7 ms·

Your question is exactly correct. As long as they are real orders, with real risk of being executed, there should be nothing at all wrong with this behavior.

Your question is exactly correct. As long as they are real orders, with real risk of being executed, there should be nothing at all wrong with this behavior. If people are so stupid as to move their orders trivially based on others' actions, they deserve what they get. The reason this gets prosecuted is that it's an easy target for the exchanges to make it look like they care. They are now publicly-traded companies interested in profits first and foremost--not market integrity (which maybe used to be the case--different discussion). source: 25-year vet of futures markets, the last 10 in HFT; many many millions of orders and executions

digler999 10y ago
> they deserve what they get. what about buy-and-hold investors who don't do anything to deserve that ? Why should they get unnecessary volatility in their portfolios just because some get-rich-quick kids want to treat NYSE like its Mortal Kombat? > if people are so stupid as to move their orders trivially based on others' actions Then why show level 2 quotes at all ? Isn't your argument equivalent to "level 2 information is useless"? If not, then people wouldn't be stupid for using it, would they ? Would you trade in a market that only had level 1 quotes ?
- brownegg 10y ago
  They don't get unnecessary volatility unless they're paying attention to the order book all the time. Realized equity volatility is MUCH MUCH MUCH lower in the era of HFT. Yes, "flash crashes" exist, and normally because of liquidity disappearing. Yes, algos are basically sheep that all bail at the same time. But overall, the net effect is massively beneficial to everyone except lazy traders (which include fund managers who miss the days of getting lots of steak dinners from their favorite brokers).
  - digler999 10y ago
    I'm not arguing against algos or HFT, just spoofing. also I updated my comment to ask about level-2 quote information. If people are stupid for acting on perceived intention of other market participants, wouldn't that make the case that L2 quotes are entirely garbage and should just be removed from the exchange ?
    - brownegg 10y ago
      You're conflating two things (in my mind). L2 is very useful to people like me. If it's useful to you, you should be able to handle spoofing. The "average investor" doesn't need L2, and doesn't care what it says, including flashing "fake" orders.
  - baloneyman 10y ago
    HFT doesn't really do anything for markets since they take very little risk, and that is the purpose of a market... the magic coil will kill your business anyway I thought true HFT (not short-term momo, etc. where the intention is to actually take risk) had essentially died already, Virtu aside
    - pgwhalen 10y ago
      True HFT is not in any sense dead, it's just matured so only those with deeper pockets can compete.
- tedunangst 10y ago
  Flash crashes have no effect on buy and hold investors. You're holding, there's a crash, you're holding, bounces back, you're still holding.
  - gnaritas 10y ago
    Not remotely true, many buy and hold investors have stops to limit their losses and/or exit their positions at certain levels. Flash crashes hurt them greatly.
    - brownegg 10y ago
      Which part of "buy and hold" includes "sell when it goes down"?
      - pdpi 10y ago
        It's called cutting your losses. Buy and hold isn't "buy and go down with the ship".
        brianwawok 10y ago
        No in fact that is the opposite of buy and hold. If you are selling as it goes down you may as well just light your money on fire.
        gnaritas 10y ago
        So you'd rather ride the sinking ship and lose all your money as the company goes bankrupt? Are you saying you'd never exit any of your positions no matter how much money you lost?
        brianwawok 10y ago
        Correct and correct. The stock market cannot go to 0. It is literally impossible. If you are invested in the fortune 500.. and the value went to literally 0.. we are in a zombie Apocalypse. Money no longer has value. So yes I lost all my investment, but I also don't have a job, and a gun is my most valuable asset. Buy and hold = Buy big index funds (i.e. Fortune 500), and then never ever ever ever sell, until you are ready to spend the money (i.e. draw-downs in retirement). Trying to go "oh the market lost 20% this week, it is going to 0 soon" is a fools investing.

digler999 10y ago

> they deserve what they get. what about buy-and-hold investors who don't do anything to deserve that ? Why should they get unnecessary volatility in their portfolios just because some get-rich-quick kids want to treat NYSE like its Mortal Kombat? > if people are so stupid as to move their orders trivially based on others' actions Then why show level 2 quotes at all ? Isn't your argument equivalent to "level 2 information is useless"? If not, then people wouldn't be stupid for using it, would they ? Would you trade in a market that only had level 1 quotes ?

brownegg 10y ago
They don't get unnecessary volatility unless they're paying attention to the order book all the time. Realized equity volatility is MUCH MUCH MUCH lower in the era of HFT. Yes, "flash crashes" exist, and normally because of liquidity disappearing. Yes, algos are basically sheep that all bail at the same time. But overall, the net effect is massively beneficial to everyone except lazy traders (which include fund managers who miss the days of getting lots of steak dinners from their favorite brokers).
- digler999 10y ago
  I'm not arguing against algos or HFT, just spoofing. also I updated my comment to ask about level-2 quote information. If people are stupid for acting on perceived intention of other market participants, wouldn't that make the case that L2 quotes are entirely garbage and should just be removed from the exchange ?
  - brownegg 10y ago
    You're conflating two things (in my mind). L2 is very useful to people like me. If it's useful to you, you should be able to handle spoofing. The "average investor" doesn't need L2, and doesn't care what it says, including flashing "fake" orders.
- baloneyman 10y ago
  HFT doesn't really do anything for markets since they take very little risk, and that is the purpose of a market... the magic coil will kill your business anyway I thought true HFT (not short-term momo, etc. where the intention is to actually take risk) had essentially died already, Virtu aside
  - pgwhalen 10y ago
    True HFT is not in any sense dead, it's just matured so only those with deeper pockets can compete.
tedunangst 10y ago
Flash crashes have no effect on buy and hold investors. You're holding, there's a crash, you're holding, bounces back, you're still holding.
- gnaritas 10y ago
  Not remotely true, many buy and hold investors have stops to limit their losses and/or exit their positions at certain levels. Flash crashes hurt them greatly.
  - brownegg 10y ago
    Which part of "buy and hold" includes "sell when it goes down"?
    - pdpi 10y ago
      It's called cutting your losses. Buy and hold isn't "buy and go down with the ship".
      - brianwawok 10y ago
        No in fact that is the opposite of buy and hold. If you are selling as it goes down you may as well just light your money on fire.
        gnaritas 10y ago
        So you'd rather ride the sinking ship and lose all your money as the company goes bankrupt? Are you saying you'd never exit any of your positions no matter how much money you lost?
        brianwawok 10y ago
        Correct and correct. The stock market cannot go to 0. It is literally impossible. If you are invested in the fortune 500.. and the value went to literally 0.. we are in a zombie Apocalypse. Money no longer has value. So yes I lost all my investment, but I also don't have a job, and a gun is my most valuable asset. Buy and hold = Buy big index funds (i.e. Fortune 500), and then never ever ever ever sell, until you are ready to spend the money (i.e. draw-downs in retirement). Trying to go "oh the market lost 20% this week, it is going to 0 soon" is a fools investing.