Home » Market Structure » Packer on Amazon and Smith on HFT

Packer on Amazon and Smith on HFT

George Packer, The New Yorker, Cheap Words, here.

According to Marcus, Amazon executives considered publishing people “antediluvian losers with rotary phones and inventory systems designed in 1968 and warehouses full of crap.” Publishers kept no data on customers, making their bets on books a matter of instinct rather than metrics. They were full of inefficiences, starting with overpriced Manhattan offices. There was “a general feeling that the New York publishing business was just this cloistered, Gilded Age antique just barely getting by in a sort of Colonial Williamsburg of commerce, but when Amazon waded into this they would show publishing how it was done.”

Noah Smith, Noahpinion, The HFT arms race, here. Declining HFT trading graphics, here.

But what if HFT consumes liquidity instead of increasing it? Theory suggests that if HFT consists of a bunch of algorithms trying increasingly hard to beat each other to the punch, then liquidity will go down, and the resources spent on HFT will just be a waste. Now, via Johannes Breckenfelder of Stockholm’s Institute for Financial Research, we have evidence to back up the theory.

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