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To me this does not sound "rigged". It sounds like one participant in the market feels entitled to the profit another market participant makes. One issue with

To me this does not sound "rigged". It sounds like one participant in the market feels entitled to the profit another market participant makes. One issue with most criticism of financial markets is that people tend to view only the price, and may be the transaction cost. What they completely fail to see is risk management and liquidity. Both have intrinsic value, and people are selling and buying liquidity and risk management. This concept is hard to grasp. But the HFT traders are providing a value to the market. Restricting HFT will undoubtedly lower liquidity, and maybe even increase risk. That's why regulators are so anxious about it. The HFT traders are indeed taking on some amount of risk, which otherwise would be with the stock exchange or the other participants. The salient question is whether or not the competition among HFTs is hard enough for the Bertrand paradox to kick in.

kelvin0 13y ago
OK, then why would investors actually switch to doing business with iEX if HFT brings any value at all? Looks to me like HFT is a like 'free' games that 'offer' to buy in-game items which are needed to play the game properly. In this case, investing is the game and if you don`t have a billion dollar fiber optic running, you play at a net disadvantage.
- bayesianhorse 13y ago
  "a billion dollar fiber optic" has to come from someplace. Money costs money, which is the basic tenet of finance. If an HFT company invests a few hundred million Dollars into the trading system, the profit better beat the market. That's why I think that there are probably enough competitors in the HFT sector to squeeze the profits. The investors who "switch to iEX" are money managers who have to place orders to diversify a portfolio. Without the new strategy they essentially pay some extra money to intermediary traders. The value of intermediary traders is hard to grasp. They do carry the risk inherent in their positions, and they provide liquidity by bridging the time-gap between the intention to buy and the intention to sell. iEX basically seems to offer their clients the chance to bridge this gap themselves by cleverly dispersing orders over different markets and obfuscating their intentions. Finance is a fascinating technology in itself...

kelvin0 13y ago

OK, then why would investors actually switch to doing business with iEX if HFT brings any value at all? Looks to me like HFT is a like 'free' games that 'offer' to buy in-game items which are needed to play the game properly. In this case, investing is the game and if you don`t have a billion dollar fiber optic running, you play at a net disadvantage.

bayesianhorse 13y ago
"a billion dollar fiber optic" has to come from someplace. Money costs money, which is the basic tenet of finance. If an HFT company invests a few hundred million Dollars into the trading system, the profit better beat the market. That's why I think that there are probably enough competitors in the HFT sector to squeeze the profits. The investors who "switch to iEX" are money managers who have to place orders to diversify a portfolio. Without the new strategy they essentially pay some extra money to intermediary traders. The value of intermediary traders is hard to grasp. They do carry the risk inherent in their positions, and they provide liquidity by bridging the time-gap between the intention to buy and the intention to sell. iEX basically seems to offer their clients the chance to bridge this gap themselves by cleverly dispersing orders over different markets and obfuscating their intentions. Finance is a fascinating technology in itself...