Re: [Caml-list] caml trading

[Markus Mottl <markus.mottl@gmail.com>]

On Mon, Mar 16, 2009 at 10:24, Yoann Padioleau <padator@wanadoo.fr> wrote:
> I did watch the video, that's why I asked the question. From the video
> it sounds like your are buying and selling things on the market
> at the micro-second level. I don't see any value, any wealth created
> doing that. The only thing that come to my mind is that there should
> be a law that forbid such micro-transactions. I can see the
> value of banks, of investors, I don't understand the value
> of "arbitrage". To make money flow better ? ...

This is clearly not on-topic for this list, but since it may be of
interest to OCaml-developers who want to work with us, let me quickly
dispel this unfortunately very common misconception concerning the way
markets work and what the actual service is that market makers /
traders like us (and in general) provide.

First of all, what do you think would be a "fair" average period that
traders should hold their positions?  Ten years?  Three months?  One
nanosecond?  It's clear that different people might have different
subjective opinions on fairness so any of the above would then just be
an arbitrary choice.

But there are clearly economic reasons for transaction speed.  E.g. a
trader in a grocery store surely won't buy and sell apples within
milliseconds.  Even if it were physically possible, we would certainly
expect that the required infrastructure would be too expensive.  It is
hard to imagine that the added benefit in more accurately meeting
demand for apples is big enough that customers would be willing to pay
the extra cost for that level of service.

Thus here we have it: cost and profit, these are the determinants of
how fast you should trade.  It is costly for us to be able to trade
fast: you may need to buy very expensive computer equipment, pay a lot
of money for realtime financial information, and, most importantly,
hire good OCaml hackers (a rare species!).  As long as the extra cost
of investment is at least compensated by extra profits (look up
"marginalism" on Wikipedia), it is economically advisable to trade
faster.

What is now the added benefit for society?  How do you personally
benefit from companies like ours?  This is easily explained, just
imagine we did not exist.  We can only be profitable by providing
better prices than competitors, otherwise nobody would trade with us
on a given market.  Therefore, if we didn't exist, you would have to
pay a higher price to somebody else.  Same if you want to sell again:
you would receive less for your investment from a competitor, thus
making you worse off.

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.

Regards,
Markus

-- 
Markus Mottl        http://www.ocaml.info        markus.mottl@gmail.com