Has HFT destroyed the small-mid cap stock arena?

G

Grandluxe

I found that has happened in US stocks as well. That whole space is dead. How long can this carry on? capital access is being impeded, everyone is trading C or BAC. wtf is going on

http://www.efinancialnews.com/story...rs-lament-small-and-mid-cap-liquidity-drought

European buyside investors are growing increasingly frustrated at their inability to trade in small and medium-sized stocks, as commercial pressures deter high-speed marketmakers from providing liquidity in the stocks.

Speaking at a Paris trading conference run by Knight Capital last month, Mark Northwood, global head of equity trading at Fidelity Investment Managers, said: “Investors like us have most difficulty in trading small and mid-cap stocks.

There is a lot of scrutiny on high-frequency trading and its effect on blue-chip trading, but the issues are most acute further down the market.”

Northwood’s comments follow a report, published by accountancy firm Grant Thornton in December, which found that one of the primary concerns of the 50 fund managers surveyed was dwindling levels of liquidity in small and mid-cap stocks.

High-frequency traders focus almost exclusively on large, blue-chip stocks, where profits are easier.

“The move to high-speed trading has had unintended consequences for small and mid-cap companies as it strips the economics from the secondary market,” said Philip Secrett, head of Aim and smaller listed [companies] at Grant Thornton.

“We have markets that were designed to be allocators of capital but they have moved from platforms that are designed for investing to platforms that are designed for trading.”
 
Quote from Grandluxe:

... one of the primary concerns of the 50 fund managers surveyed was dwindling levels of liquidity in small and mid-cap stocks.
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Lower liquidity means higher spreads...
Seems like a feature, not a bug.
 
---Has HFT destroyed the small-mid cap stock arena?---i've been saying this for years. and i'm no "expert" or pro in this field,just regular average joe,trading his own account from home....anyone,who actually do trade those stocks a lot would notice that long time ago.. most of the 'liquidity' is a phantom. it's disappears right when you either try to hit it or even if you just step into the market.
 
I agree the real illiquid stocks I use to trade especially NASDAQ, have really ceased trading. We use to be able to move bids an offers all around close spreads up and have liquidity follow. I mean these stocks tend to have a point or two spread to begin with but there was visible liquidity to move these things around. Now they just stay dormant no activity at all. You might find a dark pool print here and there but internalizers pretty much own it. Plus those big bank prop traders were the best they use to manipulate the hell out of them just following them was a great edge.
 
Quote from bears21:

I agree the real illiquid stocks I use to trade especially NASDAQ, have really ceased trading. We use to be able to move bids an offers all around close spreads up and have liquidity follow. I mean these stocks tend to have a point or two spread to begin with but there was visible liquidity to move these things around. Now they just stay dormant no activity at all. You might find a dark pool print here and there but internalizers pretty much own it. Plus those big bank prop traders were the best they use to manipulate the hell out of them just following them was a great edge.
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100% AGREED, someone who knows what he is talking about. back in the days the programs were so easy to manipulate, its either now gone or..they are so well disguised i cant even figure it out anymore. How are you trading right now? I have been trying to move to swing/position trading, but returns are simply not compounding as fast. Do you think it will ever come back? At this point, I am thinking about leaving the business, sucks after 8 years of trading...
 
Quote from Grandluxe:

100% AGREED, someone who knows what he is talking about. back in the days the programs were so easy to manipulate, its either now gone or..they are so well disguised i cant even figure it out anymore. How are you trading right now? I have been trying to move to swing/position trading, but returns are simply not compounding as fast. Do you think it will ever come back? At this point, I am thinking about leaving the business, sucks after 8 years of trading...
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same here(except that my system is a bit different). if there some decent % in bonds i would just put something like 50/50 between stocks and bonds or just put everything in bonds and forget it,but everything is so f**d up now, that i don't even know what to do..back to a drawing board or do something else..
 
I feel your pain bro right now I have been swing trading and trading a pairs system for the past year. Much more watching then eyeing level 2 and time and sales, also more boring. But it is still profitable and believe it or not I have been watching level 2 demo of how brazil trades and it's very similar to what we were use to seeing more pure following the liquidity. Not much automation mostly manual trading.

100% AGREED, someone who knows what he is talking about. back in the days the programs were so easy to manipulate, its either now gone or..they are so well disguised i cant even figure it out anymore. How are you trading right now? I have been trying to move to swing/position trading, but returns are simply not compounding as fast. Do you think it will ever come back? At this point, I am thinking about leaving the business, sucks after 8 years of trading... [/QUOTE]
 
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