I'm not sure having the ability to buy or sell for less than a penny limit price would help me, especially compared to eliminating the drain on returns sucked out by HF trading where nanosecond advantages matter. Can you explain how that would help long-term investors?
Well, my understanding is HF trading pips the current best bid or offer by a small fraction of a penny, and thus their trade goes through while our limit trades (which may be the best in the market until they pip us) do not.
Example, I'm a buyer at $53.45, and someone else is a seller at $53.46. A new person tries to sell (to me) at $53.45, and the HF trader is able to put in a bid at $53.451 and get filled, while I sit and wait.
The HF trader is able to jump in front of the best bid and offer by a 1/1000th of a penny, and get filled while we at the full penny prices wait for the HF trader to get his fill and give up, or we don't get filled at our $53.45 price.
That's the "theoretical problem" with HF trading, right?
Allowing us to enter orders in smaller fractions of pennies (as they are somehow able) reduces their ability to "grab the spread", because it shrinks the spread.
If that's not the problem with HF traders, what are you talking about?
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Wait. What's a "long term" investor as opposed to someone who has been investing for a long time? |
