3 ms·
Before HFT existed those risk free trades were taken by NYSE floor brokers. If anything the amount taken is smaller since spreads are so thin now - they used to
by hendzen 8y ago
Before HFT existed those risk free trades were taken by NYSE floor brokers. If anything the amount taken is smaller since spreads are so thin now - they used to be much wider in those days. There is always going to be some way to profit by doing a really obvious thing the fastest. Like trading on news or company earnings, etc.
And as the sibling commenter said I suggest reading other sources besides Flash Boys, which I have read before. There is a lot of misinformation in that book. And by the way, IEX has been a public exchange now for some time and still has a tiny share of the volume.
- Erlich_Bachman 8y agoThey are not real spreads. They are fake spreads made by HFT bots using small orders. Once a real investor will try to execute on such an order, the HFT bot will either withdraw it (or it will simply get filled because it's a minimum order for the minimum allowed amount), and then the bot will immedately put in another order which will make more money for the HFT and less money for the investor. HFTs will use their fast connections to other markets to make sure that the new order is such that the investor will have no choice but to pay the price, because by the time the investor will try to go to another market to execute the trade cheaper, HFTs will already have been on that other market have front-runned the investor's order. This is not "providing liquidity". This is parasitic behavior. Not all HFT strategies do this, but many do.