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When someone buys liquidity, they don't do so to close their order 500ns faster. They do it to ensure they can trade at the current market price because they do
by harryh 5y ago
When someone buys liquidity, they don't do so to close their order 500ns faster. They do it to ensure they can trade at the current market price because they don't want to take the risk that the market will move away from them while waiting for a counter-party to trade with.
Those that are comfortable taking this risk can simply issue a LIMIT order instead of a MARKET order.
- HWR_14 5y agoSo your contention is that HFTs make prices more stable? That they somehow assume risk and that justifies their profits. How would that work? I thought HFTers only got involved in between two parties when they knew they could make a profit. That's why HFTs don't have days when they lose money.
- harryh 5y agoI thought HFTers only got involved in between two parties when they knew they could make a profit. You thought wrong. While there are a variety of things that HFT firms do, most of it is market making. https://en.wikipedia.org/wiki/Market_maker https://en.wikipedia.org/wiki/Market_maker
- HWR_14 5y agoThose market makers are known, formal and regulated. HFTs are none of those. Well, I guess semi-regulated.
- harryh 5y agoThe big HFT firms are, in fact, well known. https://medium.com/automation-generation/15-well-known-high-frequency-trading-firms-f45292c56d05 https://medium.com/automation-generation/15-well-known-high-... They're also regulated in various ways.
- kasey_junk 5y agoIn fact all of the nyse designated market makers are HFT firms. https://www.nyse.com/markets/nyse/membership https://www.nyse.com/markets/nyse/membership