From City AM:
A TOP European Parliament committee voted unanimously in favour of rules to cut down high frequency trading yesterday, and move forward plans to limit the number of positions market participants can hold.
MEPs claimed the markets in financial instruments directive (Mifid2) will promote market stability by forcing traders to place orders in markets for at least half a second.
Thursday, 27 September 2012
"Half a second"
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11 comments:
Honestly I don't have a problem with this because there really is no legitimate reason to have an offer up for less than that. If you make an incorrect offer by mistake you're not going to be counting down the milliseconds until you can retract it... you'll be lucky if you even notice within 0.5 seconds. This measure will only prevent "raping" with no real side-effects.
RA, these HFT computers do trades (buy and sell) within tenths or hundredths of a second*. That's why they battle to have their servers as close to the main exchange computer as possible**, because each extra yard cable length adds an imperceptibly small delay which can turn a sure fire profit into a questionable loss.
* Possibly even milliseconds?
** Cue LVT.
Clueless.
This will just mean fewer transactions are made but with higher values.
Also it is opposing natural laws to limit a market artificially. That can only mean any ill effects will be moved elsewhere.
If hft is a monopoly power, all this means is that, the monopoly profit will be shifted elsewhere.
If there is location value in proximity and speed of transaction, that unearned income should be collected for the common good who created the value.
More fiddling in Rome more avoiding root cause. More jealousy of wealth. Mote RobinHoodItis.
RS: "If there is location value in proximity and speed of transaction, that unearned income should be collected for the common good who created the value."
Exactly. The rental value of a couple of square feet near the exchange is hundreds of thousands of pounds a year.
Now, the exchange people will say that they created the value; but seeing as the HFT people are trading in real stuff in the real world (commodities, shares etc), I would argue that those rents belong to the world in general and UK citizens in particular.
The issue of collecting the land rent embedded in the proximity of the mainframe is a different one from deciding that such a measure has a limiting effect on the efficiency of the stock-market. And I don't know, does it? There are both privately and publicly imposed limitations to markets, in auctions for example, that has a function.
As Robin wrote:
This will just mean fewer transactions are made but with higher values.
Kj, why would it? If the owner of the land on which the servers are sited has to pay extra £ millions in tax, that has no impact on anything, optimum use is still optimum use. The HFT people are entirely unaffected because their rent is what it is, whether it all ends up with the landowner or with HMRC.
JH, I doubt it very much. HFT only works because you have £1 million to play with and you buy and sell for £1 million a hundred times a day (making an 0.001% profit each time).
They can't do ten x £10 million trades because they simply don't have £10 million to play with and there are no guaranteed 0.01% profits anyway.
MW: I was talking about the limit on order-withdrawal, not the collection on LVT without the rule. Does the limitation on 0,5 sec. on order-withdrawal have a negative impact on the efficiency of the stock-market?
Kj: "Does the limitation on 0,5 sec. on order-withdrawal have a negative impact on the efficiency of the stock-market?"
No, not in the slightest, we used to manage with horse drawn carraiges and then telegraph and so on, but it kills the HFT people stone dead.
I thought so. Ofcourse the stock-market should decide this themselves ultimately, who is to say whether companies want to be listed on a no-limits HFT saturated exchange or one that requires victorian clad kids to deliver the orders :)
"Now, the exchange people will say that they created the value;"
So they did, but if they didn't take steps at the time to capture that value a la Metropolitan Railway, tough shit, they shouldn't expect the state to do it for them.
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