the NYSE is closed, when stocks are thinly traded and easily manipulated. Tyler Durden writes:

"[A]s the market keeps going up day in and day out, regardless of the deteriorating economic conditions, it is just these HFT's that determine the overall market direction, usually without fundamental or technical reason. And based on a few lines of code, retail investors get suckered into a rising market that has nothing to do with green shoots or some Chinese firms buying a few hundred extra Intel servers: HFTs are merely perpetuating the same ponzi market mythology last seen in the Madoff case, but on a massively larger scale."

HFT rigging helps explain how Goldman Sachs earned at least $100 million per day from its trading division, day after day, on 116 out of 194 trading days through the end of September 2009. It's like taking candy from a baby, when you can see the other players' cards.

Edited by Sir John Steed
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that doesnt answer this

The only reason you are going to lose out is if you are invested in a historically fundamentally overvalued equities bubble and the price falls/collapses, thats got fck all to do with anything other than bad fundamental/technical analysis

its another excuse to blame on a poor investment decision, as highlighted if you buy a solid company cheap you will make money as a long term investor no matter what GS or any other idiots are doing

Edited by Tamara De Lempicka
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its another excuse to blame on a poor investment decision, as highlighted if you buy a solid company cheap you will make money as a long term investor no matter what GS or any other idiots are doing

Please explain where GS and the "other idiots" profits are coming from? Its not new money, fresh wealth is it?

I'm sure its great too for those employed in maintaining the HFT systems for banks.

GS have the benefit of FDIC backing, but I also wonder how much of Merv's newly minted tenners ended up getting splurged in high frequency trading scams.

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But why does it harm pension funds or long term investors? They invest in a company based on the fundamentals and hold that investment and hopefully pick up nice dividends. Short term price fluctuations don't force long term investors in or out of the market.

it hurts them because by the time the BUY offer is inputted, the HFTs have inserted thousands of instant false offers too...most of which are unfulfilled and withdrawn in seconds....that forces the price up for the sellers and for the pension fund.

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Please explain where GS and the "other idiots" profits are coming from? Its not new money, fresh wealth is it?

I'm sure its great too for those employed in maintaining the HFT systems for banks.

GS have the benefit of FDIC backing, but I also wonder how much of Merv's newly minted tenners ended up getting splurged in high frequency trading scams.

GS having a government backed advantage has nothing to do with the point of this thread , its a seperate issue. I am highlighting that it is it has fck all to do with somebody making an investment decision or not at any point in time. As i said i cant see any market price anomolies today compared to any time in the past and i cant see how its possible to lose money by buying a solid company very cheaply whatever GS are doing. If peoplelose money today, its not because of dealing costs or spread, ive already highlighted they are at historical lows, it will be because stocks arent cheap because they are just as infected as property by the credit and leverage bubble of the last 3 decades

Edited by Tamara De Lempicka
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it hurts them because by the time the BUY offer is inputted, the HFTs have inserted thousands of instant false offers too...most of which are unfulfilled and withdrawn in seconds....that forces the price up for the sellers and for the pension fund.

Rubbish. You're saying that the orders of funds/investors don't get filled because HFT takes the price away from them! We are talking about tiny increments here. Funds/investors try to buy on big dips on the dark days (and HFT can't stop those from occurring - they always have and they always will).

Edit: And don't forget that HFT occurs in both directions - funds/investors actually benefit from the volatility when a market gets oversold.

Edited by Constable
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Rubbish. You're saying that the orders of funds/investors don't get filled because HFT takes the price away from them! We are talking about tiny increments here. Funds/investors try to buy on big dips on the dark days (and HFT can't stop those from occurring - they always have and they always will).

Its the HFT orders that don't get filled. Their computers flood the market with fake transactions, in order to sense very minute movements in price, and falsely insert themselves into the transaction. If the institution doesn't buy, the HFT (a hedge fund or bank) will simply cancel the trade.

HFT isn't really about trading the market as such, a bear or bull market. Its purely an artificial, algorithmic arms raise, to gain some minor technical advantage over other investors, but over zillions of transactions, the looting all adds up.

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Its the HFT orders that don't get filled. Their computers flood the market with fake transactions, in order to sense very minute movements in price, and falsely insert themselves into the transaction. If the institution doesn't buy, the HFT (a hedge fund or bank) will simply cancel the trade.

HFT isn't really about trading the market as such, a bear or bull market. Its purely an artificial, algorithmic arms raise, to gain some minor technical advantage over other investors, but over zillions of transactions, the looting all adds up.

exactly...I knew I wasnt going mad.

Market ticker had some vids showing this in action....blocks of trade of 2000 would appear, the price rise, the blocks disappear after a very short time, as soon as the price rose!....time and again he's seen this.

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Its the HFT orders that don't get filled. Their computers flood the market with fake transactions, in order to sense very minute movements in price, and falsely insert themselves into the transaction. If the institution doesn't buy, the HFT (a hedge fund or bank) will simply cancel the trade.

HFT isn't really about trading the market as such, a bear or bull market. Its purely an artificial, algorithmic arms raise, to gain some minor technical advantage over other investors, but over zillions of transactions, the looting all adds up.

But funds/investors don't care about tiny intra-day price movements. A couple of ticks either way makes no difference to a long term player.

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The problem with the stock market in it's current form is it undermines the stability of the economy, whilst rewarding and encouraging a culture of speculation instead of true investment. Given the option I'd shut it down today.

And that would help the stability of the economy?!

You either believe in free markets or you don't. I agree that some of the tactics of HFT are a bit dubious to say the least, but that doesn't mean we should shut down markets - unless you're advocating a move to a communist system...

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exactly...I knew I wasnt going mad.

Market ticker had some vids showing this in action....blocks of trade of 2000 would appear, the price rise, the blocks disappear after a very short time, as soon as the price rose!....time and again he's seen this.

It's called spoofing - but it's a risky business. Imagine that something fundamental occurs when that order is in the market and it gets filled and the price crashes through it. They then have to chase the market down even further to get out - that's when the funds/investors should be buying :-).

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