tag:blogger.com,1999:blog-8040007778377298809.post6259100550173610512..comments2010-01-18T15:07:51.929-05:00Rick Bookstaberhttp://www.blogger.com/profile/01753622527319607465noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-8040007778377298809.post-8246633345933898432009-09-14T12:19:11.854-04:002009-09-14T12:19:11.854-04:00The idea in the last post and its link to have discrete trading is an interesting one, and one that hearkens back to the &#39;old days&#39; of Walrasian markets. These markets, used as the basis for most economic analysis up until a decade or two ago, assume people enter in orders, and then the person running the market calls out prices until there is a balance of trades. <br /><br />Walrasian markets were thought of in once-a-day sort of time frames. Today, even once a second or once every ten seconds would do the trick.Rick Bookstaberhttp://www.blogger.com/profile/01753622527319607465noreply@blogger.comtag:blogger.com,1999:blog-8040007778377298809.post-75653222209982445712009-09-11T21:21:21.989-04:002009-09-11T21:21:21.989-04:00It would seem pretty difficult to regulate latency in a continuous market. Turning to frequency instead addresses a problem, but does not prevent the latency arbitrage arms race since one would still practice this at longer periods between trading episodes in a single security. Simpler than regulation or taxation is to move to a discrete-time trading model, as I&#39;ve advocated <a href="http://mblog.lib.umich.edu/strategic/archives/2009/07/countering_high.html" rel="nofollow">here</a>.Michaelhttp://www.blogger.com/profile/11765498828290075749noreply@blogger.comtag:blogger.com,1999:blog-8040007778377298809.post-30469623622095871752009-09-10T23:54:05.754-04:002009-09-10T23:54:05.754-04:00The problem with high frequency trading will occur when the markets gap. High frequency trading is not deigned to handle gaps and during market dislocations gaps do occur.Rajat Bhatianoreply@blogger.comtag:blogger.com,1999:blog-8040007778377298809.post-83107265786414456342009-09-06T16:01:21.274-04:002009-09-06T16:01:21.274-04:00On the other hand, the speed of response to a bid or offer has always been a part of the market making game. <br /><br />Another thought. &quot;Wash Sales&quot; are already illegal, since long ago.. how can a firm be certain to not afoul of the wash sale rules while executing a hundred trades a second ?mutant_dognoreply@blogger.comtag:blogger.com,1999:blog-8040007778377298809.post-26501667437844785372009-09-05T07:02:55.472-04:002009-09-05T07:02:55.472-04:00Happy to see someone bringing some real life relevance to this conversation.<br /><br />To extend it a bit, if the capital markets are there ultimately to allow users of capital to access it, latency and trades per second have no relevance. The topic is more the extent the looters are allowed a share of the process.<br /><br />To think this is getting the attention it is...Anonymousnoreply@blogger.com