Eric, since you use a 'black box' that I assume isn't sitting next to each exchange computer out there like the big boys, I'm curious if all the new ways they have come up with to fleece the markets affects you..
Regards,
John
I think this HFT focus is just another scapegoating attempt by the media. Just since I've been a fulltime trader, the media has targeted 'daytraders', then hedge funds, then the banks (and their 'outrageous' compensation schemes), and now this so-called 'high frequency trading'.
It all seems bogus to me, and is just another attempt to point the finger at some perceived evil to blame for the publics problems. I think that the fingers need to be pointed at our collective politicians for our public's problems, and let businesses take care of themselves. AIG, GM, Chrysler, Fannie Mae, Freddie Mac, Citi, and numerous others should be bankrupt right now and selling off assets to pay off creditors with about ten cents on the dollar. Instead, they are all still viable businesses, while the taxpayer has foot the bill for well over a trillion bucks. Makes me sick.
Anyway, I believe that the bulk of HFT is good for the markets, providing needed liquidity for all. Similar to Walmart, or discount stock brokerage (or really no different than the Nasdaq market-makers or NYSE specialists of old), these firms rely on extremely small margins and large volumes to make a profit. I don't believe that the HFT firms 'fleece' the market any more than a discount stock brokerage firm like E*Trade fleeces the retail client by providing cheap commissions to their clients. The HFT firms generally succeed by being willing to buy stocks at higher prices, and sell stocks at lower prices, than others in the market, earning a very small profit per share on a huge volume.
I'm certainly not an expert with HFT, but I don't buy the argument that they are necessarily a problem for the retail client whatsoever. Similarly, I might add, I don't see the slightest problem with flashed orders, either. While not having access to flashed order flow myself, I certainly will route a decent percentage of my orders to these flashed destinations as they save me money on my order execution costs (generating rebates, or lower ECN fees, than I would otherwise have, resulting in better average execution quality).
Anyway, those are my two cents, for what they are worth. |
