3 ms·
Your first point is literally just market making, which requires absolutely no HFT. Your second point (arbitrage to keep prices in line) also doesn't require HF
by patrec 8y ago
Your first point is literally just market making, which requires absolutely no HFT. Your second point (arbitrage to keep prices in line) also doesn't require HFT and I find it awfully difficult to imagine that (actual) people would need to worry about where to get their stock if arbitrage would occur at less than microsecond frequencies, because otherwise there might be significantly out of line prices at timescales people care about (many orders of magnitude slower).
- integrate-this 8y agoMarket makers need to be able to close arbitrage opportunities or they won't participate in the market. Speed matters just as much to them as it does to the prop traders.
- patrec 8y agoOf course market makers wouldn't want to compete in a market where they are forced to make much slower trades than anyone else. But market making existed long before HFT, so it can't possibly be a unique benefit of it. You can argue that market making has become better because of HFT, but not that it requires HFT.
- ycombobreaker 8y agoThe technical aspects are more cross-cutting than your labels. "HFT" is for the most part just a latency threshold being crossed, whereas more functional roles such as market making, various forms of "pure" arbitrage, statistical arbitrage, prop trading, etc. have existed at the older latencies as well as the newer. All participants benefit from having lower-latency access than their competition, which creates a (thus far) neverending arms-race as firms leapfrog each other.
- mruts 8y agoThe faster a market maker can trade, the smaller spread they can offer. This is clearly a good thing.