Here’s the advantage high-frequency trading firms have over everyone else

[Banjo]

Eric Hunsader, founder of Nanex LLC, the U.S. financial markets consultancy, did a quote and trade time-stamp analysis recently, and what he found is worse than even he, a frequent markets structure commentator, suspected.

http://www.marketwatch.com/story/he...ding-firms-have-over-everyone-else-2015-08-13

 

[i960]

"A spokesman from Nasdaq declined to comment."

 

[2rosy]

Can't everyone else pay for direct feeds, colocate, etc

 

[trendo]

"... the HFT business model under these conditions as essentially riskless. 'They know how both sides of the trade will come out before they ever press the button.' "

 

[Rum Runner]

Yeah. HFT is riskless. That is why so many HFT firms have folded and many more are far less profitable than they were.

 

[Speculate]

So what?

A decade or 2 ago, traders would pay money to stand on the floor of NYSE or CBoT, CME etc so they could get information advantage on order flow and act on it before others. These days, you spend that money on co-lo, microwave, and direct feeds - none of it is cheap, and they wouldnt do it if there was no edge.

Losers will always find someone to blame. Nothing ever changes.

 

[vicirek]

If you clicking your reaction time is 200 to 300 milliseconds, they are talking about 500 microseconds. Now, say everybody colocate, have direct feed and then what? Do you know what to do with incoming tick? Do you have enough capital to trade at that speed for more than a few seconds, minutes? What they are not telling you is that HFT is essentially market making operation and as such it does not fall under charitable activity umbrella and if you did not know market making is as old as markets themselves.

 

[i960]

Losers will always find someone to blame. Nothing ever changes.

It's riskless front-running, dude. What isn't clear about that? Your example of "yeah so what, back in the day floor traders also did this!" doesn't excuse anything and is false justification.

To the ones who inevitably pipe up about "they're just market makers!" <--- the ones who are not *formal* MMs are not required to provide liquidity!

Either people buy the bullshit hook line and sinker or are working for HFT firms.

 

[IAS_LLC]

It's riskless front-running, dude. What isn't clear about that? Your example of "yeah so what, back in the day floor traders also did this!" doesn't excuse anything and is false justification.

To the ones who inevitably pipe up about "they're just market makers!" <--- the ones who are not *formal* MMs are not required to provide liquidity!

Either people buy the bullshit hook line and sinker or are working for HFT firms.

If it is riskless, why hasn't it been arbitraged away ?

 

[2rosy]

It's riskless front-running, dude. What isn't clear about that?

It isn't clear to me. Can you or anyone give step by step example?