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What is the point of this article? HFT provides liquidity, and some would argue, more accurate equity pricing. I have never heard anyone say high-frequency tr
by valuegram 14y ago
What is the point of this article? HFT provides liquidity, and some would argue, more accurate equity pricing.
I have never heard anyone say high-frequency trading leads to a more even distribution of wealth. Since the birth of stock exchanges "trading" has always been a game where the institutions with greater resources have an advantage.
Correlating HFT computerization to the general democratization of data, and it's effect on political institutions is just silly.
- ChristianMarks 14y agoThe HFT provides liquidity argument overlooks a crucial point: diminishing returns. You can't increase transaction efficiency indefinitely and expect that the liquidity at vanishingly small intervals is worth much.
- valuegram 14y agoAgreed on the diminishing returns front. Defining necessary/useful liquidity would be impossible. Markets would absolutely function just fine (as they have previously) without HFT, but by definition HFT is increasing liquidity.
- ChristianMarks 14y agoNot enough to justify, since the value of that liquidity is negligible, according to researchers.
- valuegram 14y agoTo be fair "researchers" have also stated the converse: http://people.stern.nyu.edu/jhasbrou/Research/Working%20Papers/HS10-11-10.pdf http://people.stern.nyu.edu/jhasbrou/Research/Working%20Pape... http://www.automatedtrader.net/headlines/127545/hft-helps-market-structure-and-liquidity--academic-study-finds http://www.automatedtrader.net/headlines/127545/hft-helps-ma... http://home.uchicago.edu/~bweller/files/Liquidity_and_High_Frequency_Trading.pdf http://home.uchicago.edu/~bweller/files/Liquidity_and_High_F... Not sure what we're arguing about. I never said HFT is "justified" by its infusion of liquidity. It is simply a function of High Frequency trading, whether justified or not.