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So if a stock price crashes there's no one around to buy the stock, so HFT doesn't help in that scenario. They're not going to reduce the buy/ask spread. But
by bb88 3y ago
So if a stock price crashes there's no one around to buy the stock, so HFT doesn't help in that scenario. They're not going to reduce the buy/ask spread.
But if a stock is going up, HFT inserts themselves between the buyer and the seller and takes a small cut in the process. I don't see how it helps the liquidity stock, but seems to be more like an HFT tax.
They didn't increase the number of stock shares, just got in between the buy/ask margin.
- t0mas88 3y agoGoing in between the buy/ask margin means the margin got smaller which is good for all traders in the market. There is no way to "go in between" and not make it smaller, because the best price gets the order. Here's a much deeper analysis on bid ask spread from HFT market making: https://www.cftc.gov/sites/default/files/2022-08/HFT_and_market_quality_ada.pdf https://www.cftc.gov/sites/default/files/2022-08/HFT_and_mar...
- caddemon 3y agoJane Street is not a huge player in HFT, they are primarily a liquidity provider and therefore actually do enable people to sell stocks during a crash. Any registered market maker has specific rules imposed by the exchange about always needing to provide a 2 sided offer within a reasonable bound of the current market.