I think your problem is with Reg NMS, not the hft's. Get rid of the locked market rule and most of the problems people have with HFT will vanish.
Reaction to Michael Lewis's book and "60 Minutes" interview
- Thread starter Maverick74
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I think your problem is with Reg NMS, not the hft's. Get rid of the locked market rule and most of the problems people have with HFT will vanish.
'Flash Boys' author Michael Lewis is on CNN's Fareed Zakarias GPS show today.
"Author Michael Lewis tells Fareed that regulations have inadvertently allowed traders to take advantage of the system."
The 1:47-minute video already posted below (if still up when you read this) is just a pre-show teaser.
The interview lasts about five minutes or more and no doubt will later be CNN-posted.
http://www.cnn.com/video/data/2.0/video/bestoftv/2014/04/05/exp-gps-lewis-sot-scalping.cnn.html
"Author Michael Lewis tells Fareed that regulations have inadvertently allowed traders to take advantage of the system."
The 1:47-minute video already posted below (if still up when you read this) is just a pre-show teaser.
The interview lasts about five minutes or more and no doubt will later be CNN-posted.
http://www.cnn.com/video/data/2.0/video/bestoftv/2014/04/05/exp-gps-lewis-sot-scalping.cnn.html
In my opinion I think it is impossible to prosecute anyone for being 'faster'. It's like trying to prosecute someone for being 'smarter'. I didn't see a way the SEC could pass laws that would force exchanges to give the same speed advantages to everyone under latency rules, i.e., data feed socialism...haha.
On the other hand, IEX has leveled the playing field with a very smart solution. As I see it, HFT's business model is doomed.
On the other hand, IEX has leveled the playing field with a very smart solution. As I see it, HFT's business model is doomed.
Peple keep forgetting big gorilla in the room; total market capitalization is about 14- 15 trillion. The reason there are multiple exchanges, dark pools and hft is simple. Old model of MM and Specialist was unable to provide liquidity for exponentialy growing market cap. Emergence of HFT coincides with big spike of paper being thrown at the markets and hft is more of necessity than anything else. SEC and old MM and Specialists were not that generous to democratize lucrative business they enjoyed. They were forced to do that because they were failing in providing liquidity.
My problem is with people who front-run marketable orders, via order flashing. That's theft. Instead of blaming criminals for theft, HFT proponents blame the law.
It's legal to steal. So why not do it, eh
give me a break..volume is lower and lower every single day. go head and compare today volume on most liquid etf's (QQQ,IWM,SPY,liquid stocks etc) with volume 5-7-10(!) years ago..tell you more-good chunk of today's volume is just phantom,prearranged trades away from market etc..NOT REAL
Not sure about volume being lower maybe it is function of volatility. In general I see volumes up or steady. Point is good that most of the volume is phantom or illusionary - this is the purpose of HFT - illusion of liquidity, take $1000 turn it x1000 times and bam there is perception of $1 000 000 liquidity in the market. Simply put money to cover capitalization of many stocks (or web pages, social media with handful of employees) has not been printed yet.
Virtu, one of the largest HFT firms, has just delayed its IPO based in part of the Lewis uproar over HFT.
The chart below shows that Virtu had only 1 trading day loss from Jan 1 2009 to Dec 31 2013. 1 losing day in 1238 trading days. Do you believe these results are generated in a fair market?
In a zero-sum trading world that money is coming at the expense of every other trader that is not 'exploiting the system'.
http://www.zerohedge.com/news/2014-...irm-reveals-1-losing-trading-day-1238-days-tr
I doubt Virtu will get its IPO.
This graph makes me wonder what happened that one particular day - did they spill coffee on the keyboard or something? Was that day of the flash crash thus proving their liquidity argument is nonsense?
Volume drops because arbitrage is self-limiting in a free market system. Volatility drops because that is what they basically trade - each other. So the HFT arms race destroys the integrity of the market since they will not stop a severe market fall, they will turn off their systems. It is fake liquidity - liquidity when the market doesn't need it and none when it does need it. (A HFT is a fellow who lends you his liquidity umbrella when the sun is shining, but wants it back the minute it begins to rain. - market twain) In the previous days, the market makers/specialists actually supplied a service. Not anymore IMO.