Round 1 of Lewis vs. HFT debate goes to CNBC

"It was the fight that stopped trading on the floor of the New York Stock Exchange," says CNBC, but fortunately trading on the actual New York Stock Exchange -- the one that trades stocks -- did not slow down even a tiny little bit. What CNBC meant is that the NYSE floor traders who provide picturesque background for television shows stopped pretending to trade and started cheering criticisms of the computers who have taken their jobs. Meanwhile, Felix Salmon does not trust the FBI to fix market-structure problems, Michael Lewis's book has spoiled Virtu's initial public offering, and Goldman Sachs is apparently planning to sell its NYSE floor specialist business, which the Financial Times says is mostly pretty dull "apart from small telegenic huddles of activity at the start and finish of each day."

Cliff Asness is okay with high-frequency trading.

It may not have stopped trading on the NYSE, but this op-ed by Cliff Asness and Michael Mendelson of AQR Capital Management is a good thing to read if you want to get a better understanding of high-frequency trading. AQR, which is good at statistical analysis, thinks that HFT lowers trading costs for long-term institutional investors, though "We can't be 100% sure." Here is their view on institutional investors who criticize HFT:

Often when they try to trade large orders quickly, they find the trades more difficult to execute in a market that has gravitated toward more frequent trades in smaller sizes, and that the price moves away from them faster now.

We doubt that these old-school managers were truly better off in the pre-HFT world, but it's hard to prove either way. And if they're right, it may be only because HFTs have made the markets more efficient, eliminating some of the managers' edge.

Well, sorry, but prices responding quickly—and traders not being able to buy or sell a ton without the market moving—is what is supposed to happen in a well-functioning market. It happens to us too. It may be that in the old days these managers were able to take advantage of whomever was on the other side of their trade, and that nowadays they find it far more difficult to gain that advantage. A more efficient market shouldn't be mistaken for an unfair one.

Also, Asness is good at Twitter.

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