Oct

17

How is it a boon to investors to get screwed on every transaction by people with better information? Mind you, it's not that they worked harder for more information about a companies prospects, they just paid a lot of money to get an unfair edge.

I know the standard response is "liquidity" but I also know that such liquidity disappears the second the "liquidity providers" aren't guaranteed profit. The normal justification for the money earned for providing liquidity is that it is a service and that risk is incurred.

With HFT it's just a guaranteed screwing over of everybody.

And people wonder why investors are buying gold and silver.


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3 Comments so far

  1. Andre Wallin on October 18, 2011 4:15 am

    i think they call it “toxic flow” when they shut down their machines.

  2. Anatoly Veltman on October 18, 2011 6:08 am

    One has to be extremely selective re: one’s entry. You may not find good opportunities for days at a time. It’s no longer like Chair used to do: run an idea through a 20-year data base - and reliable odds pop out. HFT negates long data, and flexionism contaminates recent data.

    So, it’s deeper than just HFT: combination of flexionism and HFT.

    Economy needs capital market participation: momentum speculators and long-term value seekers. Participants became disenchanted due to above combination, feeling markets are rigged. We’re in catch-22 now, where stock market only advances on money printing; then panics on realization.

    The speculators of this forum have always sought to compete in rich diverse environment, where they could do their work and outsmart crowds of amateurs and pseudo-professionals - within near-perfect zero-sum! Alas, the crowds have so totally dispersed. To be more precise: speculative money has left the traditional, “regulated” U.S. arenas. It currently resides elsewhere - where we are outsiders.

    A handful of HFT leaders R&D way more than how to get inside current bid and offer. What they discover and what they end up implementing, from time to time, is beyond the scope of this discussion. Alas, it is also beyond regulators’ comprehension. Their employees are valued at eight-figures/annum, and possess the ability to camouflage principal activity.

    Simply put, speculator dilemma is to seek ways of overcoming the average $50 million dollar daily hurdle

  3. Methinks on October 18, 2011 1:36 pm

    I don’t understand this complaint.

    You might as well ask why anyone should be allowed to act on comparative advantage.

    Why would you expect anyone to trade if they don’t think they have edge?

    I’ve shut down my market making operation and we’re moving toward an automated model. The SEC and the central bank has destroyed the market in ways that HFT can only dream of. Algos are the only way to go.

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