If you don't pay bonuses, do you give a managing director at a bank a 1 million dollar salary independent of performance? How is that a good thing? And if you tried to pay her very little, the bank would just turn itself into a shadow bank and proceed as before. Remember, GM was not a bank, at least nominally, and it was bailed out
Let's not forget that you could major in STEM and take plenty of liberal arts courses. For example, I was an engineering major and still took English I and English II, as well as Japan Before 1600, History of the Labor Movement, African History and some others. Let's not turn this discussion into comparing multiple false choices to each other.
Agreed. The options are not mutually exclusive. I also was an engineering major and picked up two minors outside my field specifically in the social sciences.
I wonder how common the reverse is? As in [choose: English, Art, History, etc] majors taking Calculus or Physics..
if facebook manages to earn 100 present value dollars per user per lifetime of their facebook usage on a user base of 600 million, they should be worth 60 billion. It does not seem outrageous at all. Using their average profit per user over the last 5 years, as the article does, seems a bit silly because in the first 4 of those 5 years they were focused on acquiring users, not so much on monetizing their usage.
be careful about the idea of clamping down on legal tax-paying businesses based on how much "social value" they are producing. It is very hard to judge that and it is subjective. One could argue,I am not arguing it but one could, that lots and lots of web startups produce very little social value. Should we ban them too?
yes but if there is an obligation, you could end up with less total liquidity because if you oblige traders to trade when it is a losing proposition to do so, you will get less traders and less liquidity all the time, including volatile times. That's why exchanges actually pay traders to provide liquidity and charge liquidity takers. Imagine if you ordered convenience stores to sell twinkies to people even if they have no money. How would that work in practice ?
that would reduce liquidity drastically. Think about this. Suppose all the quotes show up once a second: if the values of the assets in question are momentarily mispriced relative to some other assets somewhere in the world, HFT algorithms will attack those quotes and make money from taking liquidity instead of providing it. That would also increase adverse selection and reduce the incentives to provide liquidity, resulting in less liquidity for small investors
trading activity is information because it is real people putting real money at risk and expressing their views of what the assets are worth. As in any competitive market, HFT traders cannot make money if they only trade with themselves - that is a mean zero proposition. But by trading with people who price the assets incorrectly at a point in time, they help move asset prices to their "correct " levels
everyone can purchase fast access. If a brokerage or a bank wanted to do it, they certainly could. It's like saying that Kinko's has an unfair advantage at making copies because it bought expensive copiers and regular folks have not.
And why do you think reducing frequency of all trades to 1 second would eliminate HFT ? the term high frequency would simply mean 1 second. But what it would do is drastically reduce liquidity in the market place, which would hurt small investors and not the HFT.
yes because spreads were wider and stock trading was routed to specialists on NYSE who could "jump the queue" and peek ahead at who they wanted or did not want to trade with. Also stock commissions were a lot higher in those days. Also, it was unfair because to have "fast access" required presence on the exchange floor which is much harder than putting a computer in the colocation facility
I'd say it's more like Kinko's discovering you want to make some copies...and quickly erecting a store right outside your house so you stop there instead of Staples.
I think you still got it wrong. It is more like Kinkos discovering you need to make some copies and then buying up ALL the paper and ink at staples, and then setting up shop right outside your house, with a higher price :).
I don't see anything wrong with this, it simply forces the market (theoretically) to hold on to valuable securities longer, which in theory would make it impossible for HFT firms to do this. In practice, everything is irrational, but it sure beats the pants off overregulation.
Yes, because that key word...discovering...implies that our rhetorical Kinko's has somehow gleaned advance knowledge that you're about to leave home to purchase some copies.
I don't think HFT in general is ruining things. I think the ability of HFT firms to quickly enter orders and quickly widthdraw those same orders millions of times a minute enables them to gain some insight into the trading market that the market was never designed for. And I believe that is a perversion of the original open-call trading that the stock market was built upon. All buyers should be able to see the ask at the exact same time.
A better solution would be to reduce the granularity of trades to, for example, 1 second. Nobody needs to trade faster than that. If all trades are executed in a random order every 1 second rather than the current 'fastest fingers first' nothing would really change much in the world, just the HFTs would go away. HFT is a leech on the face of the financial world.
