4 ms·
I don't think that's a very good way of putting it. I'd say its more correct to say orders from retail investors are valuable because: 1) They tend to be a re
by chollida1 10y ago
I don't think that's a very good way of putting it.
I'd say its more correct to say orders from retail investors are valuable because:
1) They tend to be a relatively equal number of buys and sells. This is figurative manna from heaven for market makers
2) They don't mind crossing the spread, also a gift for market makers.
3) They can't really move the spread
and probably least importantly......
4) they aren't trading based on some sort of knowledge most of the time, ie they are typically just buying because they buy a bit each month or selling because they need money or selling to re-balance,
ie they aren't trading due to market signals, but rather due to their own personal situations.
- jessriedel 10y agoCan you quantify why you think 1-3 are more important than 4?
- physguy1123 10y ago4 is the root cause of 1-3. By itself 4 doesn't mean much for a market maker, but the collective market behavior it results in (1-3) remove a lot of risk from market making against retail exclusively.
- mywittyname 10y agoRetail investors are essentially paying a few pennies more per share in order to trade commission free. I think that's a good deal.
- taylorwc 10y agoI completely agree with this. I'm willing to take a few pennies hit because of HFT front running my order if it means I am saving several dollars per trade in commission. Especially when you first starting out with a tiny amount to invest, the commissions of normal brokers decimate any returns.
- harryh 10y ago#1 is largely because of #4