7 ms·

Yeah, the stock market may be positive sum over the long-term, but it's certainly zero sum over the millisecond-term. Whether it's "retail" or "institutional" t

by ralph84 1mo ago

Yeah, the stock market may be positive sum over the long-term, but it's certainly zero sum over the millisecond-term. Whether it's "retail" or "institutional" that is paying for HFT profits, it's all retail in the end.

Anon1096 1mo ago
The millisecond-term zero sum game is part of what allows for a positive sum long term. For example, zero fee trading was pioneered by Robinhood and only possible because of payment for order flow, and as a result it's virtually unheard of now for retail to be paying per transaction. Now more retail investors can participate and everyone benefits. You can also point to lower spreads and faster execution as direct benefits.
- ralph84 1mo ago
  Or you could just hold auctions a few times per day and eliminate the billions of dollars spent trying to win a pointless race.
  - loeg 1mo ago
    No one wants four-trades-a-day settlement to save 0.00001% or whatever in trading fees.
    - amenhotep 1mo ago
      That's true, we don't want it to do that, we want it to kill these parasitic entities. Much like one doesn't swat a mosquito because one will truly miss the amount of blood she's taking.
    - ralph84 1mo ago
      No one? Mutual funds have managed to attract $33 trillion trading once a day. The demand for millisecond-level trading is almost entirely from a very small group of firms profiting from it.
      - loeg 1mo ago
        And they are steadily losing new investment dollars to ETFs, which trade interday. I don't think interday trading is why ETFs are more attractive to all or most investors, but a 0.000001% (or whatever) cost advantage just falls below the noise floor. It isn't worth any other tradeoff.
  - naveen99 1mo ago
    Then the real trading will just move to hyper liquid or another platform that allows trading in real time.
- Retric 1mo ago
  > zero fee trading Such wonderful marketing terminology. That’s not actually free, the cost of trading with less information is quite high.
loeg 1mo ago
> it's certainly zero sum over the millisecond-term. Why do you think market-making is zero sum? Providing liquidity has value and market makers are compensated for that. (Milliseconds of liquidity being appropriately compensated with fractions of pennies.)
- Retric 1mo ago
  > milliseconds of liquidity Speed of light delays. Due to the underlying physics of the universe there’s physical limitations on how much liquidity can matter on sufficiently small timescale.
  - loeg 1mo ago
    Again, the costs are de minimis and they're just competing with other, slower market makers to provide the same service at lower costs and faster speeds. Who cares? Retail investors, rationally, should not care about this at all.
    - Retric 1mo ago
      If the costs where actually de minimis nobody would be fighting on those timescales, instead the costs paid by the market is the full operating budget of these companies plus their profits plus their negative externalities which combined ends up being significant. Ultimately the primping value of markets is in information gathering and by flooding the market with trades based on ms timescales you’re masking important signals with meaningless white noise.
      - loeg 1mo ago
        > the costs paid by the market is the full operating budget of these companies plus their profits plus their negative externalities Agreed. > which combined ends up being significant No. Combined, it is still de minimis. US equity markets alone trade something like $500B/day of volume or like $125T/year.
        1mo ago

by ralph84 1mo ago

Anon1096 1mo ago

The millisecond-term zero sum game is part of what allows for a positive sum long term. For example, zero fee trading was pioneered by Robinhood and only possible because of payment for order flow, and as a result it's virtually unheard of now for retail to be paying per transaction. Now more retail investors can participate and everyone benefits. You can also point to lower spreads and faster execution as direct benefits.

ralph84 1mo ago
Or you could just hold auctions a few times per day and eliminate the billions of dollars spent trying to win a pointless race.
- loeg 1mo ago
  No one wants four-trades-a-day settlement to save 0.00001% or whatever in trading fees.
  - amenhotep 1mo ago
    That's true, we don't want it to do that, we want it to kill these parasitic entities. Much like one doesn't swat a mosquito because one will truly miss the amount of blood she's taking.
  - ralph84 1mo ago
    No one? Mutual funds have managed to attract $33 trillion trading once a day. The demand for millisecond-level trading is almost entirely from a very small group of firms profiting from it.
    - loeg 1mo ago
      And they are steadily losing new investment dollars to ETFs, which trade interday. I don't think interday trading is why ETFs are more attractive to all or most investors, but a 0.000001% (or whatever) cost advantage just falls below the noise floor. It isn't worth any other tradeoff.
- naveen99 1mo ago
  Then the real trading will just move to hyper liquid or another platform that allows trading in real time.
Retric 1mo ago
> zero fee trading Such wonderful marketing terminology. That’s not actually free, the cost of trading with less information is quite high.

loeg 1mo ago

> it's certainly zero sum over the millisecond-term. Why do you think market-making is zero sum? Providing liquidity has value and market makers are compensated for that. (Milliseconds of liquidity being appropriately compensated with fractions of pennies.)

Retric 1mo ago
> milliseconds of liquidity Speed of light delays. Due to the underlying physics of the universe there’s physical limitations on how much liquidity can matter on sufficiently small timescale.
- loeg 1mo ago
  Again, the costs are de minimis and they're just competing with other, slower market makers to provide the same service at lower costs and faster speeds. Who cares? Retail investors, rationally, should not care about this at all.
  - Retric 1mo ago
    If the costs where actually de minimis nobody would be fighting on those timescales, instead the costs paid by the market is the full operating budget of these companies plus their profits plus their negative externalities which combined ends up being significant. Ultimately the primping value of markets is in information gathering and by flooding the market with trades based on ms timescales you’re masking important signals with meaningless white noise.
    - loeg 1mo ago
      > the costs paid by the market is the full operating budget of these companies plus their profits plus their negative externalities Agreed. > which combined ends up being significant No. Combined, it is still de minimis. US equity markets alone trade something like $500B/day of volume or like $125T/year.
      - 1mo ago