3 ms·
I think I understand your view that low latency trading is fair competition. I see that from the perspective of traders, it's unfair skimming that's literally i
by allenz 8y ago
I think I understand your view that low latency trading is fair competition. I see that from the perspective of traders, it's unfair skimming that's literally impossible to compete with. (Compare in more corrupt days, you could literally pay NASDAQ for faster access to price information.) I am still interested in that competition improves spreads or efficiency.
- tptacek 8y agoThere is obvious evidence that algorithmic trading has improved spreads: look at the spreads. Since the advent of electronic trading, they've fallen from almost a dollar(!) to pennies. Human traders colluded to keep spreads high; Google [odd eighths].
- allenz 8y agoSorry, I mean microsecond-level competition. I agree regarding algorithmic trading.
- crzwdjk 8y agoThe microsecond level competition comes from the fact that the HFTs can't compete on price below one cent, because the minimum quote increment is one cent. So they have to compete with each other on speed. There have been proposals to allow sub-penny quotes, and thus let the HFTs compete more on price and possibly bring spreads down even further, but those proposals don't seem to have gone anywhere.