4 ms·
Can you explain why that's true? I understand why it would be true if the broker provides that liquidity for you and settles the trade immediately, while takin
by notch656a 4y ago
Can you explain why that's true? I understand why it would be true if the broker provides that liquidity for you and settles the trade immediately, while taking the risk that on his end it may settle at a different time and place. But If I just put an order directly on the exchange book using full collateralized cash in my trading account, why would that cost my broker more? Wouldn't this liquidity thesis mean that brokers should charge more for stock trades that have less liquidity?
To be honest, I just figured they were able to eliminate fees by front running and/or selling my trading information.
- thaumasiotes 4y agoThe broker isn't selling your trading information. He is selling the opportunity to trade with you, and quantitative traders will pay him for that, because you are -- in all likelihood -- really bad at trading stocks. The professionals are so convinced that you have no idea what you're doing that they're happy to give you better-than-market prices, because the market is going to move against you anyway. (And of course, on average they are correct.) You could make an argument of the form "HFTs have made trading so cheap that people are hurting themselves more than they used to, and we need to bring the price of trading back up so that people won't be tempted". But that is a pretty different argument than "HFTs don't provide any value". They clearly do. When you place an order to buy or sell stock, you pay lower fees and you get better prices than you otherwise would, because you look just like a million idiots.