looseleafer

he wanted to

While I wholly agree on the problem of HFT when it comes to flash crashes - and am in favor of volatility regulation as an attempt to control panic - I see it as a losing battle. Technology is allowing people to realize, and act upon, negative news all at once.

I feel that everyone (mainstream economics) is beginning to accept the fact that the market is NOT truly random. I am a huge proponent of behavioral economics - hence my position as a boutique trader. The advance of technology has greatly increased investor sentiment as a major influence of the markets, rather than simply fundamentals.

Much of HFT (what you described as latency arbitrage) I don't have a problem with. Many people see it as a problem because as of now, it's a certain bunch making the money off of this. The firms are not misleading the ordinary investors in day-to-day situations. They've simply gotten on top of said technological advances.

My problem is with the regulators themselves. For the passed few years - first America, and now much of Europe - has relied upon satisfying short term demand of investors rather than actually fixing the problem. In my opinion much of this is a result of the nature of political systems and the desires of those to get re-elected. The same goes for a large amount of wealth managers - that sector is based upon beating the average, so it doesn't matter if the average sucks - as long as the unedcated clients with money are happy to be doing better than everyone else.

So personally, I don't see the firms who are profiting for themselves and their client - through (as of now) legal means, as a problem. They aren't misleading anybody.

Am I crazy? Should I read your book to get proven wrong? Thanks a bunch for providing easily one of the most interesting AMAs from my point of view.