Comments (20)

Aug 12, 2019

It adds a meaningful amount of liquidity.

But it doesn't have to provide any benefit for it to be allowed to exist, since it is a zero sum game

Aug 12, 2019

There is definitely a baseline benefit. In terms of joining the industry today, can a case be made?

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Aug 13, 2019

It provides liquidity. That's pretty much it. Yes, I can be a trader that does aggressive execution but regardless, it still provides liquidity because SOMEONE has to hit the bid or lift the offer to move the market...

No liquidity = Dead Market

Aug 12, 2019

liquidity

Aug 13, 2019

Liquidity is not enough for you uh?

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Aug 13, 2019

The market will always be improving in terms of efficiency, but there are simply diminishing returns in terms of how much society cares about having a liquid market vs. a slightly more liquid market?

Aug 13, 2019

If your question is - will the markets benefit by having one more trader? The answer is no.

You can always trade on behalf of clients. Managing other peoples money has value.

Aug 13, 2019

without short term trading, bid/ask spreads would be very wide...because by definition, very few limit orders for trading would exist for any security.

For many securities, there would be no market at all...and no way for the average investor to have a clue what the current price is for a stock or bond.

However, there is a limit to the benefit of short term trading. ultra high frequency trading, where algos try to step in front of orders and front run them..not looking to take any risk, just looking to arb the latency between exchanges and the laziness of certain retail brokers that don't look for best execution with advanced order types....this type of short term HFT trading does not benefit society in any way...it is a tax on society, and should be stamped out. The speedbump for example helps remove this.

just google it...you're welcome

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Aug 13, 2019

Agree with what you said here regarding HFT.

When I started in trading, 90% of futures volumes in the S&P 500 contracts was in open outcry .. the CME had just started messing around with Globex, but the markets were too thin. But it is ironic now for me to hear people complain about high frequency traders and how they are ripping people off ..

20 years ago it was "all those scumbag locals at the Merc" who were ripping people off.

So things change, but not really

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Aug 13, 2019

I guess it depends on whose society you're talking about

Aug 13, 2019

It creates young wealthy people, thereby ensuring the health of luxury brands.

Aug 13, 2019

It rigs the game because the high-velocity traders have insanely fast internet connections (and the resulting instantaneous data feeds) that allow them to front-run retail traders and skim risk-free arb off the efficiency delta. This is why day-trading is a fool's errand for 99.9% of individuals - instead, the way to win as an individual market participant is patient long-term investing.

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Aug 13, 2019

Efficient markets exist only in the mind of academics that get raped whenever they tried trading in real markets. Forget about it.

HFT firms love the concept because it's good PR for them.

Most Helpful
Aug 13, 2019

Liquidity is probably the biggest benefit to existing shareholders and new investors. The fact that a company trades on a daily basis (with significant volume) is a huge value add, and inarguably is the biggest draw for a company going public.

Being public also benefits shareholders as it provides the company access to new sources of capital, allowing a company various fundraising options - (oftentimes generated from new debt or equity issuance).

Publicly traded companies can also benefit from fluctuations in public demand for the stock (although I look at this as a double-edged sword as price can equally rise or fall significantly based upon public perception).

**All of these "benefits" are inarguably aided by the fact that there is an active and highly liquid market in a particular stock, which is no doubt tied to the active exchanging of shares (whether it be done day traders, market makers, or other investors)

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Aug 13, 2019

If I had a penny for every genius that shits on HFT because they read flash boys.

idiots.

    • 1
Aug 14, 2019

Is there an HFT strategy that revolves around something other than using speed to anticipate another participants' move and taking advantage?

Aug 15, 2019

You guys don't seem to get that there aren't these like bands of marauding algorithms just "sniffing" out people to hose. There are market makers like Citadel yes.

Aug 16, 2019

With speed would be front-running since they would have that "nano-second advantage".

Are you talking about anticipating another participant's move as in knowing what they will do before they execute their trade or knowing how the market will react? Bill Tsai would be a prime example of the latter ahaha.

F.

Aug 13, 2019
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