High Freq Trading Is 70% of Volume; Take It Away = Armageddon

Perhaps I am missing something but what is actually "fake" about the volume.

From my seat a trade is a trade and if the price moves against or for me those are REAL as far as my account NAV goes.

I don't have much of an opinion on HFT so maybe thats why I am not against it.

I also generally agree with many of BLSH posts but have a hard time getting my head around the idea that a computer (or any trader) is going to see three orders that total less than a thousand shares on any given stock and start to buy it with the thoughts that it spotted a "real" buyer with a lot more shares to buy and that they will make money off of that (At the same time I am aware of alogros that looks to get very small gains so maybe its just I think that example is pretty weak)

For the most part I would not be against the HFT as long as everyone knows its happening (as we all do now). We can choose to engage the market or not too. On its face to me it doesn't appear that regulating it gone is anything more than a "feel good" restriction. I don't think it will change my PnL at the end of the year but if there are traders out there who think it will change their PnL I will be glad to listen as to why.

Best

Robert
 
Goldman is feeling a lot of heat these days. They're just being smart in not raising more trouble with outlandish spending.

But people really ought to continue the pressure on these thieves until they're broken up into several smaller units ala AT&T!


Quote from obama-lama:

I lean towards this analysis as well. But frankly, as someone else mentioned, it's mostly a yawn.

Much more interesting imo, though unrelated to HFT is Goldman telling their people to hoard cash. Is it really based on PR? Or is it bonus part deux? http://www.reuters.com/article/newsOne/idUSTRE5732GJ20090804
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Quote from ByLoSellHi:

High Frequency Trading Programs account for 70% of market volume. TAKE AWAY 70% of MARKET VOLUME AND YOU HAVE FINANCIAL ARMAGEDDON.

http://seekingalpha.com/article/153555-five-reasons-the-market-could-crash-this-fall

High Frequency Trading Programs (HFTP) collect a ¼ of a penny rebate for every transaction they make. They’re not interested in making a gains from a trade, just collecting the rebate.

Let’s say an institutional investor has put in an order to buy 15,000 shares of XYZ company between $10.00 and $10.07. The institution’s buy program is designed to make this order without pushing up the stock price, so it buys the shares in chunks of 100 or so (often it also advertises to the index how many shares are left in the order).

First it buys 100 shares at $10.00. That order clears, so the program buys another 200 shares at $10.01. That clears, so the program buys another 500 shares at $10.03. At this point an HFTP will have recognized that an institutional investor is putting in a large staggered order.

The HFTP then begins front-running the institutional investor. So the HFTP puts in an order for 100 shares at $10.04. The broker who was selling shares to the institutional investor would obviously rather sell at a higher price (even if it’s just a penny). So the broker sells his shares to the HFTP at $10.04. The HFTP then turns around and sells its shares to the institutional investor for $10.04 (which was the institution’s next price anyway).
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can this be done by the retail guy?
 
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