Saturday, April 5, 2014

High frequency trading? Who fucking cares...

Michael Lewis’ new book ‘Flash Boys’ has got a lot of people pissed at high frequency trading firms. I personally don’t know much about high frequency trading (HFT), but I think people are fucking overreacting about something that shouldn’t even affect them. In fact, HFT probably reduced the cost of investing as it resulted in greater liquidity and therefore smaller bid-ask spreads.

The main argument against HFT is that HFT firms pay exchanges for proprietary data feeds and use their fancy equipment to quickly capitalize on the order data. This could result in investors having to pay a few cents or fractions of a cent more per share on a portion of their buy order. Big fucking deal. If having to pay $50.01 instead of $50 is such a deal breaker, then you probably shouldn’t be investing in the stock. I don’t know about you, but when I buy a stock for $50, I don’t do it because I think it will be worth $50.25 in a few hours; I invest in the stock because I think it will be worth a heck of a lot more than $50 in 10 years. And if someone is so anal about having to pay a cent more per share to complete his order, then he should just place a limit order. I personally use limit orders slightly above closing price. More often than not, my order is filled below the maximum price I’m willing to pay for the stock.


Look, it’s no secret that HFT firms pay exchanges for proprietary data feeds (it is public knowledge, so I don’t know why people are acting as if a fucking conspiracy is going on). I’m fine with that as it doesn’t affect me. I’m actually glad that HFT exists as I think it reduces my cost of investment as a whole. But if you find that your dick can’t get hard or your pussy can’t get wet because someone out there is making money through HFT, then don’t invest in stocks. I think this crusade against HFT is driven by envy. Instead of trying to make the most out of their own lives, a lot of people would rather spend their time hating on successful people. Anyway, thank you for reading. Take care and stay rational.                 

4 comments:

  1. Replies
    1. Haha, thx man! Btw is there any high frequency trading going on in Malaysia? Of course I'm not interested as I'm a value guy, but just curious

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    2. I don't think Malaysians are sophisticated enough to have HFT technology.

      Also, the Malaysian stocks market may be too inefficient for the computers to understand the mechanism. Share prices can be driven up by bonus shares issue or stocks split. The computers must be scratching head. XD

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