High frequency trading, as the jacketles ones pointed out, has very little to do with individual investors. I won't get into Cuban's comments, he is simply way over his head in the discussion, but I am wondering what Cooperman is up to. He actually called for a return of the uptick rule during short-selling. What the hell was that about?
. He used as an example the price of Apple stock that was up 6 points and down 6 points in a short period of time, as an HFT problem for investors. How does this have anything to do with a long-term investor buying on fundamentals? Here's a five year chart of Apple. The stock has gone up because they are making awesome products and thus their sales and profits are going through the roof. If HFT is making AAPL more volatile, this is great. If you identify Apple as a long-term winner, you should wait for this volatility to drive the stock down and buy aggressively. As long as you understand the game, even three card monte, you can beat the game.
If you are a long-term investor and know what the hell you are doing (and you should only be in the market if you know what you are doing), HFT is an advantage, since it is occasionally driving down stocks against the long-term trend. It is a gift to the long-term investor, providing discount prices. Never trust anybody coming out of Goldman Sachs. Cooperman's agenda is most likely concerned with front running by HFTs against his large trades, this battle has nothing to do with the average individual investor.
Wow, you seriously missed the point when it comes to HFT.
ReplyDeleteThe main issues (as illuminated by Nanex and Zerohedge) are that:
1. HFT widens the spread by offering bogus bid/ask offers, effectively screwing investors and traders out of the best bid/offer.
2. By artificially levitating markets far beyond all fundamentals, it creates a vast "air pocket" which will eventually result in a crash a la 1987^3.
The only one who benefits from HFT are the HFT'ers, as they make their money chiefly from "liquidity rebates" (which they in reality, do not truly provide).
In brief, it is a fraud, and the investing public is the victim.
Please do a bit more homework next time, as the expected standards for EPJ are thankfully very high!
1. If the spread widens, a long-term investor simply puts in a limit order at the bid and gets a better price.
Delete2. These so called "air pockets" are also to the advantage of the long-term investor. You simply buy when the stocks fall. There were all kinds of bargains created by the 1987 crash. You could have bought CitiBank stock for under 10 and sold it the next day for 20 plus.
If you don't know how to play the game, stay out of it.
Those crying about HFT are babies who just aren't sharp enough to know how to profit from this stuff. There's big money to be made by knowing how to trade this stuff. Sorry you haven't figured this out.
As a rule of thumb, I tend to think that whatever is good for Goldman Sachs is bad for the average investor, and whatever is bad for Goldman Sachs is good for the average investor.
ReplyDeleteRobert you're still really not getting it. The investor doesn't get the lower end of the bid/ask spread.
ReplyDeleteThe investor always gets the high end if they are buying, and the low end if they are selling.
Again, I refer you to nanex and zerohedge. You really need to educate yourself on this.
Now, you sound like you have no idea what you are talking about, if you place a limit at the bid price, you are going to get the bid price.
DeleteAnonymous, I think you're the one that needs to do some research ...
DeleteIf you place a limit buy order and someone else hits your order, then THEY are the aggressive party who take liquidity, and you are the passive party providing liquidity. Your limit order will be filled at your price, which will also be the National Best Bid (NBB) at the time of the fill.
I forgot to mention, those air pockets also insure that protective stops just get raced past. Forget a limit order getting filled, and forget the exchange busting bad trades - they know shich side their berad os buttered on and it aint the little guy. So unless you only buy in after a HFT crash, and spmehow manage to take profits at the top, you are SOL. Trying to dollar cost average will get you killed. Please read the last 5 or so articles on ZH about this.
ReplyDeleteWho the hell is suggesting the use of "protective stops" that just a "rape me" sign. There is a big difference between a limit order and a stop order. You don't know what you are talking about.
DeleteI'm surprised Wenzel even allowed your idiotic comment to go through.
Lol. You guys are the definition of an echo chamber. Bobby sez it's so, so it's SO!
ReplyDeleteI suggest you read up a bit before you open your mouths next time. And Robert - SHAME ON YOU. Looks like I'm going to have to spoon feed you this stuff, I really expected more from you...
Enjoy:
This illustrates how HFT *destroys* liquidity instead of providing it http://www.nanex.net/aqck2/3581.html
This illustrates how it creates the *illusion* of liquidity http://www.nanex.net/aqck/2806.HTML
This explains how HFT harms even long term investors http://www.nanex.net/aqck2/3532.html
Covers some of the dangers of HFT and has links to further costs of same http://www.nanex.net/aqck/3247.html
There's NO REASON to have HFT. If an order is legitimate, let is sit on the exchange for say, 0.2 of a second to let it get hit. What is the harm in that?
The only reason to allow HFT is so the banksters can skim a little more from J6P, and the government can fluff the markets in the hopes of kicking the can a bit further.
I expect a full retraction in a future article. If it doesn't happen, it's because you ignored this, or didn't understand it.
I don't think you are going to see Wenzel comment on this either. You don't get is point which is that wide swings and less liquidity provide more opportunities for long-term investors to buy cheap.
DeleteAll your links prove Wenzel's point that HFT provides opportunities.
Leon is going against HFT now is because he is no longer a GS guy and no longer able to enjoy the technological advantages he got to enjoy during his GS years. He is on his own now and so he find his bottomline getting eaten away by his previous employer. If he were to stay on with GS, he will most probably remain shut up against HFT now.
ReplyDeleteThat's it exactly. GS is now front running him. LOL.
DeleteAbolish the SEC. Remove the Fed's monopoly on legal tender. Let banks and businesses rise and fall by profit/loss. It's a real good start.
ReplyDelete