with dark pools, HFT - is it still worth trading

[chibiks]

it just seems the odds are seriously against; for the first time we can have orders matched off exchange! via dark pools; noone really understands how the stock market really works and i just feel lots of things are out of the sight of retail participants.

So with dark pools in particular (e.g. the public charts/ Technical analysis charts says buy, while dark pool guys charts say sell) - majority looses.

I dont know but with all these things how can one win? Why cant SEC just ban dark pools outright? This is supposed to be one stck exchange afterall!

 

[lurkerlurker]

I have a trading acquaintance who runs his own HFT firm. Spends six figures a month in overheads, writes direct to the exchanges, connected to most of the worlds exchanges, (including jurisdictions where you need reams of paperwork to establish any sort of trading presence), and has worked massively hard to create and develop opportunities. This operation needs to take in every tick and every change in the order book for every contract tracked. Assembling, processing, compressing and storing that data is a massive undertaking in itself. Most true arb opportunities are gone by 70 micros. He uses some fully automated strategies which trade 10-100 contracts with a hold time of a few seconds, for a total of 20-40s of market exposure per day, leading to multimillion dollar profits per year. HFT is tough, many firms have gone under in the last 18 months due to rising costs of technology and robust competition. Its a crowded space now, with the low hanging fruit long gone and I give kudos to anyone who is still doing it successfully.

This is somebody who has used his intelligence, skill, and hard work to build a useful and profitable business which employs a lot of people and directly funds innovation in technology which ultimately benefits everyone.

People like you who advocate for using state violence to ban innovation and protect your own limited point of view are downright dangerous. And it is clear that you are wilfully ignorant about how markets work generally and HFT in particular. For you, no it is not worth trading. Do something else with your life.

With your attitude, it isn't possible to be a winner.
There have always been bogey men to blame for losses, for those who don't take any personal responsibility. 20 years ago it would be the specialist screwing you or the guys in the pit.
Now it is HFT.

Ironically, in the old days of floor trading, the barrier to entry was the cost of a seat on the exchange. While a useful service was provided by locals, there was also a lot of corruption and economic rent seeking. Ironically, the markets are a lot 'fairer' under HFT which has substantially higher barriers to entry than the cost of a seat. I suppose you'd rather go back to the days of paying a spread of a full 1/8th rather than a penny and having your large orders front run by your brokers buddy in the pit though?

If you want to know more:
http://www.smh.com.au/business/debunking-myths-about-highfrequency-trading-20121001-26uwo.html
http://www.elitetrader.com/vb/showthread.php?threadid=266552

 

[chibiks]

you are attacking me personally (sign of a loser) and have done nothing to answer the question/ concern.

A stock exchange is exactly that, a stock exchange - dark pools can give some people an unfair edge over others.

The state should therefore ban dark pools and HFT.

 

[DionysusToast]

2 different topics here - dark pools & HFTs....

Dark Pools allow off-exchange trading for equities true enough - that does reduce visibility but trades do have to still be reported, so they aren't entirely hidden. To me this does seem like an unlevel playing field.

HFTs - well I'm not sure what the issue is. To me it's a but like long term investors saying day trading should be banned. As long as the HFTs are not cheating - latency arbitrage (where they cause the latency) that sort of thing - then why not?

To some extent there are benefits to having all this arbitrage going on at a lower level IMO. It makes things a little more predictable.

 

[jacknapier]

I was a little skeptical about HFT until I learned more about how it actually worked. It's just another competitor and if you understand their strategies you can use that against them. If you really feel you are losing because of HFT and that the gov't ought to ban it, then you really should take lurkerlurkers advice and leave the market. No offense intended.

Dark pools, on the other hand, I can't comment about since I don't know much about them.

 

[Jack o'Clubs]

From a brokers' (and ultimately end clients') perspective, the public exchanges are very expensive places to do business. Anything that puts pressure on their monopolistic and extortionate charges is a good thing by my book (just look at the multiples the quoted exchanges trade at to see what a blood-sucking business it is). And if two counterparties want to exchange financial instruments somewhere else, I don't see an issue with that, as has been noted it gets reported anyway and there are rules about the quotes that must be offered. I think 'Dark Pools' as a name adds unnecessary intrigue to a fairly basic concept (and right). Retail traders have always had to adapt to survive, and this is just something else to adapt to, and should ultimately bring your spreads and comms down.