> I find the general "Main Street" sentiment toward the profession to be misguided.
> I won't say HFT is the most valuable thing that its practitioners can be doing. I think the (trading) world would operate just fine without all these micro-second level transactions. But they are NOT the next subprime mortgage, and I just hope folks stop commenting on stuff they have no clue about.
Your post is interesting and I learned from it. However you admit that HFT is not the most valuable thing smart people could be doing - this is the reason that many dislike it. HFT provides little value to humanity or society. I do not think this makes me 'misguided' or 'have no clue' and I don't like how this makes it okay for advocates to sweep away concerns about it. We could easily say the same thing: algorithmic trading in itself is misguided: it does not use technology to solve socially useful problems such as global distribution, food production or folding proteins to better understand drug interaction and find cures for disease.
I think we can say similar things about Google engineers working on making infinitesimally small ad targeting efficiency gains, yet this group typically has much less vitriol directed at them, though the degree to which this is the case may differ.
The counter argument to this would be that said efforts help fund more genuinely beneficial work such as their recent work in robotics and proliferation of internet availability globally, but how the net balance of talent productivity plays out is murky. The ad team is a large, multifaceted team inside Google.
Difference being engineers don't get paid as much – though perhaps they should be.
Finance guys are much more aggressive about capturing more of the revenue they create in salary and bonuses, while engineers seem to shrug at being "overpaid" while letting proportionally more of their value go to execs, investors and giant cash hoards.
I have not seen that to be the case. As a software developer in the HFT trade I make about the same as I would working for google. If the firms I work for take off or have particularly good years, I might make a lot more than the google salary bands, but it would be about the same as if I were an early employee (but not founder).
Now if you are talking about ibank traders who HFT are replacing, that is true. Their salary bands are enormously higher than engineer pay scales. Sort of explains why they direct so much vitriol towards HFT.
In general though, finance firms (at least the publicly traded ones where we can see their books) reserve a higher proportion of revenue for compensation compared to tech firms. Not entirely sure at HFT shops, but I think that may be what the grandparent comment may be referring to (and I agree that we could do better if our goal were to be more equitable -- but no one has an incentive to do this on a grand scale yet)
That's the thing. There are only a couple of publicaly traded HFT firms and they are tiny. Their compensation looks more like a technology firm than a "finance" firm.
Remember, that the vast majority of people who make large compensation in a finance firm are essentially sales force. They are selling complex products, financial services, or operations.
HFT of type #1 means that you can go to any market and roughly get the same deal.
IE: You can purchase a stock in Euros in some European exchange, OR you can purchase a stock in Dollars on the NYSE. In both cases, you get the same value.
This equivalence in value only exists because traders perform arbitrage on fractions of a penny over the course of milliseconds. And thanks to HFTs, any divergence in value larger than a penny or so is arbitraged away within miliseconds.
This is a solid service for all involved, and HFTs are the ones who take the risks behind arbitrage. (IE: if the markets move in an unpredictable way)
> I won't say HFT is the most valuable thing that its practitioners can be doing. I think the (trading) world would operate just fine without all these micro-second level transactions. But they are NOT the next subprime mortgage, and I just hope folks stop commenting on stuff they have no clue about.
Your post is interesting and I learned from it. However you admit that HFT is not the most valuable thing smart people could be doing - this is the reason that many dislike it. HFT provides little value to humanity or society. I do not think this makes me 'misguided' or 'have no clue' and I don't like how this makes it okay for advocates to sweep away concerns about it. We could easily say the same thing: algorithmic trading in itself is misguided: it does not use technology to solve socially useful problems such as global distribution, food production or folding proteins to better understand drug interaction and find cures for disease.