Quote from failed_trad3r:
the bid and ask is also liquidity. and thats exactly what disappeared because a few HFT decided to shut them off.
If you want to know what edges HFT have over the average trader go to defendtrading.com.
defentrading is pure propaganda used to discredit the HFT industry. instead of focusing solely on the issues (internalization, exchange product inefficiencies), they scapegoat the entire industry by associating it with the handful of firms that exploit those 'edges'. they state on their homepage that they're not against HFT, but then on every page blame them for everything under the sun. it's sponsored by bright trading, whose volumes are a fraction of what they used to be and whose traders are being out competed by HFT's on a regular basis... enough said.
here's what happened may 6th: more than one specific buy side firm puked out their yen/corp bond/big cap carry trades (if you pull up yen and corp bond charts you can see they preceeded the drop by a good margin and started showing first: use FXY for yen PSY, DHF, VLT on the bonds to name a few). they used algos they had little understanding of how to use, which they had recently implemented so they could save a couple of pennies from having sell-side 'vultures' work their orders for them. having little knowledge of the limitations of the algos, specifically, no practical experience (or common sense) in using those algos to unwind multi-billion dollar positions or performing any kind of market impact studies or using any kind of RISK CONTROL, they SEVERELY impacted the market. HFT firms were taking the other sides of those trades all the way down, but ONLY UP UNTIL their firms RISK CONTROLS prevented anymore exposure given the high cost and huge spreads created by the firms WITHOUT RISK CONTROLS. the ONLY people that acted irresponsibly on that day were those buyside firms with zero impact assessments and it was for that reason that the exchanges decided to bust an unprecented >60%... ie, they made sure those funds ate the majoriity of their losses as they should have.
those buy-side firms WERE NOT HFT firms, they were your typical pension/mutual fund, ie they were the type of fund that manages money for the everyday investor and they FUCKED UP, just as they did many times in 2008. their response has been an incredulous fingerpointing at HFT firms (ie market makers) as to why they weren't there to take the other side of their enormous, illogical, irrational, blowout trades. the people bitching in this thread about the lack of liquidity are basically asking market making firms to act like human shields in front of planes flying into the WTC. the size of the orders being worked were ENORMOUS, and given the exposure limits of the totality of the HFT industry (HUUUGE), for there to be NO liquidity means they were all filled to the gills and praying for a bounce while the idiot buyside kept dumping into penny bids.
so before all you envious little whiners get too ahead of yourselves and continue to make asses of yourselves with your bitching, there's something you should really understand about trading... and this should be BASIC trading knowledge. the reason HFT firms make money everyday, has NOTHING to do with the stupid structural arbs you're touting here (flash orders, etc). why does it have nothing to do with those? because structural arbs ARE NOT SCALABLE and the MAJORITY of HFT firms are interested in large SCALABLE profits. but NOT NECESSARILY a large EDGE, in fact, most HFT firms have VERY VERY small margins (<.5 cps). so how do they make money everyday? i'll give you a hint, they make money everyday by a mathematical theorem HFT firms are VERY familiar with and every trader should be familiar with which was postulated by Gerolamo Cardano and proven by Jacob Bernoulli. if you actually take the time to google who they were and how their theorem translates into making money consistently, then you'll actually learn something about trading vs wasting your time as victimized bitches pointing fingers on the propaganda bandwagon. really, it's time to get off that ride, it will get you nowhere.
