Publication bias is a gigantic problem for amateur FinTech.
How many hundreds of engineers tried the same thing and won't get an article on the front page of HN because no one wants to read about mediocre performance? I don't want to sound too skeptical, quantitative HFT is absolutely the future, but if enough people try something that's effectively gambling, some of them are bound to succeed, and those people will get dramatically disproportionate exposure.
EDIT: I do still like this post and the project, the infrastructure is great and it offers insight into something I'm sure many people are curious about.
It doesn't look like the article is not about HFT in particular or even trading professionals in general. It's about academic articles, where the incentive is to publish a paper, not to make money. I recall (but cannot find) a paper that looked at the sort of strategies published by academics. Younger, non-tenured professors sometimes published results that were actually interesting, because they needed to get a job and built a reputation. Older professors don't do that. If they find an effect that's real, they take it to a hedge fund. There isn't too much incentive to publish a paper about something that will really make you money.
The whole point of this article is to present a pro-HFT viewpoint. I don't have an opinion either way (yet), but this is clearly written by someone with an HFT bias.
a) there is a pernicious and wide spread myth about the elite status of people working in HFT. My experience is that it is largely the same as any other technical profession. That is to say, it is no more or less likely for people in HFT to know about online estimation than any where else.
b) Given the reactionary view that many HFT participants have to information sharing, widely known/documented algorithms are often thought of as secret sauce and are frequently not talked about.
c) I agree with your sentiment specifically to one-pass algorithms being not terribly novel but am very happy that people with HFT backgrounds are publishing anything at all as it will hopefully help to remove the backwards thinking around secrecy so prevalent in the industry.
Sometimes I think of the HFT and quant trading industries are like the Formula 1 of tech. A way for extremely talented people to apply their skills and compete with each other, with lots of money involved, but ultimately the technologies developed for the 'race track' make their way onto 'main street' in some shape or form.
I'm sure all this research into ultra low latency infrastructure and live data mining is bound to come in useful somewhere else. Maybe this is off base but why be cynical.
I suspect you'll have trouble convincing a forum of primarily engineers that a high frequency trader is more worthy of sympathy than an engineer. They're both pretty privileged jobs and HFT is not known for having tons of benefits to society
I’m genuinely curious about who the target customers are for this platform. In terms of simple strategies (see signals A and B, fire order, wait for signal C, exit market, profit), there’s just no chance of a startup beating the established HFT players on execution speed. In terms of sophisticated model generation, training, optimization, etc., I don’t see being able to compete with them either. Their data and computational resources are just too good. You interviewed 100s of traders; I wonder how many truly successful ones you talked to. Did you give more weight to their input than the less successful ones?
I’m certainly biased here, as I’ve spent many years building infrastructure for large HFT firms. If nothing else, it’s made it crystal clear that there’s smart money in the market and dumb money in the market. On my own, I’m absolutely the dumb money when I compare my resources to infrastructures costing $300M or more and hundreds of the brightest people around. Unsurprisingly, I keep my money in mutual funds.
I wish you the best of luck, though. I hope you prove me wrong.
As someone who knows just about nothing about HFT(theoretically this article's target market) I don't see anything wrong with it. Care to elaborate about why its "bad on so many levels"?
What I've been thinking about recently though is that the problems HFT companies work on may have unexpected benefits in other fields. For instance they are working on things like machine learning, transmission speed, long range networking, mathematical modelling, and software. If we were to ban HFT we would lose the potential upside of all this. In the words of NN Taleb, this sort of 'stochastic tinkering' is primarily how scientific progress is made.
I could be totally wrong, and perhaps I should read that blog, but working in HFT doesn't sound very rewarding except perhaps in a pure financial sense. It seems to me that the field contributes nothing to society, and has only negative externalities like raising barriers of entry to markets and using insane amount of resources.
Arguments for or against HFT aside, the optics around HFT are pretty bad. Hedge funds getting rich investing millions in faster ways to trade isn't going to play well.
I am a professional trader, and by almost any definition I operate in the "high frequency" space. First, let's establish that Traders is an authority on the real world of financial markets in the same sense that PC World is an authority in the world of technology.
So I've not read the linked article, nor am I going to. But I will say this: HFT does perform a viable, necessary economic function. A well-functioning capital market absolutely requires this kind of activity.
HOWEVER, like most mainstream-media memes, what gets talked about / opined on is almost never relevant to what is actually important and/or controversial: in this case, the question of whether HFT creates a two-tiered playing field where individual (read: non-technically-sophisticated) investors suffer at the hands of the "pros".
Most arguments against HFT basically say that algorithms are purely predatory and only serve to hurt the performance of large investors. This is naive at best and deceptive at worst; for every share I purchase "ahead of" a big order, a seller has been filled at the price he desired. Every transaction has two sides; you can't just pick one and say they got screwed. The other side has to have done as well as the other did poorly (assuming a fictional frictionless world).
The reality is that HFT requires tons of knowledge and a technology budget of seven figures per annum at the barest minimum, and this provides a very real barrier to entry. What should be talked about, but never is: is that ok? Why or why not? What ramifications does it have?
Their "is hft good or is it bad? it's opinion! <but look at all these scary things they are "responsible" for>" bit is really disappointing. I see it in articles all over the place and it's really lazy research and reporting. Isn't this article about the tech? Why are we suddenly having an extremely off-the-cuff discussion on whether HFT is "good or bad"?
Also, I have trouble reading the tone of the article. I hope the "making trades in the past" and "until someone manages to break the laws of physics" are completely in jest. I know it's probably a joke, but it's a poor enough excuse for one that it just leaves me wondering if they might actually be somewhat serious.
I don’t. As someone in the industry, almost nothing in that book is actually correct. Moreover, HFT is a very small part of the industry and is not particularly profitable.
Quantitative investing as a whole is becoming more and more popular, while HFT isn’t.
As opposed to no-one having access, a restricted access is a much better idea.
I was not aware that HFT algorithms are that 'personal', now that article makes even less sense! What seems extremely blasphemous is that this person outrightly denies the importance of creativity and innovation that goes into Product designing at (pardon my ignorance, and bias for real tech firms), say, Google.
What I do get from the port is this: HFT people are extremely smart - extremely closed circle. They know algorithms and optimization. Speed is of utmost importance. They know more ways to optimize than I will ever know (Actually I don't even need to. I can very well work on something more significant). And they earn a lot (Well I will earn enough for my satisfaction, so I don't give a flying SegFault).
How many hundreds of engineers tried the same thing and won't get an article on the front page of HN because no one wants to read about mediocre performance? I don't want to sound too skeptical, quantitative HFT is absolutely the future, but if enough people try something that's effectively gambling, some of them are bound to succeed, and those people will get dramatically disproportionate exposure.
EDIT: I do still like this post and the project, the infrastructure is great and it offers insight into something I'm sure many people are curious about.
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