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Tax each transaction, that'd put a damper on high-speed trading. If you want to see the arguments for eliminating HFT, here's the central issue, there are othe

Tax each transaction, that'd put a damper on high-speed trading. If you want to see the arguments for eliminating HFT, here's the central issue, there are others: > "Former economists for the Commodity Futures Trading Commission (CFTC) studied HFT firms over a two-year period and found that revenue was concentrated among a handful of companies in a winner-takes-all market structure. " https://www.investopedia.com/financial-edge/0113/has-high-frequency-trading-ruined-the-stock-market-for-the-rest-of-us.aspx https://www.investopedia.com/financial-edge/0113/has-high-fr...

immibis 2y ago
I've also heard of stock exchanges that added deliberate delays.
TeaBrain 2y ago
That's not an argument for trying to eliminate HFT market makers. The competition referenced between HFT market making firms that results in a winner take all structure between the HFT firms, is a competition to take the bid/ask spread, which is something that only HFT firms are trying to do. It should not be taken to mean that HFT firms are the sole collectors of profits in the markets, but that the best HFT firms out-compete the other HFT firms at a very specific type of trading. This competition to take the spread between HFT market makers decreases the spread and increases liquidity for everyone who isn't HFT, which lowers trading costs for non-HFT participants in the markets. Prior to the advent of HFT, slippage costs were consistently higher, due to how much larger the bid-ask was and due to how much less liquidity was present around the bid-ask at any given price, which the presence of HFT has helped to improve. https://www.ft.com/content/ff8c6486-cb37-11e3-ba95-00144feabdc0 https://www.ft.com/content/ff8c6486-cb37-11e3-ba95-00144feab...
quickthrowman 2y ago
Liquidity is good for markets. Taxing every trade would reduce liquidity and increase transaction costs for all market participants. https://en.m.wikipedia.org/wiki/Market_liquidity https://en.m.wikipedia.org/wiki/Market_liquidity
- exe34 2y ago
  I think the idea is to make it unprofitable to do high frequency trading, but you could still do normal trading with the usual benefits.
  - quickthrowman 2y ago
    High frequency traders provide liquidity—-making it unprofitable would reduce liquidity and increase the bid/ask spread of all stocks. What you propose would mean more profits for market makers and less profits for retail investors.
    - exe34 2y ago
      do you know what the mechanism that would do that? I see a lot of these claims in economics/finance, but I don't see a lot of explanation of the why.

immibis 2y ago

I've also heard of stock exchanges that added deliberate delays.

TeaBrain 2y ago

That's not an argument for trying to eliminate HFT market makers. The competition referenced between HFT market making firms that results in a winner take all structure between the HFT firms, is a competition to take the bid/ask spread, which is something that only HFT firms are trying to do. It should not be taken to mean that HFT firms are the sole collectors of profits in the markets, but that the best HFT firms out-compete the other HFT firms at a very specific type of trading. This competition to take the spread between HFT market makers decreases the spread and increases liquidity for everyone who isn't HFT, which lowers trading costs for non-HFT participants in the markets. Prior to the advent of HFT, slippage costs were consistently higher, due to how much larger the bid-ask was and due to how much less liquidity was present around the bid-ask at any given price, which the presence of HFT has helped to improve. https://www.ft.com/content/ff8c6486-cb37-11e3-ba95-00144feabdc0 https://www.ft.com/content/ff8c6486-cb37-11e3-ba95-00144feab...

quickthrowman 2y ago

Liquidity is good for markets. Taxing every trade would reduce liquidity and increase transaction costs for all market participants. https://en.m.wikipedia.org/wiki/Market_liquidity https://en.m.wikipedia.org/wiki/Market_liquidity

exe34 2y ago
I think the idea is to make it unprofitable to do high frequency trading, but you could still do normal trading with the usual benefits.
- quickthrowman 2y ago
  High frequency traders provide liquidity—-making it unprofitable would reduce liquidity and increase the bid/ask spread of all stocks. What you propose would mean more profits for market makers and less profits for retail investors.
  - exe34 2y ago
    do you know what the mechanism that would do that? I see a lot of these claims in economics/finance, but I don't see a lot of explanation of the why.