well it only took 2 major exchanges to have their net incomes drop nearly 50 percent and the supposed genuine volume to keep dropping month on month quarter on quarter year on year and then the inevitable happens. shareholders revolt - the top guys at the exchanges get replaced, regualtors dont get back handed because all of a sudden no one is earning any money out of this. all change please. rsj, getco and renaissance only have a limited time to cheat the system before the game will change. 1/2 a second for resting orders and fines for orders entered that they do not trade on. they dont trade on 99.99 per cent of the bullshit they put in. looks like we can have the perfect schaudenfreude of watching them go under. ROLL ON JULY THE 9TH. The European Parliament will vote on July 9 to ratify the European Commission's controversial new regulatory proposals, including plans to slow down high-speed traders. Markus Ferber, the German centre-right lawmaker steering the reforms through the European Parliament, wants trading orders to be forced to stay in the market for at least 500 milliseconds, or half a second, before they can be cancelled. The world's fastest exchanges currently trade in less than 100 microseconds, or one ten thousandth of a second, so a resting time of 500 milliseconds would mean these trades were being slowed down by a factor of 5,000. The proposals have prompted concern among the traders who argue they are simply using technology to glean a competitive advantage. http://www.reuters.com/article/2012...tateNews&rpc=43 http://www.atmonitor.co.uk/news/newsview.aspx?title=hft-what-is-in-store-for-the-industry-in-2012
I agree with your sentiments Beaker but don't share your optimism. It strikes me that the exchanges will react to the drop in volumes by spending billions on technology and tens/hundreds of millions on management consultants that will be asking the likes of RSJ what the exchange needs to do to help them increase their volumes. The exchanges are in the process of spending billions on technology -for example there's a new LIFFE venue in Basildon and the CME have a new venue in Aurora. The CMEs timing reminds me of them ploughing money into a new trading floor in the mid 90s, for it to come into use when floor trading was already in terminal decline. I have never been able to understand why the exchanges are run by such halfwits. I would certainly support this law in principle but I worry that the politicians will be bought off. Clearly such a law in the US would never stand a chance, what with the politicians being such corporate whores. The questions is whether the Europeans can pass the law. I suspect the Euro politicians are just as corrupt but not quite so brazen about it. Fingers crossed though.
Beyond HFT there is another even worse scenario I have been troubled thinking about for a few years now. HFT is not really a significant threat to traders in my view. It simply toughens the game. Let's for this thread assume a zero sum game and a government intent on ensuring profits for their financial campaign contributors. It seems to me that facism can rise when civilizations fail. So, as computer power grows and record-keeping increases, will we reach a day when every trader and trade can be correlated and used by giant computers and mega databases to ensure that only the deepest pocket traders win. Could an algorythm be built that takes into account each trader's estimated capital size and position direction, estimated tolerance for risk etc. , to effectively and systematically, wipe them out one by one over a long period of time as temporary liquidity pockets occur? In the long run, I believe every trader potentially loses. Mathematically, I think that is very simple to show. The investment banks and market makers don't lose because the political system backstops them through Too Big To Fail. You and I are simply canon fodder - perhaps some of us a big more tasty. More to the point - Is such an algorythm in development as we speak? Does it already exist? Would traders recognize that before it was too late? How?
So how fast can a human being enter and cancel an order? I would be surprised if its any/much quicker than 1/2 second so unless someone can prove otherwise, I think that 1/2 second commitment could be effective.
the exchanges are accountable to shareholders. shareholders are not going to agree to paying exchange staff massive salaries and bonuses for returning no dividend and a declining share price. there will be change because the game has changed amigos. the cosy relationship that made the exchanges billions worked for them when volume was increasing but now is falling apart because the income being produced is falling off a cliff. hft will take the blame rightly or wrongly.
the exchanges are accountable to shareholders. shareholders are not going to agree to paying exchange staff massive salaries and bonuses for returning no dividend and a declining share price. there will be change because the game has changed amigos. the cosy relationship that made the exchanges billions worked for them when volume was increasing but now is falling apart because the income being produced is falling off a cliff. hft will take the blame rightly or wrongly.