2 ms·
>When the average time for HFTs to hold onto a new position is less than 30 seconds, I'd say they're merely claiming credit for liquidity that was already there
by paperwork 15y ago
>When the average time for HFTs to hold onto a new position is less than 30 seconds, I'd say they're merely claiming credit for liquidity that was already there
This is factually incorrect. A lot of ultra-high frequency trading refers to a practice where traders post a bid or an offer--their orders sit in the 'book,' waiting for other to come and trade with them. The traders who have bids and offers sitting out in the market are even referred to as liquidity providers (as opposed to liquidity takers). There are whole exchanges out there which offer rebates to such traders for providing this liquidity (which means you actually get paid by an exchange to post liquidity).
These guys are not in the business of holding positions, they are in the business of providing trade-able liquidity. A car dealer may buy your car, then turn around and sell it the same day--that doesn't not mean they are harming the car market.
- SHOwnsYou 15y agoIf liquidity exists without HFT then it's not correct for HFTers to justify their existence by claiming they are liquidity providers. I realize the semantics of this can be argued ("existing liquidity doesn't preclude or prevent the existence HFT" for example), but not only do I think that is a wash argument but it also misses the point entirely on the utility of HFT.
- paperwork 15y agoTo paraphrase professor Krishnamurthi [http://www.cs.brown.edu/~sk/ http://www.cs.brown.edu/~sk/] "Just semantics. That’s all there is!" HFTers don't have to justify their existence at all. They exist because they are able to profit and their existence is not against the law. As far ethics and morality, I guess that is what we are arguing here :) Liquidity is not pregnancy, there can be a little of it.