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Occam's razor is all I'm saying: What's the simplest answer to the question, why aren't large HFTs with high overheads being eaten alive as technology decentralizes access to trading? Wouldn't we expect types like Burry -- self-driven, confident financial geniuses -- to be equally decentralized? Wouldn't we expect returns to become equally decentralized?
Fraud is the simplest answer. Maybe that comes in the form of market coercion, regulatory capture, negligence, or any other plain old market manipulation. Look back at Enron: The Smartest Guys in the Room. It's all much too similar for my tastes. Time will tell.
This is absurd reasoning. It's like saying Apple has such large profit margins on their iPhones that they must be either cooking their books or in cahoots with someone somewhere. It's just a phone! How hard is it for a competitor to make a comparable phone?! They've had 15 years to copy them!
> I honestly can't name any investment firm with double digit returns YoY for more than a decade or two that doesn't have bodies in the closet.
It's clear you have literally zero idea what HFT actually does, yet you don't hesitate to call them frauds. HFT firms do not "invest" like traditional investment firms or hedge funds. They provide liquidity and sometimes take liquidity but only tend to hold those positions for seconds or minutes. At the end of every day, most HFT firms have zero position (some might hold some spreads or hedged positions overnight but those are generally less risky).
> why aren't large HFTs with high overheads being eaten alive as technology decentralizes access to trading?
HFT firms don't compete against each other on pure "technology", but more so on mathematical models or what you could call intelligence. Intelligence is not simply arbitraged away over time, although it does happen to some extent. My comment earlier discusses some of this [0]. Technology has little to do with their success. By the same reasoning, why hasn't Apple's margins been eaten over time?
> Fraud is the simplest answer.
The ancient Greeks thought that Zeus was the simplest answer for lightning, but clearly we know that not to be the case.
> Time will tell.
We do not need time. We already know. That you personally don't know doesn't change the fact that nothing illegal or wrong is going on.
> They provide liquidity and sometimes take liquidity but only tend to hold those positions for seconds or minutes.
Do HFTs issue or purchase billions of dollars of debt with the express goal of market liquidity? No? So why do you use the term "providing liquidity?" You know "providing liquidity" isn't the same thing as "frenetically purchasing and selling derivatives," right? If these funds didn't exist, I've seen no compelling evidence markets would so much as hiccup. I've seen plenty of compelling evidence that much of financial services in this country are a net drain on its productive capacity.
> We do not need time. We already know.
We'll have to agree to disagree. I think far too much activity happens in financial services, that they aren't nearly boring enough. I harken back to the 70s/80s back before massive deregulation in financial markets, when financiers had to get two jobs just to tread water. I suggest we might revisit such a time. Time will tell!
Your entire argument is "I don't know what they do, and they make money in finance, so they must be doing it illegally." The burden is on you to provide evidence to back up your claim. That's how things work. I could claim that HN user rgifford is the Zodiac Killer, and my evidence is "I don't know him but if you rearrange some subset of the letters of words he's typed in the past, they spell out 'I am the Zodiac Killer'". Whether you realize it or not, your reasoning is that specious at best.
> The market for consumer electronics hasn't fundamentally threatened the stability of the US government every decade for the past 5 decades.
Nothing HFT has ever done has come within even 0.000001% to threatening the stability of the US government. Period.
> Renaissance Technologies Medallion fund may as well be an insider trading scheme for all the public can tell.
Again, claims require evidence. You need to provide that evidence. But more importantly, the fact that you compare RenTech's Medallion Fund to HFT again demonstrates your complete ignorance on the topic. The Medallion Fund isn't powered by high frequency trading. It started decades before HFT ever existed.
> Do HFTs issue or purchase billions of dollars of debt with the express goal of market liquidity? No? So why do you use the term "providing liquidity?" You know "providing liquidity" isn't the same thing as "frenetically purchasing and selling derivatives," right?
You don't know what providing liquidity means. When you place an order to buy or sell 100 shares of MSFT in the market, who is taking the other side of your order? The vast majority of the time, it's an HFT firm.
> If these funds didn't exist, I've seen no compelling evidence markets would so much as hiccup.
I'm sure if you took all of the grease out of your car engine, it would continue to operate without a hiccup.
> I've seen plenty of compelling evidence that much of financial services in this country are a net drain on its productive capacity.
Another false comparison. HFT is not a standard "financial service" that is provided to consumers.
> We'll have to agree to disagree [...] Time will tell!
Flat earthers also ignore reality and disagree, but that doesn't make their perspective equally as valid as those who look at pictures of the earth and conclude it's spherical. Time has already told us, but whether or not you want to look at facts or educate yourself on even the basics of what you think you're talking about is a different question.
Almost every sentence you said in your post contained some flat out false or wrong statements. Your unfounded arrogance is matched only by your ignorance on this topic. You have not made a single concrete or factual point about how HFT might be fraudulent, yet you seem to hold this worldview with the same conviction that the sun rises in the east.
