3 ms·

it doesnt. HFT is pure rent seeking

• sgt101 6y ago
  I wonder what the amount of money made by HFT taking advantage of "natural arbitrage opportunities" is, and how it compares to HFT as pure front running of known orders? My guess is ~0 vs ~lots.
  • baybal2 6y ago
    If it was so, they wouldn't be losing money, closing the shop. Quite a number of them went under. So even such clearest cut front-running is not a fool proof strategy with "money out of thin air." Seeing somebody saying "give me money, and I will multiply them with some magic mumbo jumbo" they themselves don't seem to understand, if the most usual investment industry hot air.
  • Arnt 6y ago
    The big natural arbitrage opportunity is other people's coarse-grained price changes. HFTs make finer-grained changes at shorter intervals, and so win trades that the exchange directs to the best offer. If being a market maker is profitable, then this profit derives from executing trades. Because the exchange directs trade to the best offer, the profit goes to whoever offers the best price, which is whoever adjusts its offer prices quickest. That's the recipe for HFT.