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High frequency traders create liquidity. Arbitrage in general helps ensure that prices are uniform across geographies and across linked securities (e.g. options
by URSpider94 8y ago
High frequency traders create liquidity. Arbitrage in general helps ensure that prices are uniform across geographies and across linked securities (e.g. options are priced appropriately vs. the underlying asset). You can argue that there is no incremental value in going to shorter and shorter timescales, but fundamentally this mechanism is how information moves around the economy.
- tcbawo 8y agoThere used to be less sensitivity to the receive-side time by exchanges, but in many cases there had been an emphasis on fairness and high res timestamps (they sell colocation services). Now, many times the first through the post wins. This creates a constant arms race and narrows the field to a handful of competitors. Many companies that survived in the fat tail can no longer do so.