3 ms·

During a liquidity crisis - aka any crisis - buyers don't get front run - sellers do. There is a reason for this - front running only occurs when you want somet

During a liquidity crisis - aka any crisis - buyers don't get front run - sellers do. There is a reason for this - front running only occurs when you want something (liquidity) without having to pay for it first. For example: You want to off load a metric ton of stock in a company - you tell your broker - he puts out a VWAP sell call to an algorithm - HFTs realise - they short sell to anticipate your liquidity premium (aka you want to sell NOW and you are willing to pay for it). If you didn't want to get out so bad - you cannot be front run - because you wouldn't demand a liquidity premium.

001sky 14y ago
Buy side liquidity means quick access to sellers at little cost and on favourable terms to you. This was always the case - HFTs just make it faster and easier. Maybe there is a terminology glitch. Buy side and Sell side mean something else, generally. Buy side is commonly referred to people holding asset on book, and sell side are capital raisers or intermdiaries. If I'm buy side, I want liquidity -- period. HFT does not provide liquidity, it provides decreased "viscosity". As you note, (observed) liquidity evaporates under high Vol. Which, if it were true liquidity, or if markets participants met the threshold assumpyions of EMH, would not be the case. If you're trying to differentiate two sides to a trade on an exchange, that's usually referred to as Bid/Ask. Again, observed lack of liquidity on one side or the other (or: massive spreads), signify commonly held assumptions about the markets are askew. If we throw away EMH behavioural assumpyions, and we throw away liquidity, what we are left with is the following: (1) Opportunistic market participants;and (2) Ultra-low transaction viscosity. These are a shitty combination, from the perspective of public policy. The lack of viscosity actually increases the returns to increasingly obscure and opaque methods of market maniplation.

001sky 14y ago

Buy side liquidity means quick access to sellers at little cost and on favourable terms to you. This was always the case - HFTs just make it faster and easier. Maybe there is a terminology glitch. Buy side and Sell side mean something else, generally. Buy side is commonly referred to people holding asset on book, and sell side are capital raisers or intermdiaries. If I'm buy side, I want liquidity -- period. HFT does not provide liquidity, it provides decreased "viscosity". As you note, (observed) liquidity evaporates under high Vol. Which, if it were true liquidity, or if markets participants met the threshold assumpyions of EMH, would not be the case. If you're trying to differentiate two sides to a trade on an exchange, that's usually referred to as Bid/Ask. Again, observed lack of liquidity on one side or the other (or: massive spreads), signify commonly held assumptions about the markets are askew. If we throw away EMH behavioural assumpyions, and we throw away liquidity, what we are left with is the following: (1) Opportunistic market participants;and (2) Ultra-low transaction viscosity. These are a shitty combination, from the perspective of public policy. The lack of viscosity actually increases the returns to increasingly obscure and opaque methods of market maniplation.