Re: [Caml-list] caml trading

[Alexy Khrabrov <deliverable@gmail.com>]

Ah, what the heck, let's put this into a good "Old Europe" vs "New  
World"-style, capitalism vs. socialism perspective!

On Mar 16, 2009, at 10:37 PM, David Baelde wrote:

> Like many others, I've been feeling for a long time that many
> financial products and practices don't make sense. I recognize that we
> live in a complex world, and perhaps I should just learn more about
> economics. However, the recent crisis showed that this feeling is not
> entirely unfounded, even if it does not show that finance is harmful
> as a whole.

Jane St is a market maker.  They have to enable liquidity in the  
markets.  They offer to buy or sell shares and they fulfill their  
promise -- exactly and fast.  The terms of their offers are crystal- 
clear to all participants and are enforced by the electronic market.   
The terms are known in advance, no hidden charges, no gimmicks.  Take  
it or leave it.  Very different from the "financial crisis."  Say a  
sewage tank explodes in Lyon and covers passers-by with its contents.   
Does it mean all sewage business is a scam?

The failed securities were derivatives, stemming from the rotten  
mortgages pushed onto unqualified American buyers, mixed with AAA  
bonds, rated highly by crooked agencies, and sold to the world  
investors.  Many European investors wanted to basically exploit hard- 
working American home owners, working with higher American  
productivity to uphold their higher American way of life.  The  
productivity of the US worker is higher than that of his European  
counterpart because EU is loaded with socialist obstacles to  
productivity, and EU capitalist investors know that and prefer to get  
a higher US rate of return.  This desire to live off of hard-working  
American mortgage payers was deftly exploited by smart US crooks, so  
the world and EU investors essentially got what they deserved.   
There's no easy money.

This has noting to do with the clearly stated and honestly settled  
trades where the nature of stocks was known forever and never changed  
by any trading company.

> I agree with Yoann's old-fashioned feeling: if you don't bring
> anything to society, why should you make that much money? The point
> against super-fast trading is not so much that speed is immoral in
> itself, but that such fast transactions usually seem to fall in the
> category of no-value-added.

Why should stupid pseudo-art be sold at Sothebie's for millions?  Why  
do folks spend $15,000 for a brunch in a pseudo-French New York bistro:

http://www.nytimes.com/2009/03/15/nyregion/thecity/15part.html

Who decides what's value-added for society?  This is socialism and  
we'd have none of it in the US unless required by law.  No amount of  
bureaucrats in Brussels will ever tell us what to do.

> A simple answer to this criticism is that the notion of usefulness to
> the society is very controversial. Let me comment on the answer that
> was given instead.
>
> On Mon, Mar 16, 2009 at 4:31 PM, Markus Mottl  
> <markus.mottl@gmail.com> wrote:
>> Thus, besides providing wonderful jobs for OCaml-hackers, our company
>> makes it cheaper for people to invest their hard-earned money by
>> providing extra liquidity on financial markets.
>
> All you're saying is that you believe in free trade. If my mobile
> phone company is ripping me, they can justify it because other
> companies might rip their customers even more? Notoriously, this
> argument does not always work: in France, all mobile phone companies
> practice similar insane prices and no "fair" one arises.

Because socialism is bad, and US and Asian companies are more agile  
and their services are better priced than the EU ones.

> I'd like to understand finance, maybe I'll read some serious stuff
> about it some day. But I feel that it's really too bad that such an
> important matter is inaccessible to most citizens. More importantly,
> one should not fool people (or oneself) with sloppy metaphors and
> apparently flawless reasoning when it actually boils down to
> non-trivial beliefs about the world economy.

Trading is a highly specialized endeavor.  So is cutting diamonds and  
launching rockets.  Settling trades is as important as water and waste  
management.  Municipal waste requires a degree in civil engineering to  
do right, and trading is no different.  It's the blood of the economy.

> In my opinion, a major sickness of our world is that it is ruled by
> people who claim to understand it when they don't. Politicians always
> have solutions, never doubts. Obviously, it's just a way to justify
> why they're ruling those who don't understand. We should keep our eyes
> open and don't let it happen unnoticed, nor reproduce it ourselves.

The best way for smart people in such a situation is to unite and  
act.  Jane St is not a government or political organization.  It is a  
set of folks who believe they know how the world works and prove it  
daily.  That's the most honorable way for people to act in our times.   
They use their education, technical savvy, creativity and software  
skills to build an agile system which thrives.  This is one of the  
most beautiful things possible under the constraints you lament.  As  
we say here, stop whining, roll up your sleeves, raise some seed  
capital, and go change the world!

> Despite my doubts, I enjoyed Yaron's talk and appreciate the Jane St
> involvement in OCaml.

Here we finally agree.

> I just wish it were that simple.

It's simpler than you think!  "Just do it."

Cheers,
Alexy