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It depends on what you mean by impact. A market makers role is to provide market participants the instantaneous ability to buy or sell a security. They compensa
by sseveran 10y ago
It depends on what you mean by impact. A market makers role is to provide market participants the instantaneous ability to buy or sell a security. They compensated a small amount for providing this service. If someone is using very poor execution techniques the price could worsen, however most large asset managers and brokers that serve them have quite advanced execution technology. The actual impact of modern market making on final execution price is typically positive relative to not having it due to competition and ultimately a tighter spread.
See Vanguard on this: http://www.cnbc.com/2014/04/25/vanguard-chief-defends-high-frequency-trading-firms.html http://www.cnbc.com/2014/04/25/vanguard-chief-defends-high-f...
- lmm 10y agoVanguard invests almost purely passively, and does not generally take directional views. I agree HFT benefits Vanguard but that doesn't contradict my point at all.
- sseveran 10y agoBuy and hold is a directional view.
- lmm 10y agoLet's not get into a semantic argument. The point is that Vanguard doesn't do fundamentals research or participate in capital allocation (in a meaningful sense; Vanguard does allocate capital but in proportion to existing allocation); they just invest passively and hope to earn the return of the overall market.
- sseveran 10y agoIts not semantics. You simply don't know much about the asset management business. Vanguard has numerous actively managed offerings. For example Windsor (http://performance.morningstar.com/fund/performance-return.action?t=VWNDX®ion=usa&culture=en-US http://performance.morningstar.com/fund/performance-return.a...). But there are others like the Admiral funds.
- lmm 10y agoAny big enough company has small fingers in many pies. Vanguard's focus and specialty is their low-cost index (and similarly passive) funds.