h a l f b a k e r yI think, therefore I am thinking.
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Pundits have been complaining lately about evil investors (very big investors) who use high-frequency trading to gain an edge that (1) is unavailable to the average investor and (2) does not serve any conceivable capitalist purpose.
So this invention is simply: Make it available to the average investor.
A retail brokerage introduces a program that offers "trades executed at better prices" by offering a menu of the same sneaky techniques the big boys use (like flash trades). Either these tactics will be available to everyone, or the markets will introduce rules to eliminate them.
High Frequency Trading Is A Scam
http://market-ticke...ding-Is-A-Scam.html
blogger complains about HFT [joee, Aug 25 2009]
[link]
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I see a frequency-war ensuing; differing financial houses competing at ever-faster frequencies to pick up the edge, pushing the limits of predictive computational servers in a bandwidth war to rival Intel/AMD, and a whole new paradigm of the Financial equivalent of Moore's Law coming into play. |
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Why not auction the shares? The problem with high frequency trading, as the article describes, is that a fast computer gets the trade, rather than the best offer. Auctions allow no such cheating. You either make the best offer or someone else gets it. |
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Switching to an auction model or adding a time delay to each trade sounds like a great solution. I don't know the subtleties of stock exchange rules or economic theory and practice well enough to say. |
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The crux of my idea is that it's a cheap way to add fuel to the frequency war that already exists. This will reduce the time it takes for the practical-minded folks who set exchange policy to institute whichever rule makes the most sense. And then we can use all those supercomputer cycles to make decisions that serve a conceivable capitalist purpose. |
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It's probably not just a case of escalating the frequency
of sampling periods, alone. The market (or if there's
more than one, markets) quite probably has a resonant
effect, and sweeping the trade frequency up may
traverse several nodes and nulls in efficacy. You'll
probably find that there's a half-wave or quarter-wave
optimum point, and higher than that is only going to
diminish the resonant efficiency of the action. |
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