Hi all,
So there has been a lot of talk about Michael Lewis's new book, Flash Boys, and I have even gotten a private message asking about my opinions on it.
Just so everyone's aware, I'll start of with full disclosure that I do work for a HFT firm, one of the original players in the space in fact. However, I'm not going to attack or defend the business model, I'm here to make people aware of what HFTs do, how they work, and what their impact on the markets is. We at TMC are clearly an intelligent, and well-informed, group when it comes to Tesla Motors, and I feel like it is my duty to the community to make sure that they aren't swayed by the mainstream media and publicity stunts like Michael Lewis has done with his 60 minutes piece and his CNBC interview. To say that the "Markets are Rigged", and then to go and blame it on the High Frequency Trading firms is completely an oversimplification of a very complex situation, and in my eyes, a marketing move for him to sell his new book.
Now that being said, here is what I posted on the short-term tread about the discussion (mods feel free to move that discussion here as it has nothing to do with Tesla):
So here is what the other side has to say about it (Full disclosure, I'm a fan of Tower):
http://nymag.com/daily/intelligencer/2014/04/9-gripes-from-a-high-frequency-trader.html
Now IMHO, he makes some pretty good points about HFT and has valid critisms of the book, and the general take on the situation. I mean, lets face it, his big headline is "Markets are Rigged" or whatever the 60 minutes segment called it. To be fair, I think Gorton is being a slightly defensive about HFTs as well... Lets face it, everyone in finance is in it to make money. But I think electronic trading as definitely improved the market place, and I view what (HFTs) do as being positive in terms of liquidity provision. Its just that it comes at the costs of big banks and hedge funds.... At the end of the day though they still take a lot of money out of the retail investor's pockets... There is no reason why TDAmeritrade should be charging $8/trade and over $15 for options (I just did some CSIQ trades and was surprised by the costs!) when IB can do the same thing for $3 on a much better execution engine... Obviously, if your an HFT, you probably don't pay more than a few cents on a small trade, but to charge retail investors anything over $5 for any single trade (stock, option, etf, fx, future, forward, spread, whatever), is insanely overpriced (especially since most retailers dont trade in huge quantities).
Do I think HFTs were a net positive when they came out? Yes, they provided liquidity. Today, any new HFTs that come out are probably not going to be doing social good since liquidity is plentiful, but that also means its much harder for them to survive and make money let alone succeed.... Do I think the founders of various HFTs a decade and half ago had social good as a goal? No, most likely not. They wanted to make money, and the social good it did was a nice by-product... That being said, I do believe certain companies/executives have/had done things that are morally questionable, if not illegal. But lets face the facts, thats true of any industry any where in the world. You have your good apples, and your bad. To judge an entire industry from the bad apples is a big mistake and very narrow minded...
Also for those who don't know, here is a excerpt from the book:
http://www.nytimes.com/2014/04/06/magazine/flash-boys-michael-lewis.html?_r=0
- - - Updated - - -
So, for those that want a more balanced view on the markets, or have questions about HFT, electronic trading. You can post here, and I'll try to answer them to the best of my abilities (and of course I encourage friendly discussion as long as everyone stays civil... )
So there has been a lot of talk about Michael Lewis's new book, Flash Boys, and I have even gotten a private message asking about my opinions on it.
Just so everyone's aware, I'll start of with full disclosure that I do work for a HFT firm, one of the original players in the space in fact. However, I'm not going to attack or defend the business model, I'm here to make people aware of what HFTs do, how they work, and what their impact on the markets is. We at TMC are clearly an intelligent, and well-informed, group when it comes to Tesla Motors, and I feel like it is my duty to the community to make sure that they aren't swayed by the mainstream media and publicity stunts like Michael Lewis has done with his 60 minutes piece and his CNBC interview. To say that the "Markets are Rigged", and then to go and blame it on the High Frequency Trading firms is completely an oversimplification of a very complex situation, and in my eyes, a marketing move for him to sell his new book.
Now that being said, here is what I posted on the short-term tread about the discussion (mods feel free to move that discussion here as it has nothing to do with Tesla):
So here is what the other side has to say about it (Full disclosure, I'm a fan of Tower):
http://nymag.com/daily/intelligencer/2014/04/9-gripes-from-a-high-frequency-trader.html
Now IMHO, he makes some pretty good points about HFT and has valid critisms of the book, and the general take on the situation. I mean, lets face it, his big headline is "Markets are Rigged" or whatever the 60 minutes segment called it. To be fair, I think Gorton is being a slightly defensive about HFTs as well... Lets face it, everyone in finance is in it to make money. But I think electronic trading as definitely improved the market place, and I view what (HFTs) do as being positive in terms of liquidity provision. Its just that it comes at the costs of big banks and hedge funds.... At the end of the day though they still take a lot of money out of the retail investor's pockets... There is no reason why TDAmeritrade should be charging $8/trade and over $15 for options (I just did some CSIQ trades and was surprised by the costs!) when IB can do the same thing for $3 on a much better execution engine... Obviously, if your an HFT, you probably don't pay more than a few cents on a small trade, but to charge retail investors anything over $5 for any single trade (stock, option, etf, fx, future, forward, spread, whatever), is insanely overpriced (especially since most retailers dont trade in huge quantities).
Do I think HFTs were a net positive when they came out? Yes, they provided liquidity. Today, any new HFTs that come out are probably not going to be doing social good since liquidity is plentiful, but that also means its much harder for them to survive and make money let alone succeed.... Do I think the founders of various HFTs a decade and half ago had social good as a goal? No, most likely not. They wanted to make money, and the social good it did was a nice by-product... That being said, I do believe certain companies/executives have/had done things that are morally questionable, if not illegal. But lets face the facts, thats true of any industry any where in the world. You have your good apples, and your bad. To judge an entire industry from the bad apples is a big mistake and very narrow minded...
Also for those who don't know, here is a excerpt from the book:
http://www.nytimes.com/2014/04/06/magazine/flash-boys-michael-lewis.html?_r=0
- - - Updated - - -
So, for those that want a more balanced view on the markets, or have questions about HFT, electronic trading. You can post here, and I'll try to answer them to the best of my abilities (and of course I encourage friendly discussion as long as everyone stays civil... )
Last edited by a moderator: