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> They're in the same market No they aren't in the same market. There are a large number of different pools and small exchanges where trading happens. The l
by slededit 10y ago
> They're in the same market
No they aren't in the same market. There are a large number of different pools and small exchanges where trading happens. The limitations of physics mean each forum will have different prices at different times. Different forums also have different rules on who may trade and in what way.
HFT Helps arbitrage away these differences. Lowering the spread between differing markets. HFT can also play a part in ensuring correlation of related assets like futures.
- jandrese 10y agoIsn't that moot though? Every trading house is going to have all of the markets baked into their systems. There aren't going to be any companies that only trade on only one particular exchange unless they have some advantage on that exchange that they can't get on other exchanges. Even then I expect them to cross reference the other exchanges to make sure their preferred market isn't out of whack.
- slededit 10y agoThis gets very complicated mostly because its physically impossible to guarantee the best price in all exchanges at the exact point the order was entered. You simply cannot transmit the order fast enough. Brokers are required to fill at the National Best Bid and Offer price which is specifically defined as the best bid on the national quotation system. However the NQS can only update so fast. Your broker may well know it can get a better price on a specific exchange. Fidelity will actually keep track of when it gets you a better price and inform you with their "Price Improvement" statistics. Other brokerages will sell your orderflow and let a third party take the difference instead.