<story><title>Someone got the natural gas report 400 ms early</title><url>http://www.nanex.net/aqck2/4090.html</url></story><parent_chain><item><author>lifeisstillgood</author><text>At what point will HFT drive out the proper functioning of a Market?&lt;p&gt;Have there been any studies on this?  If human traders mostly reacted to &quot;real&quot; news (the Orange juice crop is bad this year) then human trading was mostly linked to actual changes that affect the price mechanism&lt;p&gt;But if large volumes of trades are speculative, or even worse, are directed at affecting the behaviour of other large Market players, is there not a point where the selling of actual OJ is just noise in the Market?&lt;p&gt;One can anticipate HFT bots acting like the strange Amazon pricing of obscure books in the millions of dollars, bots competing against bots to acquire more of the rent 
redistribution.  If we can imagine that we can imagine a failed crop with prices being driven down in a frenzy.&lt;p&gt;Surely some research exists on this? Where is the price signal tipping point?</text></item><item><author>apaprocki</author><text>&lt;a href=&quot;http://invezz.com/news/alternative-investments/625-uk-report-advises-against-more-hft-regulations&quot; rel=&quot;nofollow&quot;&gt;http://invezz.com/news/alternative-investments/625-uk-report...&lt;/a&gt;&lt;p&gt;&quot;Veteran traders would usually wait in anticipation for the weekly report of gas-inventory figures by the U.S. Energy Information Administration released on Thursday at 10.30 AM and then dive into the busiest trading window of the week. This is no longer true as most traders are now staying out of the market due to the HFTs new strategy - sending floods of orders in an effort to trigger huge price swings just before the data gets released, also known as “banging the beehive”.&quot;&lt;p&gt;edit: Fast algo puts orders out on multiple equity exchanges and then hedges itself with a slow algo in the futures market.</text></item></parent_chain><comment><author>jdietrich</author><text>The HFT boys are creating vast amounts of liquidity and squeezing the spread down to unprecedented lows. The volatility created by their trading is essentially invisible to a retail investor who observes the markets day-to-day rather than minute-to-minute.&lt;p&gt;It seems to me that people are fixated on volume, which is essentially an irrelevant figure - holding a big position for a couple of milliseconds has no meaningful impact on anyone but other HFTs. If we smooth our data to a resolution of minutes rather than milliseconds, market behaviour looks no different today than a decade ago. Even a supposed disaster like the &quot;flash crash&quot; of 2010 corrected itself within five minutes.&lt;p&gt;I&apos;d be curious to see if the same debates were happening when computerised trading was first introduced. The magnitude of change was far greater, but there&apos;s broad consensus that computerisation led to fairer and more efficient markets. I just don&apos;t understand how faster trades can be bad in and of themselves. If your objection is to speculation in principle, then by all means argue for a Tobin tax; I just don&apos;t see why it matters very much whether that speculation occurs over the course of days, hours, minutes or milliseconds.</text></comment>
<story><title>Someone got the natural gas report 400 ms early</title><url>http://www.nanex.net/aqck2/4090.html</url></story><parent_chain><item><author>lifeisstillgood</author><text>At what point will HFT drive out the proper functioning of a Market?&lt;p&gt;Have there been any studies on this?  If human traders mostly reacted to &quot;real&quot; news (the Orange juice crop is bad this year) then human trading was mostly linked to actual changes that affect the price mechanism&lt;p&gt;But if large volumes of trades are speculative, or even worse, are directed at affecting the behaviour of other large Market players, is there not a point where the selling of actual OJ is just noise in the Market?&lt;p&gt;One can anticipate HFT bots acting like the strange Amazon pricing of obscure books in the millions of dollars, bots competing against bots to acquire more of the rent 
redistribution.  If we can imagine that we can imagine a failed crop with prices being driven down in a frenzy.&lt;p&gt;Surely some research exists on this? Where is the price signal tipping point?</text></item><item><author>apaprocki</author><text>&lt;a href=&quot;http://invezz.com/news/alternative-investments/625-uk-report-advises-against-more-hft-regulations&quot; rel=&quot;nofollow&quot;&gt;http://invezz.com/news/alternative-investments/625-uk-report...&lt;/a&gt;&lt;p&gt;&quot;Veteran traders would usually wait in anticipation for the weekly report of gas-inventory figures by the U.S. Energy Information Administration released on Thursday at 10.30 AM and then dive into the busiest trading window of the week. This is no longer true as most traders are now staying out of the market due to the HFTs new strategy - sending floods of orders in an effort to trigger huge price swings just before the data gets released, also known as “banging the beehive”.&quot;&lt;p&gt;edit: Fast algo puts orders out on multiple equity exchanges and then hedges itself with a slow algo in the futures market.</text></item></parent_chain><comment><author>snowwrestler</author><text>It won&apos;t. High frequency trading slices the gap between offer and purchase into an enormous number of tiny slices, and HFT companies compete to see who can collect the most number of slices. But that does not affect the underlying factors that lead to most offers and purchases of stock.&lt;p&gt;For example you could offer OJ futures at improperly high prices a billion times per second, but that does not mean anyone will buy them. I&apos;m not aware of any evidence that Amazon&apos;s weird million-dollar books have affected the price of popular new books.&lt;p&gt;In addition, I wonder by what criteria one would evaluate how &quot;properly&quot; the markets are functioning. Who decides what is proper? For example, based on the business fundamentals it seems ludicrous to me that Apple would have a lower P/E ratio than GM--but it currently does.</text></comment>