Make $377,000 trading Apple in one day

jackpearson · Sep 2, 2013

Quote from OnClose:

http://finance.fortune.cnn.com/2013/08/30/latency-arbitrage-costs/
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"According to his study, in one day (May 9), playing one stock (Apple (AAPL)), Hendershott walked away with almost $377,000 in theoretical profits by picking off quotes on various exchanges that were fractions of a second out of date."

THEORETICAL PROFITS. lol

I theoretically profited $900 trillion dollars from trading yesterday. how about you?

cmb · Sep 2, 2013

oh wow theoreticle profits, I wish I could pay my rent with theoretical money.

jb514 · Sep 2, 2013

Everyone has know about this forever. Direct feeds are slightly faster than the sip. So their "theoretical profits" are coming from the fast feed crossing with the slow feed.

JamesVU2000 · Oct 1, 2013

Quote from nitro:

That article is essentially correct, but it is missing at least half the battle. Just because a market is inverted is no guarantee of profit. Getting the inversion takes engineering smarts. Taking advantage of it takes mathematics and trading smarts.

The solution is simply to have all participant have to get their quotes from SIP, no more direct feeds. Everyone gets an aggregated feed. Also no direct routing unless you are a market maker. All orders otherwise have to be submitted to the SIP. Now there is incentive to have to make markets.

If this happens, sell short equinix into oblivion. Although you could collocate and get the sip faster, it would blend the edge and make the barrier to entry far less costly. The way to remove the problem is not with endless rules, but by making competition possible to far more firms to the point it is no longer worth it.

Extracting billions of dollars from a 15T market is a tiny tiny fraction of friction. People don't mind profiteers and opportunists if they were creating or providing a service. The problem is that trading is purely a game played for its own sake like chess. It probably has no real economic value. Once you start down this rabbit hole, what value does anything have? What is the value of gold? Why does a CEO make more $ than someone who risks her life to defend a country? It's all a game played by fools.
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I think this is main problem with HFT claiming that this is a pure benefit. Its not, they are taking money away from others and then they leave

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Make $377,000 trading Apple in one day

jackpearson

cmb Guest

jb514

JamesVU2000