5 ms·

Hmm... so by this definition, all arbitrage, irrespective of its frequency, is defined as HFT?

• zhte415 11y ago
  No. HFT, when it is done at milliseconds of latency between exchanges to trick an order into executing at a 'fair price' because the order was sent to one exchange and HFT 'arbitragers', decide to manipulate the price at other exchanges due to latency for the same stock buy/sell. It is arbitrage free, riskkless arbitrage that adds no value to a market, as it creates none but destroys it. Arbitrage adds value to a market by offering something cheaper; HFT removes the cheaper for the more expensive.
  • kasey_junk 11y ago
    > decide to manipulate the price at other exchanges due to latency for the same stock buy/sell Be clear what you are saying. They are "manipulating the price at other exchanges" by changing the prices they themselves set on their own inventory. It is not arbitrage, it is price discovery and it is not without risk.
    • zhte415 11y ago
      > Be clear what you are saying. They are "manipulating the price at other exchanges" by changing the prices they themselves set on their own inventory. Which will be sold instantly, as they have 'discovered' the price on the other exchanges were lower than where the initial order went to, bought that, and then instantly, give or take a few milliseconds, resell. It is not price discovery, it is price manipulation. HFTs have no inventory, they are perfectly lean, they throw hot potatoes across different exchanges. Not that this is not interesting technology. It is, but it is also manipulative. I exclude prop trading from the above, obviously, because it is different, and does hold inventory.