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> that means it's cheaper for market participants to trade because of the rise of HFT market makers. Okay, so it makes it easier for some people to become mark

> that means it's cheaper for market participants to trade because of the rise of HFT market makers. Okay, so it makes it easier for some people to become market traders.... but is that beneficial? The money that HFT firms are making has to come from somewhere. The only way an average person can be a market participant and come out ahead, is if they have some inside information that the HFT firms do not. Risky stuff. And the ability for people to make trades that turn out to be winners, is reduced by the massive and aggressive trading done by HFT firms. The massive profits from HFT come from somewhere. Someone is making less because the HFT guys made more. HFT firms do not benefit the average person- unless you define "benefit" as allowing them to have an easier time gambling at a game that has become harder to win.

growse 3y ago
Firstly, HFTs do not generate "massive profits". Not sure where that myth comes from. It's extraordinarily difficult to make profit as a market maker, let alone a "massive" one. Secondly, their income comes from the spread, same as any other market maker. They're able to operate at much lower profit margins exactly because they're HFTs. Making a cent a trade makes no sense if you're doing 3 trades a day. However, it'll quickly become an attractive business if you're doing millions of trades per day. Because spread is what they compete on (and competition is pretty healthy), this drives trading costs down for everyone else.
- knodi123 3y ago
  > Firstly, HFTs do not generate "massive profits". Not sure where that myth comes from From places like the Tabb Group? "According to research conducted by the Tabb Group, the top 5 High Frequency Trading (HFT) firms make an average of $2 billion a year in profits." > However, it'll quickly become an attractive business if you're doing millions of trades per day Attractive as in profitable? Honestly I don't know what you're trying to get at here. Yeah, their margin is small, and they make massive profits by replacing that with volume. Why is that a controversial claim? > this drives trading costs down for everyone else It really feels like you didn't even read my last comment. Okay, let's grant that they lower trading costs, while extracting many, many billions of dollars from the market. I have a great idea for a business. I'll lower the door charge at vegas casinos, in exchange for bumping the house edge up by a fraction of a percent. There you go, I have made it a lot cheaper for everyone to get in and participate in the craps market. I have offered a valuable service and am in no way a parasite. What's the difference between my business plan, and what you're describing?

growse 3y ago

Firstly, HFTs do not generate "massive profits". Not sure where that myth comes from. It's extraordinarily difficult to make profit as a market maker, let alone a "massive" one. Secondly, their income comes from the spread, same as any other market maker. They're able to operate at much lower profit margins exactly because they're HFTs. Making a cent a trade makes no sense if you're doing 3 trades a day. However, it'll quickly become an attractive business if you're doing millions of trades per day. Because spread is what they compete on (and competition is pretty healthy), this drives trading costs down for everyone else.

knodi123 3y ago
> Firstly, HFTs do not generate "massive profits". Not sure where that myth comes from From places like the Tabb Group? "According to research conducted by the Tabb Group, the top 5 High Frequency Trading (HFT) firms make an average of $2 billion a year in profits." > However, it'll quickly become an attractive business if you're doing millions of trades per day Attractive as in profitable? Honestly I don't know what you're trying to get at here. Yeah, their margin is small, and they make massive profits by replacing that with volume. Why is that a controversial claim? > this drives trading costs down for everyone else It really feels like you didn't even read my last comment. Okay, let's grant that they lower trading costs, while extracting many, many billions of dollars from the market. I have a great idea for a business. I'll lower the door charge at vegas casinos, in exchange for bumping the house edge up by a fraction of a percent. There you go, I have made it a lot cheaper for everyone to get in and participate in the craps market. I have offered a valuable service and am in no way a parasite. What's the difference between my business plan, and what you're describing?