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Many exchanges want high frequency traders as market makers and pay them rebates for completed trades. High frequency trading is not inherently "bad". It's enco
by Permit 14y ago
Many exchanges want high frequency traders as market makers and pay them rebates for completed trades. High frequency trading is not inherently "bad". It's encouraged and desired by many exchanges.
- cma 14y agoExchanges are paid by the trade, why wouldn't they want a high frequency of trades to occur?
- Permit 14y agoI don't think we're in disagreement. The market maker wins, the exchange wins and the bid-ask spread is made smaller.
- cma 14y agoNot really; at the margins we are at, people are trading a fair coin toss of a nickle on each traded for a weighted (against them) toss of a penny.
- Evbn 14y agoAnd they are paid by people who want to trade.
- dredmorbius 14y agoSounds as if the HFTs are initiating trades but not completing them. In network terms, it's a SYN attack -- you're opening a port but not connecting to it, or dropping it. A tax on uncompleted transactions might also help here. I'd say Soros's suggestion also has merits, though perhaps the incomplete transaction tax could be set somewhat higher. Neither would have to be large to make HFT grossly unprofitable.
- Permit 14y ago>A tax on uncompleted transactions might also help here. I agree. My understanding is that regulations in my own country (Canada) are being put in place to mitigate such problems. I just think it is important to maintain the distinction between high frequency trading and high frequency quoting. They should not be condemned as one entity.